Hounding entrepreneurs who have turned risky investments into successful businesses is bad news for everyone

The occasion was so important that Mark Zuckerberg was even persuaded to put on a suit.

The Meta founder took the witness stand this week in Washington wearing a blue number as the anti-trust trial that could see his social media empire broken up began.

The regulators accuse him of running what it is in effect a monopoly over social media. He stands accused of snuffing out competition by buying competitors or crushing them.

But hold on. Sure, it is easy to make the case that Meta is too big and too powerful. And yet the reality is this: the case is laughably thin.

The only thing Zuckerberg is actually guilty of is striking great deals – and if that is ruled unlawful then American capitalism will be in deep trouble.

The case against Meta has been rumbling on for years and finally came to court this week. The Federal Trade Commission (FTC) accuses the company, which owns Facebook, Instagram and WhatsApp, of running what is effectively a monopoly in social media markets.

“They decided that competition is too hard and it would be easier to buy out their rivals than to compete with them,” argued Daniel Matheson, representing the FTC.

In effect, it has a “buy or bury” strategy, taking out fledgling competitors before they could become large enough to pose any serious threat. If the FTC wins its case, Zuckerberg’s empire could be broken up and Meta forced to sell off one or more of the sites it owns.

Of course, cynics might assume that Zuckerberg has already effectively “bought” himself protection by cosying up to President Trump.

He has, among other things, got rid of the fact-checkers at Facebook and made the site far more sympathetic to the “Make America Great Again” movement. Trump looks after his friends, especially if they are billionaires, and won’t allow the company to be taken apart, you would think.

Cynics might assume that Zuckerberg has already ‘bought’ himself protection by cosying up to President Trump Credit: Facebook

But that aside, there is another big problem with the antitrust case: it simply does not stack up.

True, Meta is incredibly powerful in the social media market. It has 3.3bn daily active users, generates more than $150bn in revenues and makes huge profits. But so what?

In reality, Meta is only guilty of one thing: it makes very smart acquisitions. It bought Instagram for a mere $1bn in 2012. It purchased WhatsApp for $19bn in 2014.

At the time, both looked like potentially risky acquisitions, and indeed plenty of people argued at the time that it was over-paying for Instagram and for WhatApp as well, given that when it was acquired it had very little in the way of real revenues.

And yet, they both now look like the deals of the century. Zuckerberg saw their potential before anyone else did, figured out how they could be monetised, saw a way to build a set of complementary, over-lapping sites, and pounced before anyone else did.

It was predatory, perhaps, and probably aggressive as well. But it was also very smart.

On top of that, Meta put a lot of hard and creative work into making both sites successful. It was not preordained that Instagram would become the place where we all share our life stories every day, and keep track of our friends and family. It had to be built step by step.

Likewise, it was not obvious, as the FTC seems to assume, that WhatsApp would dominate messaging on our smartphones. Again, under Meta’s control that had to be fought for.

Is Meta really a monopolist?

True, its share of the global digital advertising market is estimated at 19pc. It is a lot, but well below the 25pc that is generally considered to constitute an effective monopoly.

It faces plenty of competition from Google, both on its search engine and on YouTube, from TikTok, from Elon Musk’s X, from Snapchat, from Amazon for advertising, from Microsoft in the form of LinkedIn, and from plenty of smaller niche sites as well.

Likewise, WhatsApp may well be the most popular messaging app in the world. But it faces plenty of competition in instant messaging as well, especially from sites such as Telegram. And it is worth keeping in mind that WhatsApp still does not make a huge amount of money even though almost all of us use it every day.

In reality, what the FTC is trying to do is criminalise companies for making great deals. It is hard to see that going well.

Should Bill Gates be prosecuted for insisting that he should keep the rights to the code when he first sold an operating system to IBM in the 1970s?

Should Google be punished for paying just $50m for the Android operating system in 2005?

Should Bernard Arnault be put in the dock for all the acquisitions that turned LMVH into one of the largest companies in the world, or Warren Buffett for building stakes in companies that no one else was interested in at the time?

The list goes on and on. Great entrepreneurs are very good at spotting undervalued opportunities, and backing them with plenty of cash. It is often risky, but when it pays off it can do so spectacularly.

If we start to punish people for just being good at their job, then the whole system will start to collapse. If an entrepreneur buys a business and loses a lot of money then he or she suffers the entire loss. If it turns into a spectacular success then the regulator will come along and force them to sell it off.

The incentives to spot opportunities and build on them will be destroyed. Free market capitalism depends on rewarding risk-taking and entrepreneurship. If that is criminalised then the system will no longer work.

Everyone agrees that monopolies that are overcharging and ripping off consumers should be broken up if necessary. But it is important not to let that stray into punishing businesses simply for the “crime” of being successful.

There is no serious case against Meta – and the sooner the judges throw it out the better.