Facebook stock price falls after being hit by a groundbreaking lawsuit

Facebook (NASDAQ: FB) stock price closed the week more than 2% lower after the company was hit by a groundbreaking lawsuit from antitrust agencies and a high number of states. 

Fundamental analysis: Is Facebook in trouble?

A high number of states and the federal government filed antitrust lawsuits against the social media giant due to alleged monopolistic practices to obtain dominance. 

The Federal Trade Commission (FTC) requested a permanent injunction in federal court, with a special focus placed on WhatsApp and Instagram, which were acquired for $19 billion and $1 billion, respectively. 

“Personal social networking is central to the lives of millions of Americans,” said Ian Conner, Director of the Federal Trade Commission’s Bureau of Competition. 

“Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

The lawsuit shows that over 40 public prosecutors signed have backed it after a year-long investigation in Facebook’s practices. 

“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition,” Letitia James, New York Attorney General, said.

“By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived to be potential threats.”

Earlier this year, Facebook agreed to pay a $5 billion civil penalty, the highest federal privacy fine in history, on similar allegations.

“People and small businesses don’t choose to use Facebook’s free services and advertising because they have to, they use them because our apps and services deliver the most value,” Jennifer Newstead, Vice President and General Counsel at Facebook, said in a statement earlier.

“We are going to vigorously defend people’s ability to continue making that choice.”

Technical analysis: Testing short-term support

Facebook stock price initially fell 4% on the lawsuit news before regaining some of the lost ground to close the week at $273.55. As seen in the chart below, the price action is testing the diagonal support line around the $270 mark, which is further supported with the 100-DMA at $268.85. 

Facebook daily chart (TradingView)

A break of this zone would pave the way for a deeper pullback to $250.00, where investors looking to buy Facebook shares are waiting. 

Summary

The FTC and higher number of states filed a lawsuit against Facebook on the ground of alleged monopolistic practices.

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