Facebook being sued for antitrust violations

Kickflip accuses social network of edging out other companies with Facebook Credits

Financial trends and news by Steven Loeb
October 29, 2012
Short URL: http://vator.tv/n/2b47

Facebook is, by sheer numbers, the largest social network on the planet. It’s one billion users give it awesome power, which can either be used to aid to other companies, so that they can make money off of the social network’s userbase, or Facebook can try to make that money directly.

Honestly, it doesn’t seem like a very hard decision for Facebook to make, but now a company that used to make money off of the social network giant is accusing it of yielding that power in such a way that it put others out of business.

Kickflip, the company behind the Gambit payment engine, is suing Facebook for breaking antitrust laws by creating its own virtual currency, Bloomberg reported Monday.

When Facebook started getting into social gaming, it used outside companies to provide access to virtual currency to developers. What this did was allow developers to make money off of their games by having users pay real dollars to buy virtual coins. Prior to 2009, social game developers on Facebook had access to 20 virtual-currency service providers, including Gambit, the complaint says.

Then, in 2009, Facebook introduced Facebook Credits, its own line of virtual currency. Developers were from then on forced to use Facebook Credits exclusively, Kickflip says, and Facebook began taking a 30% free from each developer. Gambit, and the other virtual currency providers, were all a target of “blacklisting” by Facebook, the company said.

This move destroyed a “vibrant and competitive market,” lawywers for Kickflip said.

“Facebook leveraged its dominance in the social-game marketplace to control and dominate the separate market for virtual-currency services,” Kickflip lawyers said. “As the result of Facebook’s actions, Gambit’s business was destroyed.”

Kickflip is asking a judge to bar Facebook from enforcing its policy and award unspecified damages, according to the complaint.

"We believe the lawsuit is without merit and will defend ourselves vigorously,” a Facebook spokesperson told VatorNews.

Austin, Texas-based Kickflip has had legal problems of its own, being sued by Offerpal Media, a company which offers virtual currency payment alternatives for social games, in 2009.

Offerpal accused Kickflip of using Offerpal’s web service for two of its apps, Sports Bets and Bet Arcade, and then using the information it received toward developing Gambit.

Vator attempted to contact Kickflip/Gambit, but it does not seem to exist anymore. It’s website does not load, and its Twitter account was last updated in November 2009.

(Image source: http://blog.demandware.com)

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