FTC staff undertaking a probe of the company has recommended to commissioners that they sue the social media company in federal court, which would allow the group of states, led by New York, to join the lawsuit, according to one source.
As many as 41 states may sign on to the lawsuit, three sources said. The filing of the lawsuit or lawsuits could slip into next year, the sources said.
Following news reports on the Facebook investigation, New York Attorney General Letitia James said in a statement: "We don't comment on the details of an ongoing investigation, but as we have said before, we will continue to use every investigative tool at our disposal to determine whether Facebook's actions stifled competition, reduced choices, or put user data at risk."
The FTC and states have yet to finalize how they might file any lawsuits. The FTC may file alone to a district court while the states file their complaint separately; the FTC can file to an administrative law judge and states can file in district court, or they can join forces and sue together in district court, two sources said.
States discussed the matter during a call on Wednesday, two sources said.
FTC commissioners could make a decision as early as Friday, when a meeting is scheduled. Unlike the Justice Department, which typically gets new leaders with a new U.S. president, the FTC commissioners' terms are unaffected by Inauguration Day in January.
The FTC declined comment while Facebook could not immediately be reached for comment.
In addition to New York, other lead states on the investigation include Colorado, Nebraska, Tennessee and Utah, one of the sources said.
The legal action is expected to focus on Facebook's alleged violations of antitrust law to protect its gigantic market share in social media.
The FTC and states have converged on similar accusations, though what they will allege in court has not been finalized, one of the sources briefed on the discussions said. They contend Facebook stifled competition with its $1 billion acquisition of the image-sharing app Instagram in 2012, weakened privacy protections in the encrypted messaging app WhatsApp after acquiring it for $22 billion in 2014 and selectively squashed rivals by refusing to share user data, the source said.
States are not expected to list specific remedies in their lawsuit, the source added.
Startup investors, antitrust experts and privacy activists have criticized the FTC for its approvals of the Instagram and WhatsApp purchases.
A comprehensive report by the House of Representatives Judiciary Committee of the four Big Tech companies this year found that Facebook used its access to superior market data to identify coming competitive threats so those companies could be copied, purchased or choked off by restricting access to Facebook data.
(Reporting by Diane Bartz in Washington and Paresh Dave in Oakland, Calif.; Additional reporting by David Shepardson in Washington; Editing by Matthew Lewis)
By Diane Bartz and Paresh Dave