Are they though? They're nearly completely separate products with different activities and goals. If WhatsApp and Instagram were never acquired, I don't see them actually being very different at all from the consumer's pov, though I see them being less successful businesses without Fb's ad network and infrastructure.
I don't think these two are actually competition for facebook, facebook is fundamentally a communication tool built on top of your genuine friends and family social graph, it has no true competitors to speak of.
Facebook's acquisitions have provided them with two new business lines, one of which has been immensely profitable for them, but I don't think its actually affected the social media market. Social media companies built on different social graphs (ie. linkedin for your professional graph, twitter for a unidirectional follower graph) or a niche, fundamentally different interaction model (ie. pinterest) still can exist and thrive. I think facebook could or could not acquire any of these, and they're raison d'etre would essentially be the same.
Facebook's privacy concerns are real, and worth having a conversation over, but I think the claim that they have monopoly power over social media as a whole is false.
I don't think you'd do any good breaking whatsapp or instagram our from facebook. Instagram would have a rough couple years detaching their infra and getting a sales force, but it would remain the same. WhatsApp may die unless its given an enourmous lump of cash to fund it as it finds a path toward profitability, but without fb's ad network it will probably never be a great business.
Overall, breaking up Facebook in the way the article says wouldn't really do much harm, but it wouldn't do much good either. And I think its an abuse of antitrust power to simply not let a company be an industry conglomerate and have multiple successful business lines.
Yes. By Facebook's own admission, photos are the center of the Facebook core platform, along with the social networking properties - comments, likes, status signaling, feedback - of the service that surround photos.
Instagram was a dramatic threat to the center of Facebook: personal, social networked photo sharing, with the previously mentioned social qualities. It's the only serious, direct threat Facebook has faced since the early days of the network.
It's also worth at least $100 billion today. If you stripped Instagram off of Facebook, with how their metrics would now look (stagnant, weak, at risk of decline), I'd be skeptical Facebook would be worth more than $150 to $200 billion. Buying Instagram not only removed the only serious threat to Facebook that they've faced, it provided a dramatic moat that they could utilize for defense or drowning enemies (which is what they put it to use for in trying to kill or otherwise slow down Snapchat).
To the consumer, Instagram remains nearly completely decoupled from facebook except for friend recommendations and SSO. Instagram has a fundamentally different photo "culture" and most people don't spend time on instagram OR facebook, they simply use both for different things. On facebook I'll see 900 pictures of my cousin's new baby or graduation photos, on instagram I'll see travel/lifestyle/modeling shots. Instagram gave facebook a kick in the ass to get on the mobile train before it was too late, but I don't think it was ever a threat to facebook's core social graph model.
Back to your second point, I agree, Instagram is an enormously valuable business line for facebook. But i think its also true that facebook's infrastructure and Ad platform lead to a 2 + 2 = 5 situation for the companies. An independent instagram would likely be doing well, but not be as valuable as they are within Facebook. Sure, facebook would be worth $100B less without the ads it serves on instagram, but there's no law or moral imperative against one company having multiple, highly lucrative business lines that share certain overhead.
I see the instagram acquisition as more akin to Tata group acquiring Jaguar. Jaguar had a good brand and an interested demographic, but were a terribly run business leading to poor sales and quality issued. Tata buying them gave new life to the brand and they're now successful and standing on their own again. Instagram was always going to be some level of successful, but with facebook they're a juggernaut.
I think a lot of people have the idea that facebook acquired instagram as a defensive play to remove a direct competitor, but I don't think that they are direct competitors. Facebook and MySpace were competitors, both shooting for the generalized social graph, and Facebook won that fight, from then on being a natural monopoly in that space.
From my (naive) observation it seems that facebook "the page" popularity has dwindled and people migrated towards messaging (be it the Messenger or WhatsApp) and instagram.