By Natalie DeCoste
The Federal Trade Commission (FTC) hit a major setback in its efforts to break up one of Big Tech’s biggest players, Facebook, after a federal judge threw out an antitrust lawsuit brought by the FTC and 40 states.
The decision by the United States District Court for the District of Columbia granted the social media giant’s request to dismiss the FTC’s antitrust lawsuit, which was filed in December of 2020.
The FTC’s lawsuit alleged that Facebook illegally maintains its social networking monopoly through anticompetitive conduct. The agency accused Facebook of engaging in a systematic strategy, including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers to eliminate threats to its monopoly.
According to the FTC, Facebook’s conduct in the marketplace left consumers with few choices for personal social networking and stripped advertisers of the benefits of competition. In its lawsuit, the FTC asked the court to issue a permanent injunction that could require divestitures of Facebook’s assets and require Facebook to seek prior notice and approval for future mergers and acquisitions.
“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,” said Ian Conner, Director of the FTC’s Bureau of Competition, when the lawsuit was filed.
However, U.S. District Judge James Boasberg disagreed with the FTC’s case and deemed the lawsuit “legally insufficient” because it did not plead enough allegations to support monopolization claims against Facebook.
“Although the Court does not agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s Complaint is legally insufficient and must therefore be dismissed…The Complaint contains nothing on that score save the naked allegation that the company has had and still has a ‘dominant share of th[at] market (in excess of 60%),” wrote Judge Boasberg.
The judge found that the FTC’s claim that Facebook controlled more than 60% of the market was too speculative and conclusory because the agency failed to explain the metrics or methods it used to calculate Facebook’s market share. Supporting this claim was the crux of the FTC’s Section 2 of the Sherman Antitrust Act argument.
“The Complaint is undoubtedly light on specific factual allegations regarding consumer-switching preferences. Given that thin showing, and the fact that the PSN-services product market is somewhat “idiosyncratically drawn” to begin with, the court must demand something more robust from Plaintiff’s market-share allegations… These allegations — which do not even provide an estimated actual figure or range for Facebook’s market share at any point over the past ten years — ultimately fall short of plausibly establishing that Facebook holds market power,” wrote the judge.
Judge Boasberg established that even if the FTC had adequately shown Facebook’s market power, its challenge to Facebook’s policy of refusing interoperability permissions with competing apps is based on deals made in the early 2010s, which is too far gone to allege the implementation of that policy violated antitrust laws.
“We are pleased that today’s decisions recognize the defects in the government complaints against Facebook. We compete fairly every day to earn people’s time and attention and will continue to deliver great products for the people and businesses that use our services,” said Facebook in a statement.
This is not necessarily the end of the line for the FTC. Judge Boasberg said that the agency could try again within 30 days with more detail, although he suggested that the agency faced steep challenges.
“The FTC is closely reviewing the opinion and assessing the best option forward,” said a spokesperson for the FTC.
Judge Boasberg and the D.C. Circuit Court also dismissed a parallel antitrust case brought by the states against Facebook. Unlike the FTC’s case, which can be revived if the agency can prove its arguments about Facebook’s monopoly power, the court completely dismissed the states’ case. The court determined that the long delay between the acquisitions at issue and the 2020 case filing was unprecedented on a state level.
“The Court is aware of no case, and Plaintiffs provide none, where such a long delay in seeking such a consequential remedy has been countenanced in a case brought by a plaintiff other than the federal government, against which laches does not apply and to which the federal antitrust laws grant unique authority as sovereign law enforcer,” wrote Judge Boasberg.
Regarding the states’ interoperability claims against Facebook, the court came to the same conclusion that Facebook’s implementation of the policy may have violated the Sherman Antitrust Act, but the long-past violations cannot furnish a basis for injunctive relief
