Court Dismisses FTC And State Antitrust Cases Against Facebook

A federal judge on Monday dismissed antitrust lawsuits brought against Facebook by the Federal Trade Commission and a coalition of states.

U.S. District Court Judge James Boasberg in Washington, D.C. said in a 53-page opinion that the allegations in the FTC's complaint, even if true, wouldn't prove that Facebook has monopoly power in the market for personal social networking services.

“The existence of market power is at the heart of any monopolization claim,” Boasberg said.

“The FTC’s complaint says almost nothing concrete on the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market,” Boasberg wrote.

The legal battle dates to last December, when the FTC and a coalition of attorneys general from 46 states and the District of Columbia sued Facebook for allegedly violating anti-monopoly laws.

The lawsuits were brought separately, but both centered on the claim that Facebook violated laws aimed at protecting competition by purchasing social-media service Instagram (acquired for $1 billion in 2012) and messaging service WhatsApp (bought for $19 billion in 2014).

Both court cases came soon after Democrats on the House Judiciary committee's antitrust subcommittee issued a report stating that Facebook used its “data advantage” to identify competitors and then “acquire, copy, or kill” them.

The complaints reiterated some of the claims in that report.

“Since toppling early rival Myspace and achieving monopoly power, Facebook has turned to playing defense through anticompetitive means,” the FTC alleged in its complaint. “After identifying two significant competitive threats to its dominant position -- Instagram and WhatsApp -- Facebook moved to squelch those threats by buying the companies, reflecting CEO Mark Zuckerberg’s view, expressed in a 2008 email, that 'it is better to buy than compete.'”

Facebook countered last December that the allegations were "revisionist history," noting that the FTC allowed the company to purchase Instagram and WhatsApp. The company made a similar argument to Boasberg.

Facebook also argued the FTC's lawsuit should be dismissed for a host of other reasons, including that the allegations, even if proven true, wouldn't show that the company obtained a monopoly in a “relevant market” or that it has monopoly power to harm competition and consumers in that market.

“The FTC’s one-count monopolization case against Facebook utterly ignores the reality of the dynamic, intensely competitive high-tech industry in which Facebook operates,” the company wrote in papers filed in March.

Boasberg sided with Facebook, writing Monday that the FTC's allegations regarding the tech company's alleged monopoly power weren't solid enough to support the antitrust claims.

“The FTC alleges only that Facebook has 'maintained a dominant share of the U.S. personal social networking market (in excess of 60%)' since 2011 ... and that 'no other social network of comparable scale exists in the United States,'” he wrote, quoting from the agency's lawsuit.

“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,” he added.

Boasberg added that the FTC's allegation that Facebook commanded a market share greater than 60% falls short because the agency “does not even allege what it is measuring.”

The judge wrote that he was “unable to understand exactly what the agency’s '60%-plus' figure is even referring to, let alone able to infer the underlying facts that might substantiate it.”

Boasbert noted in his opinion that the FTC didn't offer any metrics -- such as ad revenue or time spent on the service by users -- to explain how it arrived at the allegation that Facebook commands a market share greater than 60%.

Boasberg's ruling allows the FTC to attempt to reformulate its allegations and bring them again within 30 days.

Facebook also urged the judge to dismiss the case brought by a New York-led coalition of state attorneys general, arguing they waited too long to sue.

Boasberg agreed, writing: “Facebook’s acquisitions are barred by the doctrine of laches, which precludes relief for those who sleep on their rights.”

“Although Defendant purchased Instagram in 2012 and WhatsApp in 2014, plaintiffs’ suit -- which seeks, in the main, to have Facebook divest one or both companies -- was not filed until December 2020. 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," he wrote.

He added: "Ultimately, this antitrust action is premised on public, high-profile conduct nearly all of which occurred over six years ago — before the launch of the Apple Watch or Alexa or Periscope, when Kevin Durant still played for the Oklahoma City Thunder, and when Ebola was the virus dominating headlines... The complaint’s allegations themselves make clear that the states could easily have brought suit then, just as they make clear that any equitable relief this court could or would order now would greatly prejudice both Facebook and third parties." 

A spokesperson for the New York Attorney General says the office is reviewing the decision and considering its options.

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