FTC Antitrust Case Against Facebook Can Proceed, Judge Rules

Meta Platform will (after all) have to confront antitrust charges from US regulator the Federal Trade Commission (FTC).

A judge has granted the FTC a second chance to pursue its charges of illegal monopolisation against Facebook, CNBC reported.

This means that FTC will get a second bite to go after Facebook over its alleged anti-competitive conduct by buying up rivals and stifling competition. If it loses, Meta faces a risk of having to divest itself of Instagram and WhatsApp.

First Attempt

Facebook’s troubles began back in December 2020, when Facebook was hit with two separate antitrust lawsuits.

One came from the FTC and a second lawsuit came from a coalition of attorneys general from 48 states and territories.

At the time Facebook claimed the lawsuits were nothing other than ‘revisionist history’.

Then in March 2021 Facebook asked US District Judge James Boasberg in the District of Columbia to dismiss the antitrust lawsuits.

It argued the government had failed to show that Facebook had a monopoly in a clearly defined market, or that it had hurt consumers.

Facebook also responded separately to the lawsuit brought by dozens of states and territories.

The social networking giant argued that the US state lawsuit should be dismissed because the states failed to show that they were harmed by Facebook and because they waited more than four years.

Then on 28 June 2021 Judge Boasberg dismissed the initial FTC complaint, when he ruled that the FTC failed to define a plausible market that Facebook monopolised, and suggested too loose of a percentage of market share it owned.

He said the FTC lacked authority under its chosen statute to bring charges against Facebook for how it implemented an old policy preventing rivals from accessing its platform seven years ago.

Judge Boasberg said in order for the FTC to receive an injunction under that statute it must be clear that a violation is in progress or about to occur.

However he gave the FTC the chance to amend its complaint.

At that time Judge Boasberg also dismissed the similar lawsuit from US states, without granting a chance for reconsideration.

That said, the US states have indicated they intend to appeal that ruling.

Second Bite

In August the FTC doubled down and amended its original complaint that Facebook “resorted to illegal buy-or-bury scheme to crush competition after a string of failed attempts to innovate.”

The FTC in its amended complaint also alleged that Facebook “lured app developers to the platform, surveilled them for signs of success, and then buried them when they became competitive threats.”

And now unfortunately for Mark Zuckerberg and co, Judge James Boasberg has this week rejected Facebook’s motion to dismiss the amended FTC complaint.

“The Federal Trade Commission’s first antitrust suit against Facebook, Inc. stumbled out of the starting blocks, as this Court dismissed the Complaint last June,” Boasberg was quoted by CNBC as writing in Tuesday’s filing.

The judge said while the Commission’s core theory remains the same in its updated complaint, “The facts alleged this time around to fortify those theories, however, are far more robust and detailed than before, particularly in regard to the contours of Defendant’s alleged monopoly.”

While Boasberg maintained the FTC could still face challenges in proving its allegations, he wrote Tuesday that “it has now cleared the pleading bar and may proceed to discovery.”

Boasberg said the FTC achieved this by providing enough alleged facts to plausibly establish Facebook’s monopoly power in the market, claim its market share is protected by barriers to entry and allege it’s “willfully maintained” dominance through anticompetitive behaviour, particularly through its acquisitions of Instagram and WhatsApp.

The judge also rejected Facebook’s contention that the FTC’s vote to file the amended complaint should be considered invalid because the company believed FTC Chair Lina Khan should have recused herself.

Facebook had argued that Khan’s previous writings and work had shown she had prejudged its liability, which should be grounds for recusal, but Khan participated in the FTC vote anyway.

“The Court believes that such contention misses its target, as Khan was acting in a prosecutorial capacity, as opposed to in a judicial role, in connection with the vote,” Boasberg wrote.

Tall task

However, Judge Boasberg delivered a setback to the FTC, saying it could not proceed with its claims that Facebook’s interoperability policies for developers on its platform helped it maintain its dominance.

He ruled that’s because Facebook abandoned the policies in 2018 and allegedly stopped enforcing them even earlier than that.

“Ultimately, whether the FTC will be able to prove its case and prevail at summary judgement and trial is anyone’s guess,” the judge wrote. “The Court declines to engage in such speculation and simply concludes that at this motion-to-dismiss stage, where the FTC’s allegations are treated as true, the agency has stated a plausible claim for relief under Section 2 of the Sherman Act.”

Meta was quick to respond and pointed out that the FTC had a tall task ahead of it.

“Today’s decision narrows the scope of the FTC’s case by rejecting claims about our platform policies,” a Meta spokesperson was quoted by CNBC as saying in a statement.

“It also acknowledges that the agency faces a ‘tall task’ proving its case regarding two acquisitions it cleared years ago,” the spokesperson reportedly said. “We’re confident the evidence will reveal the fundamental weakness of the claims. Our investments in Instagram and WhatsApp transformed them into what they are today. They have been good for competition, and good for the people and businesses that choose to use our products.”