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Facebook Wins Round One: US District Court Dismisses Monopoly Charges

The US District Court from D.C. dismissed the FTC's monopoly case against Facebook.
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Monopoly Charges Against Facebook Dismissed

Lawsuit Filed

On December 9, 2020, CNBC reported The Federal Trade Commission and a coalition of attorneys general from 48 states and territories filed two separate antitrust lawsuits against Facebook. The suits target two of Facebook’s major acquisitions: Instagram and WhatsApp.

Lawsuit Dismissed June 28, 2021

Shares of Facebook rose a 4% to a new record high of $355 on news Facebook Wins Dismissal of U.S., States’ Monopoly Lawsuits

U.S. District Judge James Boasberg in Washington on Monday granted Facebook’s request to dismiss the complaints, filed last year by the U.S. Federal Trade Commission and state attorneys general led by New York’s Letitia James.

The judge said in the opinion that the FTC failed to meet the burden for establishing that Facebook has a monopoly in social networking. He said the agency could refile the complaint within 30 days.

“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,” Boasberg wrote.

The Facebook lawsuits were filed in December as part of a widening crackdown on America’s tech giants. The cases followed a Justice Department against Alphabet Inc. for allegedly monopolizing internet search, and the findings of a House investigation that tech companies of abusing their dominance. Lawmakers have since proposed a of bills that would cast a broad regulatory net over the companies.

Background

The charges against Facebook stem from its 2012 acquisition of Instagram and the 2014 takeover of WhatsApp.

The FTC complaint cited Facebook CEO Mark Zuckerberg’s mantra: “It is better to buy than compete.”

Federal Trade Commission v. Facebook Inc. 20-cv-3590

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Here are key snips from the 53-Page Ruling by the US District Court for the District of Columbia, emphasis mine.

The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services. 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%).” 

Such an unsupported assertion might (barely) suffice in a Section 2 case involving a more traditional goods market, in which the Court could reasonably infer that market share was measured by revenue, units sold, or some other typical metric. But this case involves no ordinary or intuitive market.

Rather, PSN services are free to use, and the exact metes and bounds of what even constitutes a PSN service — i.e., which features of a company’s mobile app or website are included in that definition and which are excluded — are hardly crystal clear. In this unusual context, the FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague “60%-plus” assertion too speculative and conclusory to go forward.

Because this defect could conceivably be overcome by re-pleading, however, the Court will dismiss only the Complaint, not the case, and will do so without prejudice to allow Plaintiff to file an amended Complaint. 

To guide the parties in the event amendment occurs, this Opinion also explains two further conclusions of law. First, even if the FTC had sufficiently pleaded market power, its challenge to Facebook’s policy of refusing interoperability permissions with competing apps fails to state a claim for injunctive relief. 

Second, the agency is on firmer ground in scrutinizing the acquisitions of Instagram and WhatsApp, as the Court rejects Facebook’s argument that the FTC lacks authority to seek injunctive relief against those purchases. Whether other issues arise in a subsequent phase of litigation is dependent on how the Government wishes to proceed. 

The Court will not speculate further as to how, if at all, the Section 2 analysis of a claim involving a long-ago merger might differ from that regarding a more recent (or even forthcoming) purchase, including on the issue of remedy.

James E. Boasberg, United States District Judge, wrote the ruling. 

Congress Plan to Break Up Big Tech

The irony of the day award goes to Slate, for its article today, All the Ways Silicon Valley Is Freaking Out About Congress’ Plan to Break Up Big Tech

Congress is currently considering six antitrust bills, all introduced earlier this month, that would substantially constrain the likes of Amazon, Facebook, Apple, and Google in a moment of bipartisan skepticism toward major technology companies. The legislative effort is the result of a 16-month investigation by the House antitrust subcommittee into anticompetitive practices in the industry. Last week, the House Judiciary Committee approved all six bills over the protests of industry groups and major corporations. Breaking up Big Tech suddenly looks a little less hard to do.

The antitrust bills still a ways to go before potentially reaching President Joe Biden’s desk. It’s unclear whether the package has the same level of bipartisan support in the Senate as it seems to have in the House, and the House Judiciary Committee is expected to do more work on the legislation before it’s introduced to the entire body.

Democrats have railed against Big Tech for concentrating corporate power and allowing misinformation and hate speech to flourish on their platforms, while Republicans have accused such companies of suppressing conservative speech (while generally ignorning all the other stuff). Members from both parties nevertheless had doubts about the bills. Three Democratic representatives from California—Eric Swalwell, Lou Correa, and Zoe Lofgren—opposed five of the six bills, and joined Republicans in releasing a statement claiming the package leaves many questions about the scope of the legislation unanswered and “poses harm to American consumers and the U.S. economy.” Ohio Rep. Jim Jordan separately complained that the legislation did not address allegations of anti-conservative bias and warned that it would somehow actually give more power to tech companies. “These Democrat bills will only make things worse,” he wrote in a Fox News op-ed with Donald Trump’s former chief of staff Mark Meadows. “If you think Big Tech is bad now, just wait until Apple, Amazon, Facebook and Google are working in collusion with Big Government.” 

The Industry Has Melted Into a Pool of Sweat That Is Also Somehow Exploding

The bills that seem to have generated the most pushback from the tech industry were H.R. 3816, which would prohibit companies from give their own products and services an unfair upper hand on their platforms, and H.R. 3825, which would give regulators more power to break up monopolies. If passed, H.R. 3816 could potentially force Apple to take extra steps to ensure that products like Apple Music don’t upstage competitors like Spotify on the iPhone and in the App Store. It could also affect Amazon, which sells its own line of products in its marketplace and has been accused of using data about other companies’ sales on the platform to inform the strategy for its private label. (Amazon claims it has rules against such practices.) The Chamber of Progress seems particularly disturbed by this bill, claiming that it would force YouTube to host Pornhub videos and Facebook to display Alex Jones’ conspiracy theories about the Sandy Hook shooting. It’s unclear, though, that such a law would have an impact on content moderation.

Freaking Out? Pool of Sweat?

Unless and until there are 60 senators on board those Congressional bills are going nowhere. As such, I rather doubt big tech is "sweating" or "freaking out" over any of the proposed bills.

Furthermore, as this case shows, it is very difficult win a monopoly case.

Congress can change that, but wake me up when a filibuster-proof majority of 60 Senators is on board. 

Meanwhile, another Biden-sponsored effort just got flushed down the toilet.

Mish