Facebook antitrust suit can move forward, judge says

Facebook headquarters, rebranded Meta, in Menlo Park, California. Photo / AP

A federal judge on Tuesday allowed the Federal Trade Commission's antitrust lawsuit against Facebook to move forward, rejecting Facebook's request to dismiss the case and handing the agency a major victory in its quest to curtail the power of the biggest tech companies.

The judge, James Boasberg of the US District Court of the District of Columbia, said last year that the FTC had not provided sufficient evidence that the company, which has since renamed itself Meta, had a monopoly in social media and abused that power by harming competition. The agency refiled the case in August, and on Tuesday Boasberg said that it had provided adequate support.

But he also included some caveats. Boasberg said the agency could proceed with its claims that the company abused its monopoly power through acquisitions, which the agency has described as a "buy-or-bury" strategy. He dismissed, however, the agency's charge that Facebook violated antitrust laws by cutting off third parties from its platform.

The facts provided by the agency, he said, "are far more robust and detailed than before, particularly in regard to the contours of defendant's alleged monopoly."

The judge's decision is a major step forward for regulators battling the powerful armies of lobbyists and litigators employed to protect the empires built by tech giants like Amazon, Apple, Facebook and Google. Their combined market value has surpassed $7 trillion.

Government officials argue that this concentration of power hurts rivals and can harm consumers. In rare bipartisan agreement, Democrats and Republicans have rallied around antitrust action. This week, the Senate announced that it would begin to vote on new antitrust laws aimed at the tech sector.

President Joe Biden has filled federal antitrust agencies with vocal critics of the technology giants, including the FTC chair, Lina Khan, whom Facebook targeted in its motion to dismiss the lawsuit. The Justice Department and dozens of states have filed lawsuits against Google, accusing the company of crushing competition in search and in advertising technology.

While the judge's decision was a big victory for the agency, ultimate success with the suit is far from certain and it will be years before there is any final resolution. Facebook has assembled many top lawyers to fend off legal threats. In addition, Boasberg has been tough to please. In June, he dismissed a similar antitrust lawsuit against Facebook filed by more than four dozen states for falling far too short on supporting evidence of anti-competitive action. The states, led by New York, have said they plan to appeal the judge's opinion.

"Although the agency may well face a tall task down the road in proving its allegations, the court believes that it has now cleared the pleading bar and may proceed to discovery," Boasberg said.

Holly Vedova, the director of the agency's bureau of competition, said in a statement that the "FTC staff presented a strong amended complaint, and we look forward to trial."

Facebook said the judge's decision was a partial victory, because he dismissed one claim, that the company had harmed competition by cutting rivals like the video service Vine from accessing data and features of the Facebook platform. That practice ended in 2018, the judge said.

"Today's decision narrows the scope of the FTC's case by rejecting claims about our platform policies," said Chris Sgro, a spokesman for Meta. "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."

The FTC argues in its suit that Facebook obtained a monopoly in social networking and maintained it illegally by acquiring rivals. The lawsuit focuses on the company's acquisitions of Instagram for US$1 billion in 2012 and WhatsApp for US$19 billion in 2014.

In its amended complaint, the agency used data from comScore, a publicly available data analysis firm, showing that Facebook's share of the daily social media market had exceeded 70 per cent since 2016. That figure jumps to 80 per cent a month for smartphone users, 86 per cent for tablet users, and about 98 per cent for desktop users.

The agency said the company was able to achieve and maintain its dominance by buying rivals including the photo-sharing app Instagram, and WhatsApp, a popular messaging service. Instead of innovating and growing on its own merits, the company removed competition from the market and made it harder for new entrants to emerge, the agency claimed. Those deals, which were approved by previous leaders at the FTC, have led to less innovation and a deterioration in privacy and security for Instagram and WhatsApp users, it added.

"The agency will need to substantiate these allegations at later stages in the litigation — likely with expert testimony or statistical analysis," the judge said. "But lack of proof at this juncture does not equate to impermissible speculation."

In its motion to dismiss the case, Facebook said Khan had an "axe to grind" given her vocal criticism of Big Tech in past roles as an academic and congressional aide. The company argued it had created a conflict of interest. Boasberg rejected the argument, saying she was not involved in the initial decision to pursue the case.

"Nothing the company presents suggests that her views on these matters stemmed from impermissible factors," Boasberg said. "Indeed, she was presumably chosen to lead the FTC in no small part because of her published views."

Bill Kovacic, a former chairman of the FTC, said Boasberg "simplified the case in a useful way" to focus on illegal monopolisation through mergers. The agency's merger approvals, he said, were the "original sins" that led to Facebook's dominance.

But Kovacic said the suit still faced many hurdles.

"The FTC case lives to see another day," he said.

This article originally appeared in The New York Times.

Written by: Cecilia Kang
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