U.S. takes a new stab at Facebook antitrust suit
WASHINGTON — The Federal Trade Commission took new aim at Facebook on Thursday, beefing up its accusations that the company was a monopoly that illegally crushed competition, in an attempt to overcome the skepticism of a federal judge who threw out the agency’s original case two months ago.
The suit submitted Thursday contains the same overall arguments as the original, saying Facebook’s acquisitions of Instagram and WhatsApp were made to create a “moat” around its monopoly in social networking and arguing the social network should be broken up. But the updated suit is nearly twice as long and includes more facts and analysis the agency says better support the government’s allegations.
“Facebook lacked the business acumen and technical talent to survive the transition to mobile,” Holly Vedova, the acting director of the Bureau of Competition at the agency, said in a statement. “After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat.”
Facebook responded: “There was no valid claim that Facebook was a monopolist — and that has not changed. Our acquisitions of Instagram and WhatsApp were reviewed
and cleared many years ago, and our platform policies were lawful.”
The agency had to refile the case after the judge overseeing it said in June the government had not provided enough evidence Facebook was a monopoly in social networking. The judge’s decision — and a similar one he made in a case against the company brought by more than 40 states — dealt a stunning blow to regulators’ attempts to rein in Big Tech.
His decision presented the first major test for Lina Khan, the FTC chair, who was only days into her role at the time. Ms. Khan represents a wave of new thinking about the industry among administration officials and many lawmakers, arguing the government needs to take far more aggressive action to stem the power of technology giants like Facebook, Google, Amazon and Apple. President Joe Biden has appointed multiple regulators with similar aims, and lawmakers proposed updates to antitrust laws to target the power of technology companies.
The criticisms of the first version of the Facebook case levied by the judge, James Boasberg of the District Court of the District of Columbia, showed the steep challenges regulators face. Although the companies dominate the markets they are in — social media, in the case of Facebook — the courts often look at whether prices are rising as an indication of monopolization. Facebook’s most popular services are free.
“No one who hears the title of the 2010 film ‘The Social Network’ wonders which company it is about,” Judge Boasberg wrote. “Yet, whatever it may mean to the public, ‘ monopoly power’ is a term of art under federal law with a precise economic meaning.” He instructed the FTC to back up claims Facebook controlled 60% of the market for “personal social networking” and it blocked competition.
Ms. Khan then faced a choice on how to handle Judge Boasberg’s decision. One option was to drop the case entirely, while another was to expand it with even broader accusations. Instead, she took more of a middle ground, resubmitting the suit with greater detail and a more sweeping narrative of the company and what the agency says is a pattern of anticompetitive behavior since Mark Zuckerberg co-founded it at Harvard in 2004.
The revised suit was approved by the commission in a 3-2 vote, with the three Democrats on the commission voting in favor of it and the two Republican members dissenting.
In the new complaint, the FTC provides more details to support the government’s claims Facebook holds a monopoly in social networking. But the public version of the suit had many of the statistics redacted because the numbers are proprietary.
The company has until Oct. 4 to respond to the new complaint or to file for Judge Boasberg to dismiss the case. Last month, it filed a petition for Ms. Khan to recuse herself from the agency’s case, saying her work on a House investigation into platform monopolies showed a bias against the company. The FTC on Thursday said it had dismissed that petition, saying Facebook would receive “the appropriate constitutional due process protections” because the case would be tried before a federal judge.
Bill Kovacic, a former chairman of the FTC, said the agency did enough to “live to fight another day.”
“The judge said ‘show your work,’ and it appears they did enough to satisfy that request,” he said.
But he warned the case would face a long and steep challenge. The FTC has won fewer than 20 of its monopoly cases in the appeals court since the agency started more than 100 years ago, he said.
“Facebook will fight this ferociously,” Mr. Kovacic added.