United States v. Facebook: What Hollywood Has at Stake

Amazon (with MGM on its mind) will watch whether a judge rules that the FTC chair should have recused herself from targeting Facebook

What will be the first big court decision of the new year? For the entertainment industry, that could be coming from, of all places, the government’s antitrust case against Facebook.

The Federal Trade Commission is challenging Facebook’s past acquisitions of Instagram and WhatsApp and alleging the social media giant engaged in an illegal “buy-or-bury” scheme to beat out competition after failing to innovate. A federal judge may take up whether the government waited too long to sue to unwind Facebook’s buying spree, but part of what makes this case provocative for Hollywood (and elsewhere) is a question being presented about whether FTC chair Lina Khan should have recused herself. In a recent briefing, the FTC argued that even if Khan had “prejudged” facts and issues before voting in favor of an amended complaint against Facebook, that’s not a basis for her necessary recusal. In short, a federal court will address regulator bias.

Crucially, this forthcoming ruling comes as Amazon also is demanding Khan’s recusal in all antitrust matters concerning the tech giant, including the review of its pending acquisition of MGM. Before President Biden nominated Khan to lead the FTC, the 32-year-old Yale Law School grad became a superstar in academia with a treatise called “Amazon’s Antitrust Paradox,” which took on decades of conservative thought about competition regulation. In her work, Khan called for more active antitrust enforcement, particularly to address harms caused when a dominant company plays a dual role of selling to consumers and controlling the retail platform for its rivals, too.

MGM is a storied studio with a hand in the James Bond franchise plus hit shows like The Handmaid’s Tale and Fargo. But it’s hardly a huge player these days, and Amazon’s proposed $8.45 billion deal to buy it likely would get a green light from regulators in past administrations.

But Khan’s FTC?

If the agency wants to send a message, challenging Amazon’s MGM deal would certainly do the trick. A case aimed at blocking the deal would probably nod to the important intermediary role Amazon plays in the streaming economy (a giant in the cloud services space, a top-selling streaming media player in Amazon Fire and one of the most popular apps in Amazon Prime) and how the transaction would impact the market for movies and TV shows.

Should the FTC sue to stop Amazon-MGM, expect the Jeff Bezos company to point its finger at Khan’s nonrecusal, just as Facebook is doing.

“Although Amazon profoundly disagrees with Chair Khan’s conclusions about the company, it does not dispute her right to have spoken provocatively and at great length about it in her prior roles,” stated Amazon’s recusal petition filed in June. “But given her long track record of detailed pronouncements about Amazon, and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.”

A hearing in the Facebook case is scheduled for January.

Lina Khan