Facebook antitrust victory poses big test for new FTC chief

Facebook antitrust victory poses big test for new FTC chief
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A federal judge’s dismissal of the Federal Trade Commission’s (FTC) antitrust lawsuit against Facebook is posing the first big test for President BidenJoe BidenFord to bolster electric vehicle production in multi-billion dollar push Protesters demonstrate outside Manchin's houseboat over opposition to reconciliation package Alabama eyes using pandemic relief funds on prison system MORE’s new FTC chair, Lina KhanLina KhanHillicon Valley — Presented by Xerox — Democrats press FTC to resolve data privacy 'crisis' Democrats ask FTC to fix data privacy 'crisis' Overnight Hillicon Valley — Scrutiny over Instagram's impact on teens MORE.

But the renowned Big Tech critic faces a serious time crunch, with less than 30 days to try and shift the momentum through a revamped lawsuit.

The stakes are high for the 32-year-old antitrust scholar who was confirmed by the Senate earlier this month in a 69-28 vote, gaining the support of both conservatives and progressives.

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Those same lawmakers, along with advocacy groups and small businesses, are hoping she can deliver a win while enforcing the antitrust laws she’s been pushing to reform.

“It's a challenging situation to be in. It's the biggest case the FTC has had in decades, it's right in her core area, and it's right as she arrives,” said Jason FurmanJason FurmanThe Fed needs to articulate its framework for inflation Biden signals tough stance on tech with antitrust picks GOP seeks to make Biden synonymous with inflation MORE, a professor at the Harvard Kennedy School and former economics adviser to then-President Obama.

Before coming to Washington, Khan was best known for a paper she wrote as a student at Yale Law School criticizing Amazon’s market power. She later worked as an aide to the House Judiciary antitrust panel’s investigation into the market power of U.S. tech giants.

The investigation led to a 2020 report with recommendations for legislative reform that culminated in six bills that seek to give the FTC and Justice Department greater authority to rein the power of the biggest tech companies.

But the existing parameters for the FTC in its case against Facebook, which targets the social media giant’s acquisition of WhatsApp and Instagram, are creating enforcement challenges for the agency.

Judge James E. Boasberg, an Obama-era nominee, dismissed both the FTC complaint and an antitrust case against Facebook brought by state attorneys general in dual court rulings this week.

Boasberg dismissed the FTC’s complaint as presented, arguing it provided insufficient evidence to prove that Facebook controls over 60 percent of the market share, as the lawsuit alleges.

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“It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist,” he wrote.

But the FTC has a second chance at taking on Facebook. Boasberg said that while the agency fell short of proving that Facebook controls over 60 percent of the market, he said it was possible to prove that point.

The agency has until July 29 to file an amended complaint.

“If you are at the agency, remind yourself that it's not a fatal blow. But you do not dismiss it as a trivial concern either,” said William Kovacic, a former FTC chairman who’s now a professor at George Washington University Law School.

“It is damaging to the agency's prestige and to its morale, and it is foreboding of hard things you're going to have to do in order to succeed,” he added.

The agency, with Khan at the helm, will now have to decide what strategy to use moving forward. An FTC spokesperson said the agency is “closely reviewing the opinion and asserting the best option forward.”

In an amended complaint, the FTC could both “reformulate” the original charges and add others, said Kovacic, who served as head of the FTC for a year starting in March 2008.

Facebook will likely seek to dismiss the amended complaint, and it may lead to a long litigious road for the Khan and the FTC.

“If you were to liken it to a race this is a very long distance event. It is not a 100-meter sprint,” Kovacic said.

Another option for the FTC is to file a new complaint in an in-house court, either instead of amending the complaint in federal court or alongside that one.

But that would come with separate challenges, experts say.

“The downside obviously to doing that is they'll be fighting on two fronts, and the administrative proceeding lacks some of the teeth [compared to] bringing the case in court,” said Amy Brantly, an expert antitrust attorney and founding partner of Kesselman Brantly Stockinger.

Anti-monopoly group Economic Liberties Project hailed Khan for her expertise fighting Big Tech, and she’s in a strong position to take on Facebook now, and other tech companies down the road.

“It's really hard to imagine anyone who is more qualified to use the authorities at the Federal Trade Commission to Big Tech including Facebook, and bring more competition to the market,” said Morgan Harper, director of policy and advocacy at the Economic Liberties Project.

Stacy Mitchell, co-director of the Institute for Local Self-Reliance, said Khan is an “excellent person” to be in this role.

“She's focused and fearless about the need to attack the problem directly,” Mitchell said.

“I think a lot of the worries you have with an agency typically in these situations would be that they would fold up shop or they would pull their punches or this would make them shy about bringing other cases. That’s not something I’m concerned about with her,” she added.

But Brantly said Khan’s scholarly work and time on the House panel’s investigation may not give her much of an upper hand when it comes to court cases.

“As the FTC chair she's tasked with enforcing the law and the current law is old, and is what she's fought so long against. So how she's going to succeed with her goals under the current legal landscape is going to be a really tough road,” Brantly said.

Advocates for reforming antitrust laws argue that there will be a silver lining even if Khan falls short a month from now.

“I think that this judicial decision raises the odds that Congress acts,” Furman said.

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Supporters of the six bills advanced by the House Judiciary Committee last week quickly seized on Boasberg’s decision as an argument for passing the legislation.

“This decision underscores the dire need to modernize our antitrust laws to address anticompetitive mergers and abusive conduct in the digital economy,” Judiciary Chairman Jerry NadlerJerrold (Jerry) Lewis NadlerBiden to raise refugee cap to 125,000 in October Ocasio-Cortez, Bush push to add expanded unemployment in .5T spending plan Angelina Jolie spotted in Capitol meeting with senators MORE (D-N.Y.) and antitrust subcommittee Chairman David CicillineDavid CicillineDemocrats seek to cool simmering tensions Hillicon Valley —Apple is not a monopoly, judge rules Judge rules Apple is not 'illegal monopolist' in high-profile Epic case MORE (D-R.I.) staid in a joint statement.

Rep. Ken BuckKenneth (Ken) Robert BuckHillicon Valley —Apple is not a monopoly, judge rules Judge rules Apple is not 'illegal monopolist' in high-profile Epic case Lawmakers flooded with calls for help on Afghanistan exit MORE (R-Colo.), the ranking member of the antitrust subcommittee, issued a similar plea.

“Today’s development in the FTC’s case against Facebook shows that antitrust reform is urgently needed. Congress needs to provide additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anticompetitive conduct,” he said on Monday.

But despite the bipartisan support, the bills face a rough road ahead, especially with opposition from California lawmakers of both parties that represent tech-heavy districts.

If the proposals proceed in the 50-50 Senate, they may face a rockier path to reach the 60 votes needed to advance most legislation.

The Facebook case is also spurring calls for reform in the Senate from tech critics, including Senate Judiciary antitrust subcommittee Chairwoman Amy KlobucharAmy KlobucharHillicon Valley — Presented by Xerox — Officials want action on cyberattacks Senate panel advances antitrust bill that eyes Google, Facebook This week: Democrats face mounting headaches MORE (D-Minn.) and Sen. Josh HawleyJoshua (Josh) David HawleySchumer moves to break GOP blockade on Biden's State picks Dems punch back over GOP holdup of Biden SBA nominee DHS chief 'horrified' by images at border MORE (R-Mo.).

Some antitrust experts say the recent court ruling in Facebook’s favor could end up hurting the social media giant down the road if it prompts lawmakers to send legislation to Biden’s desk.

“I am expecting that this will give momentum, additional momentum to the drive for legislative reform,” Kovacic said. “It will give the advocates of legislative reform an immediate example of how problematic traditional litigation can be.”