FTC revamps Facebook antitrust lawsuit after initial setback

FTC revamps Facebook antitrust lawsuit after initial setback
© Greg Nash

The Federal Trade Commission (FTC) on Thursday filed an amended complaint in its antitrust case against Facebook after an initial courtroom setback earlier this summer.

The new complaint makes the same central argument that Facebook has maintained a monopoly on “personal social networking” by gobbling up potential competitors and enforcing unfair agreements, while offering new evidence and analysis.

It uses Facebook’s data on daily active users to counter those concerns from Judge James E. Boasberg, an Obama-era nominee. The FTC noted that Facebook has “tens of millions” more monthly users than the next largest personal social networking provider, Snapchat.

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“Measurements of a personal social networking service’s active user base and how much users use the service are appropriate measurements of market shares and market power for personal social networking services,” the complaint states.

Facebook doubled down in its defense against the allegations of anticompetitive behavior, noting as it did in response to the first complaint that the acquisitions of WhatsApp and Instagram were “reviewed and cleared many years ago, and our platform policies were lawful.”

“The FTC's claims are an effort to rewrite antitrust laws and upend settled expectations of merger review, declaring to the business community that no sale is ever final. We fight to win people’s time and attention every day, and we will continue vigorously defending our company,” a Facebook spokesperson said in a statement.

 

The FTC's definition of the social networking market that Facebook allegedly has a monopoly in will likely be a focus of any pushback. The complaint tries to parse out networking from apps dedicated to audio or video consumption like Spotify or Netflix. That definition would also exclude the widely popular short-form video app TikTok, which Facebook has previously held up as an example of competition it faces.
 
The agency argues that "TikTok users primarily view, create, and share video content to an audience that the poster does not personally know, rather than connect and personally engage with friends and family," but the platform does making sharing content with contacts an important feature.
 
The amended complaint was filed the day of the FTC’s extended deadline.

One of the new areas of focus in the case is the importance of the mobile app space since the beginning of the 2010s and how Facebook allegedly worked to stymie emerging threats in it.

“Businesses that sought to ride the mobile wave—or use it to challenge entrenched desktop-bound competitors—had to act promptly,” the complaint argues.

Facebook CEO Mark ZuckerbergMark ZuckerbergHillicon Valley — Amazon draws COVID scrutiny Meta exec who co-founded Diem digital currency leaving the company Two lawyers who filed suit challenging election results ordered to pay nearly 7K MORE was allegedly aware that his social media platform had not translated well to mobile, including for advertising.

The complaint highlights internal emails from Zuckerberg talking about the threats that apps like Instagram could pose if they had time to develop their own “social mechanics.”

Facebook’s 2013 acquisition of the web analytics firm Onavo illustrates this point — by buying it up, Facebook had new data to track what apps were on the up and deny others that info.

“With our acquisition of Onavo, we now have insight into the most popular apps,” an internal slide deck at the time said, per the complaint. “We should use that to also help us make strategic acquisitions.” 

The firm’s acquisitions of Instagram and WhatsApp make up the bulk of the complaint’s argument about anti-competitive purchases.

The complaint includes a series of emails between Zuckerberg and senior staff about those acquisitions where potential for competition is discussed outright.

Facebook’s treatment of app developers is also called into question. The complaint argues that the social media giant forced upstarts interested in using the platform into agreements that hamstrung their potential for growth.

“With the wide adoption of Facebook Platform, Facebook became important infrastructure for third-party apps and obtained immense power over apps’ developmental trajectories, competitive decisionmaking, and investment strategies,” it notes. “Facebook has used this power to deter and suppress competitive threats to its personal social networking monopoly.”

Antitrust experts and former commissioners and agency staff have said the Facebook case could be the most important case the agency takes targeting big tech. But the FTC is working under the parameters of antitrust laws critics, including the new chair Lina KhanLina KhanHillicon Valley — Chinese disinformation accounts removed GOP resistance to Biden FCC nominee could endanger board's Democratic majority Hillicon Valley — Inside the Twitter shakeup MORE, have argued are outdated to go after the market power of the tech giants. 

A set of bills that advanced out of the House Judiciary Committee in June would overhaul antitrust law in a way the bipartisan supporters of the legislation say would better address the market power of the new wave of industry giants.

The bills would define a “covered platform” in part by having at least 50 million monthly active users or 100,000 monthly active business users, and would allow regulatory agencies to curtail some of the concerns the FTC is running up against in court to show Facebook’s dominance. 

The FTC is facing an additional hurdle in its case against Facebook, as the social media platform steps up its calls for Khan to recuse herself based on comments she publicly made before joining the agency.

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Sen. Amy KlobucharAmy KlobucharBiden should seek some ideological diversity House passes bipartisan bills to strengthen network security, cyber literacy Klobuchar confident spending bill will be finished before Christmas MORE (D-Minn.), chair of the Senate Judiciary subcommittee on antitrust, praised Thursday’s refiling.

“Facebook’s long history of anticompetitive behavior is no secret,” she said in a statement. “The company’s acquisitions of Instagram and WhatsApp have made the digital landscape less competitive, ultimately harming consumers.”

—Updated at 3:10 p.m.