By Madeleine Hickman, Symposium Director
The FTC is gaining ground with the Facebook monopoly lawsuit after the D.C. Circuit Court denied tech giant’s motion to dismiss earlier this year.
On Dec. 9, 2020, the Federal Trade Commission (“FTC”), along with 48 U.S. states and territories, filed antitrust lawsuits against social media giant Facebook, Inc. (“Facebook”) (a/k/a “Meta”). The FTC’s complaint alleges that Facebook’s anticompetitive acts violate Section 2 of the Sherman Act, 15 U.S.C. § 2, and thus constitute unfair methods of competition in violation of Section 5(a) of the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 45(a). Specifically, the complaints allege that:
- the acquisition and continued control of Instagram has neutralized a significant independent personal social networking provider
- the acquisition and continued control of WhatsApp has neutralized a significant competitive threat to Facebook’s personal social networking monopoly; and
- the imposition and enforcement of anticompetitive conditions on access to APIs suppress and deter competitive threats to its personal social networking monopoly.
The government charged that Facebook “has for many years been unlawfully stifling competition and strengthening its monopoly.” Accordingly, the FTC sought relief from the court including divestiture of Instagram and WhatsApp, as well as injunctive relief preventing Facebook from pursuing anticompetitive practices.
In its subsequent motion to dismiss the complaint (FTC v. Facebook, Inc.), Facebook contended the FTC failed to adequately allege that Facebook has maintained monopoly power and harms consumers. Judge James E. Boasberg in June 2021 found the FTC failed to prove that Facebook holds monopoly power in the U.S. personal social networking market. He dismissed the FTC’s complaint without prejudice. Following Judge Boasberg’s rulings, shares of Facebook rose more than 4 percent, “sending the social media company’s market capitalization above $1 trillion for the first time.”
In July 2021, while the FTC was busy gathering additional information for its amended complaint, Facebook petitioned FTC Chair Lina M. Khan and the Commission “to recuse Chair Khan from participating in any decisions concerning whether and how to continue the FTC’s antitrust case against the company.” The petition argued that “Chair Khan, well before becoming a commissioner, had already decided the material facts relevant to Facebook’s liability in the Commission’s pending antitrust lawsuit and already reached legal conclusions that Facebook was liable under the antitrust laws.” After review by the FTC’s Office of General Counsel, the Office of the Secretary dismissed Facebook’s petition for recusal, finding that, “as the case will be prosecuted before a federal judge, the appropriate constitutional due process protections will be provided to the company.”
The FTC in August 2021 filed an amended complaint against the social media giant. The amended complaint included “additional data and evidence to support the FTC’s contention that Facebook is a monopolist that abused its excessive market power to eliminate threats to its dominance.” According to the amended complaint, “Facebook continues to monitor the industry for competitive threats to its personal social networking monopoly.” The amended complaint further alleges that “Facebook is likely to impose anticompetitive conditions on access to its platform and seek to acquire companies it perceives as potential threats, especially when it next faces ‘acute competitive pressures from a period of technological transition.’” Facebook again moved to dismiss the amended complaint, “contending that the FTC’s latest effort is akin to rearranging the deck chairs on the Titanic.”
In October 2021, Frances Haugen, a former Facebook product manager, leaked Facebook’s internal company research and documents to media outlets throughout the United States. The documents contained information indicating that the company has knowledge “of the harms its apps and services cause but either doesn’t rectify the issues or struggles to address them.” The reports resulted in increased scrutiny against Facebook. Haugen later testified before a Senate panel about the reports. On Oct. 28, in the wake of the Haugen whistleblower scandal, Facebook announced that it had changed its company name to Meta. For the purposes of this article, “Facebook” shall refer to the company now known as “Meta.”
In January 2022, the FTC cleared its first major hurdle of the case when Judge Boasberg issued a ruling denying Facebook’s motion to dismiss. The court held that “[t]he FTC has now alleged enough facts to plausibly establish that Facebook exercises monopoly power” and “that the company’s dominant market share is protected by barriers to entry into that market.” Furthermore, “the agency has also explained that Facebook not only possesses monopoly power, but that it has willfully maintained that power through anticompetitive conduct.” Finally, the court found that Facebook’s attempts to force the recusal of Chair Kahn were in vain, noting that “such contention misses its target, as Khan was acting in a prosecutorial capacity, as opposed to in a judicial role, in connection with the vote” to proceed with the suit. The court’s ruling gives the government’s case a new life and will allow the Commission to move forward to the discovery phase of the case.
Want to know more? Check out the Belmont Entertainment Law Journal’s 2022 publication later this spring!