Judge grants FTC second chance to challenge Facebook on antitrust grounds

FTC Commissioner-designate Lina M. Khan testifies during a confirmation hearing of the Senate Commerce, Science and Transportation Committee on Capitol Hill in Washington, DC on April 21, 2021.

Graeme Jennings | AFP | Getty Images

A judge gave the Federal Trade Commission a second chance to pursue charges of illegal monopolization against Facebook, dismissing the company’s request to dismiss the lawsuit in a new case on Tuesday.

U.S. District Judge James Boasberg granted Facebook’s previous petition to dismiss over the summer, but allowed the FTC to modify its complaint and try again. He also dismissed a similar lawsuit by a coalition of state attorneys general without granting an opportunity for reconsideration, although states have indicated they intend to appeal the decision.

“The Federal Trade Commission’s first antitrust lawsuit against Facebook, Inc. stumbled because this court dismissed the lawsuit last June,” Boasberg wrote in Tuesday’s filing. He said that although the Commission’s basic theory remains the same in its updated complaint, “The facts alleged this time around to strengthen these theories, however, are much more robust and detailed than before, in particular with regard to the contours of the alleged monopoly of the defendant. “

Shares of Facebook owner Meta barely moved on the news and were still positive for the day Tuesday afternoon.

Boasberg initially dismissed the FTC’s complaint because he said she did not plausibly allege Facebook’s monopoly power in what she defined as the market for personal social networking services. This market definition sought to exclude other social media platforms like YouTube, used primarily for watching videos, or LinkedIn, used for professional networking.

While Boasberg argued that the FTC may still face challenges in proving its claims, he wrote on Tuesday that “it has now passed the plea bar and may proceed with the discovery.”

Boasberg said the FTC achieved this by providing enough alleged facts to plausibly establish Facebook’s monopoly power in the market, claim that its market share is protected by barriers to entry, and claim that it is “willfully maintained” through anti-competitive behavior, in particular through its acquisitions of Instagram and WhatsApp.

The judge also dismissed Facebook’s claim that the FTC’s vote to file the amended complaint should be considered invalid because the company believed FTC President Lina Khan should have recused himself. Facebook argued that Khan’s previous writings and work had shown that she had prejudged her responsibility, which should be grounds for recusal, but Khan still participated in the vote.

“The Court considers that such a claim misses its mark, as Khan was acting as a prosecutor, as opposed to a judicial role, in connection with the vote,” Boasberg wrote.

Still, Boasberg dealt the FTC a little bit, saying it couldn’t follow through on its claims that Facebook’s interoperability policies for developers on its platform were helping it maintain its dominance. He said it was because Facebook dropped the policies in 2018 and reportedly stopped enforcing them even earlier than that.

“Ultimately, whether the FTC will be able to prove its case and prevail in summary judgment and trial is up for grabs,” the judge wrote. “The court refuses to engage in such speculation and simply concludes that at this stage of the dismissal motion, where the FTC’s allegations are considered to be true, the agency has made a plausible claim for relief under the ‘Section 2 of the Sherman Act. “

“Today’s ruling narrows the scope of the FTC case by dismissing allegations about our platform’s policies,” a spokesperson for Meta said in a statement. “He also acknowledges that the agency faces a ‘daunting task’ to prove its arguments over two acquisitions it authorized years ago. We are confident the evidence will reveal the fundamental weakness of the allegations. Our investments in Instagram and WhatsApp turned them into what they are today. They’ve been good for the competition and good for the people and businesses that choose to use our products. “

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