Facebook Files Motion to Dismiss FTC’s Amended Complaint

The back-and-forth between Facebook and the Federal Trade Commission continued this week, as the company filed a second motion to dismiss the amended complaint filed by the agency in August. In late June, U.S. District Court Judge James Boasberg dismissed separate antitrust lawsuits filed against Facebook by the FTC and 48 state attorneys general last December, giving the FTC 30 days to amend its lawsuit—an extension was granted later—and dismissing the suit by the attorneys generals altogether. Facebook’s arguments against the FTC suit remained consistent. The social network wrote in a Newsroom post, “After a year-and-a-half of investigation, the FTC’s second attempt shows again that this is an attack on procompetitive acquisitions the FTC itself cleared more than one decade ago. In turning antitrust law on its head, the commission sends the message that no deal is ever truly final, and that successful American businesses can be punished for innovating and improving products that give people greater value and choice.” Facebook claimed that there is no factual basis for the FTC’s allegations that it has a dominant share of the personal social networking services market, accusing the agency of relying on commercial data on usage of three “cherry-picked” applications—Facebook, Instagram and Snapchat—and adding that the FTC has not presented any facts establishing that competitors to Facebook faced “barriers to entry.” The company wrote, “Instead, the FTC’s factual allegations taken as true establish the opposite: Entry was not only possible, but it in fact occurred, including by startups like Instagram and Snapchat. And, again accepting the FTC’s factual allegations as true, the FTC alleges nothing that would prevent firms with established networks—the agency names several, including YouTube (Google), iMessage (Apple), Twitter, and TikTok (ByteDance)—from becoming PSNS rivals.” Facebook also said the commission did not present facts demonstrating that it limited its ads output to cause its prices to rise above competitive levels, denying those allegations. The company denied FTC claims that it maintained a monopoly via unlawful “exclusionary conduct,” and it dismissed speculation by the agency that Instagram and WhatsApp would be better products had they remained independent. Finally, the company maintained that current FTC chair Lina Khan should have been recused from the vote to authorize the amended complaint due to her authorship of a House Judiciary Subcommittee report asserting that Facebook violated Section 2 of the Sherman Act by maintaining an illegal monopoly. When Boasberg dismissed the suits in June, he said he was looking for a metric or more detail about how to determine if Facebook is a monopoly. The FTC alleged that Facebook “maintained a dominant share of the U.S. personal social networking market (in excess of 60%)” since 2011, but this was too light on detail for the judge. Two key points in the amended complaint were Facebook’s response to the emergence of the mobile web in the early 2010s and the conditions it imposed on developers using its previously open platform. The FTC cited Facebook CEO Mark Zuckerberg as saying, “We’re vulnerable in mobile,” as well as a major shareholder it did not name expressing concern that the company “ran the risk of the unthinkable happening—being eclipsed by another network.” As for platform, Facebook’s policy changes forced developers to agree to conditions that prevented successful apps from emerging as competitors, according to the FTC. The commission alleged that Facebook continues to monitor the industry for competitive threats to its monopoly, writing in its amended complaint that the company is likely to impose anticompetitive conditions on access to its platform or seek to acquire companies it deems to be potential threats, especially when it faces “acute competitive pressures from a period of technological transition.” The FTC also asked the court to require Facebook to divest assets including but not limited to Instagram and WhatsApp, as well as to file periodic compliance reports with the FTC and adhere to any other requirements the court deems necessary. The agency wrote in its amended complaint, “Facebook’s unlawful course of conduct to maintain its monopoly continues today and must be enjoined. Facebook continues to hold and operate the assets it acquired unlawfully and continues to keep them positioned to provide a protective ‘moat’ around its personal social networking monopoly. Moreover, Facebook continues to monitor competitive threats and will seek to acquire or kneecap them unless enjoined.” The FTC filed its amended complaint versus Facebook Aug. 19 in the U.S. District Court for the District of Columbia, once again accusing the company of resorting to “an illegal buy-or-bury scheme to maintain its dominance,” by unlawfully acquiring competitors with popular mobile features, as well as luring app developers to its platform and burying them when they became competitive threats. FTC Bureau of Competition acting director Holly Vedova said in a statement at the time, “Facebook lacked the business acumen and technical talent to survive the transition to mobile. After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat. This conduct is no less anticompetitive than if Facebook had bribed emerging app competitors not to compete. The antitrust laws were enacted to prevent precisely this type of illegal activity by monopolists. Facebook’s actions have suppressed innovation and product quality improvements. And they have degraded the social network experience, subjecting users to lower levels of privacy and data protections and more intrusive ads. The FTC’s action today seeks to put an end to this illegal activity and restore competition for the benefit of Americans and honest businesses alike.” Facebook concluded in its Newsroom post, “The FTC’s amended complaint fails to fix the deficiencies of its first attempt and should suffer the same fate. The FTC’s fictional market ignores the competitive reality: Facebook competes vigorously with TikTok, iMessage, Twitter, Snapchat, LinkedIn, YouTube and countless others to help people share, connect, communicate or simply be entertained. The FTC cannot credibly claim that Facebook has monopoly power because no such power exists. We continuously innovate and improve our products and services to earn people’s time and attention because we have to in order to compete with rivals like TikTok, which recently announced that it reached 1 billion monthly active users.”

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Facebook Files Motion to Dismiss FTC’s Amended Complaint

The commission’s initial lawsuit was dismissed in June

David Cohen

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David Cohen