WASHINGTON – The Federal Trade Commission re-targeted Facebook Thursday, increasing its allegations that the company was a monopoly illegally suppressing competition in an attempt to overcome the skepticism of a federal judge who dismissed the agency’s original case two months ago .
The lawsuit filed on Thursday contains the same overall arguments as the original, namely that Facebook’s Instagram and WhatsApp acquisitions were made to create a “ditch” for its monopoly on social networks, and argues that the social network should be disbanded. But the updated lawsuit is nearly twice as long and has more facts and analysis that the agency says it better supports the government’s allegations.
“Facebook lacked the business acumen and technical talent to make the transition to cell phones,” Holly Vedova, the acting director of the agency’s competition bureau, said in a statement. “After failing to compete with new innovators, Facebook illegally bought them or buried them when their popularity became an existential threat.”
Facebook replied, “There was no valid claim that Facebook was a monopoly – and that has not changed. Our Instagram and WhatsApp acquisitions were reviewed and approved many years ago, and our platform policies were lawful. “
The agency had to re-file the case after the judge in charge said in June that the government had not provided enough evidence that Facebook was a monopoly on social networks. The judge’s decision, and a similar one he made in one of more than 40 states brought against the company, dealt a staggering blow to regulatory efforts to contain big tech.
His decision marked the first major test for Lina Khan, the FTC chairwoman, who had only been in office for days at the time. Ms. Khan represents a wave of new thinking in the industry among administrators and many lawmakers, arguing that the government needs to take far more aggressive measures to curb the power of tech giants like Facebook, Google, Amazon and Apple. President Biden has appointed several regulators with similar goals, and lawmakers have proposed updates to antitrust laws to combat the power of tech companies.
Criticism of the first version of the Facebook case by Judge James E. Boasberg of the District Court of the District of Columbia highlighted the major challenges that regulators are facing. Although companies dominate the markets in which they operate – social media, in the case of Facebook – the courts often examine whether prices are rising as a sign of monopoly. The most popular services from Facebook are free.
“Nobody who hears the title of the film ‘The Social Network’ from 2010 wonders which company it is about,” wrote Richter Boasberg. “But whatever it means to the public, ‘monopoly power’ is a federal art form with a precise economic meaning.” He directed the FTC to back up claims that Facebook controlled 60 percent of the “personal social networking” market and that Competition blocked.
Ms. Khan then faced a choice of how to deal with Judge Boasberg’s decision. One way was to drop the case entirely, while another was to expand it with even broader allegations. Instead, they went more of a middle ground, filing the lawsuit with more detail and a fuller account of the company, and what the agency says is a pattern of anti-competitive behavior since Mark Zuckerberg co-founded it at Harvard in 2004.
The revised lawsuit was approved 3: 2 by the commission, with the commission’s three Democrats voting in favor and the two Republican members against.
In the new complaint, the FTC provides more details to support government claims that Facebook has a monopoly on social networks. But in the public version of the lawsuit, many statistics have been blacked out because the numbers are proprietary.
The agency said that Facebook – the company’s largest service, known within the company as Facebook Blue – and Instagram are the leading social networks in the US, well ahead of its closest competitor, Snapchat.
The agency refuted Facebook’s claims that it had many competitors in social networking, instant messaging, and entertainment. The agency argued that Facebook’s products are intended for “personal social networks”, which distinguishes them from specialized social networks such as the professional network LinkedIn or the neighborhood site NextDoor. The FTC added that Facebook’s products are also different from messaging services like Signal and iMessage in that users don’t typically use these services to send notes to large groups, nor do they use these services to find contacts.
And the agency said Facebook was different from Twitter, YouTube, and TikTok because content on those sites was usually created for the public, rather than targeted at specific people on a social network.
“Today and since 2011, Facebook has a dominant share of the relevant market for US personal social networking services, measured using several metrics: time spent, daily active users and monthly active users,” the agency said in its complaint.
The core argument of the FTC is that Facebook tried to maintain a monopoly over social networks through the acquisitions of Instagram in 2012 and WhatsApp in 2014. Facebook in the new mobile environment, “the agency said in its complaint.
The lawsuit also states that as of 2010, the company stifled competitors like Circle, a social network, and Vine, a short video platform, by pushing new boundaries for external developers whose products are connected to Facebook to work with other social ones Networks added.
“Facebook does not beat competitors by improving its own product, but by imposing anti-competitive restrictions on developers,” the lawsuit said.
Facebook has criticized the arguments as a revisionist story, pointing out that the FTC reviewed the mergers with Instagram and WhatsApp and did not block deals.
“The FTC’s allegations are an attempt to rewrite antitrust laws and reverse set expectations for the merger review by telling the business community that no sale is ever final,” Facebook said Thursday.
The company has until October 4th to respond to the new complaint or to request Mr. Boasberg to terminate the proceedings. Last month it filed a motion for Ms. Khan to withdraw from the agency’s case, saying her work on a House investigation into platform monopolies showed a bias towards the company. The FTC said Thursday it had dismissed that petition, saying that Facebook would receive “reasonable constitutional protection from due process” as the case would be heard by a federal judge.
Bill Kovacic, a former FTC chairman, said the agency had done enough to “fight another day”.
“The judge said ‘show your work’ and it appears you have done enough to accommodate that request,” he said.
But he warned that the case would face a long and steep challenge. The FTC has won fewer than 20 of its monopoly cases in the appeals court since it was founded more than 100 years ago, he said.
“Facebook will fight this bitterly,” added Kovacic.