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Far From Being Off the Hook, Facebook is Waiting For the FTC’s Next Move

Posted  August 2, 2021
By Robert L. Begleiter, Taline Sahakian

The face-off between Facebook and federal and state antitrust enforcers is not over.

As you may recall, in late June 2021, the Judge James E. Boasberg of the United States District Court for the District of Columbia dismissed the Federal Trade Commission’s (“FTC”) and the state attorney generals’ (“State AGs”) complaints against Facebook in two opinions issued the same day.[1]  While it dismissed the States’ complaint with prejudice (which means the States do not get another bite at the apple unless they win on appeal), the Court gave the FTC an opportunity to file an amended complaint to address deficiencies of the first complaint.  Last week the FTC obtained a 21-day extension to file that amended complaint.  And the State AGs announced on July 28, 2021, that they will appeal the ruling dismissing their case.

The complaints, filed on December 9, 2020, alleged that Facebook had monopolized the market for Personal Social Networking Services (“PSNS”) in the United States.   The enforcers relied on (1) Facebook’s acquisitions of Instagram and WhatsApp, which were perceived as being well-positioned to erode Facebook’s monopoly; and (2) Facebook’s policies that restricted interoperability between Facebook and certain apps impeding competition. Both the FTC and State AGs sought divestitures of Instagram and WhatsApp, as well as other equitable relief.

What can we expect from the FTC in an amended complaint?  In his opinion, Judge Boasberg gave some specific guidance on a path forward for the FTC.

First, he admonished the FTC for failing to support its assertion that Facebook had a dominant share of the PSNS market.  The bare allegation that Facebook has a “dominant share of [the PSNS] market (in excess of 60%)” was insufficient.  The Court held that the “unusual” market at issue required the FTC to plead more facts about how the FTC defined the market, what metric or methods it used to calculate Facebook’s share, and who it could identify as the other providers of PSN services in the market.  The Court also found the FTC’s allegations of “direct proof” of market power to be insufficient.[2]  The FTC’s amended complaint will likely provide more detail on market definition, market power and the calculation of Facebook’s share.

Second, the Court indicated that it would not entertain an injunctive relief claim with respect to Facebook’s policy of refusing interoperability permissions with competing apps because the most recent alleged instance of refusal occurred in 2013, more than seven years before the FTC filed its lawsuit.  Unless the FTC has more recent evidence of Facebook’s refusals to grant interoperability permissions and can show such refusals fit into the legal framework for analyzing “refusals to deal” articulated by the Court, the FTC may scale back that aspect of its claim.

Whether the FTC will continue to seek divestitures of WhatsApp and Instagram remains to be seen.  The Court rejected Facebook’s argument that the FTC lacks authority to seek injunctive relief against the acquisitions of WhatsApp and Instagram merely because they were consummated years ago.  But at the same time, it ruled in the State AGs’ case that their request for divestiture of those mergers was barred by the doctrine of laches.  If the FTC continues to seek those divestitures in its amended complaint, the elements of that request for relief may well by affected by how the Court of Appeals disposes of the State AGs’ appeal.

While waiting for the FTC’s amended complaint, Facebook issued its own “shot across the bow” on July 14, 2021, when it petitioned the FTC to recuse its chair, Lina Khan, from participating in any decisions concerning the agency’s case against Facebook.[3]  That petition is still under consideration, but it is very unlikely that the Commission will allow Facebook to influence internal agency decision-making.

More to come on August 19, when we read the FTC’s amended complaint.

Edited by Gary J. Malone

[1]             See Opinion in FTC v. Facebook, Inc., available at: gov.uscourts.dcd.224921.73.0.pdf (courtlistener.com) & Opinion in State of New York et. al. v. Facebook, Inc., available at: gov.uscourts.dcd.224923.137.0.pdf (courtlistener.com)

[2]             See Opinion at p. 19, where the Court notes: “Although the FTC briefly suggests in its Opposition that if can offer direct proof of market power, see ECF No. 59 (FTC Opp.) at 8, it spends nearly its entire brief arguing why it has sufficiently pleaded indirect proof – viz., that Facebook has a dominant share of a relevant product and geographic market (the United States market for Personal Social Networking Services) protected by entry barriers.“

[3]             See Facebook-Inc.s-Petition-to-Recuse-Chair-Khan.pdf (fb.com)

Tagged in: Antitrust Enforcement, Antitrust Litigation,

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