FTC blasts “anticompetitive actions to neutralize, hinder, or deter” competitors.
The Federal Trade Commission on Wednesday urged a federal judge in DC to reject Facebook’s request to dismiss the FTC’s high-stakes antitrust lawsuit. In a 56-page legal brief, the FTC reiterated its arguments that Facebook’s profits have come from years of anticompetitive conduct.
“Facebook is one of the largest and most profitable companies in the history of the world,” the FTC wrote. “Facebook reaps massive profits from its [social networking] monopoly, not by offering a superior or more innovative product because it has, for nearly a decade, taken anticompetitive actions to neutralize, hinder, or deter would-be competitors.”
The FTC’s case against Facebook focuses on two blockbuster acquisitions that Facebook made early in the last decade. In 2012, Facebook paid $1 billion for the fast-growing startup Instagram. While Instagram the company was still tiny—it had only about a dozen employees at the time of the acquisition—it had millions of users and was growing rapidly. Mark Zuckerberg realized it could grow into a serious rival for Facebook, and the FTC alleges Zuckerberg bought the company to prevent that from happening.
The story is the same for WhatsApp, the FTC says. “Facebook’s own messaging app, Facebook Messenger, was launched in 2011, but was already too far behind WhatsApp to prevent WhatsApp from gaining scale,” the FTC writes. “In 2014, Facebook acquired WhatsApp for $19 billion. The acquisition neutralized WhatsApp as a nascent threat and thereby deprived, and continues to deprive, users of the benefits of competition from an independent WhatsApp.
Finally, the FTC argues that Facebook attached anticompetitive conditions to companies that joined Facebook Platform, a set of APIs that allowed third-party apps to obtain data about Facebook users.
“Between 2011 and 2018, Facebook made Facebook Platform available to developers only on the condition that their apps neither competed with Facebook nor promoted its competitors,” the FTC writes. “Facebook punished apps that violated these conditions by terminating their access to the Find Friends API and other APIs.”
The motion to dismiss is the first major step in the litigation process. It allows defendants to quickly dispose of lawsuits that are frivolous or based on invalid legal theories. At this stage in the litigation, the court is supposed to assume that the plaintiff’s allegations are true and dismiss the lawsuit if the plaintiff would lose the case anyway.
But the FTC argues that most of Facebook’s motion to dismiss quibbles with facts in the FTC’s complaint—such as the FTC’s claim that Facebook has market dominance—rather than arguing that the FTC’s case is legally groundless. Facebook will have a chance to dispute the FTC’s factual claims, of course. But it will have to wait until later phases of the litigation process to do that, the FTC said.
The FTC filed its lawsuit during the Trump administration, but we shouldn’t expect the agency to be any more sympathetic to Facebook under President Joe Biden. Biden recently nominated Lina Khan, an antitrust crusader whose scholarship has focused on tech giants like Amazon, to a seat on the five-member FTC. If she is confirmed, we can expect her to be an advocate for vigorous pursuit of the FTC’s Google and Facebook cases—and perhaps launch new cases against other tech giants as well.