New FTC lawsuit against Facebook shows Biden administration is getting serious about anti-trust

Antitrust experts welcome FTC lawsuit seeking to force social media giant to divest WhatsApp and Instagram
Federal Trade Commission director Lina Khan is pictured. Photo: Shah Ali

First published at Common Dreams

The Federal Trade Commission has filed a revised antitrust lawsuit against Facebook, providing additional data and stronger details to back up its allegations that the corporation has maintained a monopoly on social media services for the past decade by “illegally acquiring innovative competitors and burying successful app developers.”

The amended complaint (pdf) comes about two months after the FTC’s initial case was dismissed because, a federal judge said in late June, the regulatory agency had failed to present sufficient evidence to support its claim that Facebook has monopolized the social networking sector.

Politico noted that “the suit seeks to force Facebook to sell off Instagram and WhatsApp, in what would be the United States’ first court-ordered breakup of a company on antitrust grounds since AT&T in the early 1980s.”

While the FTC’s overall argument hasn’t changed much, the updated lawsuit is almost twice as long and includes more statistical analysis and facts to bolster the government’s accusation that “after repeated failed attempts to develop innovative mobile features for its network, Facebook instead resorted to an illegal buy-or-bury scheme to maintain its dominance.”

“Facebook lacked the business acumen and technical talent to survive the transition to mobile,” Holly Vedova, acting director of the FTC’s bureau of competition, said in a statement. “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 anti-competitive than if Facebook had bribed emerging app competitors not to compete,” Vedova continued. “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.”

According to the FTC, Facebook “unlawfully acquired innovative competitors with popular mobile features that succeeded where Facebook’s own offerings fell flat or fell apart.” The most prominent examples include Instagram, its one-time photo sharing rival, and the messaging app WhatsApp, which Facebook purchased in 2012 and 2014, respectively.

“And to further moat its monopoly, Facebook lured app developers to the platform, surveilled them for signs of success, and then buried them when they became competitive threats,” said the FTC, which added:

After starting Facebook Platform as an open space for third-party software developers, Facebook abruptly reversed course and required developers to agree to conditions that prevented successful apps from emerging as competitive threats to Facebook. By pulling this bait and switch on developers, Facebook insulated itself from competition during a critical period of technological change. Developers that had relied on Facebook’s open-access policies were crushed by new limits on their ability to interoperate. Facebook’s conduct not only harmed developers such as Circle and Path, but also deprived consumers of promising and disruptive mavericks that could have forced Facebook to improve its own products and services. 

Once Facebook lacked serious competition, the FTC noted, it was “able to hone a surveillance-based advertising model and impose ever-increasing burdens on its users.”

Facebook on Thursday called the new lawsuit “meritless,” and noted that the FTC approved the company’s acquisitions of Instagram and WhatsApp years ago. The agency, however, is under new leadership now. President Joe Biden appointed Lina Khan, a 32-year-old “antitrust trailblazer,” to lead the FTC after she was confirmed by a bipartisan Senate vote in June.

Khan, who was just days into her role as FTC chair when the first antitrust lawsuit against Facebook was thrown out, “represents a wave of new thinking about the industry among administration officials and many lawmakers, arguing that the government needs to take far more aggressive action to stem the power of technology giants like Facebook, Google, Amazon and Apple,” the New York Times reported Thursday. Biden, meanwhile, “has appointed multiple regulators with similar aims and lawmakers proposed updates to antitrust laws to target the power” of Big Tech.

The FTC’s new lawsuit was met with praise from progressives lawmakers and advocates.

Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, tweeted that she was happy to see Khan and the FTC “continuing to hold tech giants like Facebook accountable while taking on their monopolistic practices.”

In a statement, Ed Mierzwinski, senior director for consumer programs at U.S. PIRG, said that “fortunately, while Facebook could buy or bury competitors, it can neither buy nor bury the revitalized FTC under new Chairperson Lina Khan.”

And in a series of tweets, the American Economic Liberties Project (AELP) applauded the FTC’s amended complaint, describing it as “a huge and promising step toward restoring the promise of the American economy.”

The anti-monopoly group added that “it shows the new leadership of the FTC is committed to pursuing economic fairness and meaningful competition, no matter how powerful the enemies it makes doing so.”

According to the Times:

The criticisms of the first version of the Facebook case levied by the judge, James E. Boasberg of the District Court of the District of Columbia, showed the steep challenges regulators face. Although the companies dominate the markets they are in—social media, in the case of Facebook—the courts often look at whether prices are rising as an indication of monopolization. Facebook’s most popular services are free.

“No one who hears the title of the 2010 film The Social Network wonders which company it is about,” Judge Boasberg wrote. “Yet, whatever it may mean to the public, ‘monopoly power’ is a term of art under federal law with a precise economic meaning.” He instructed the FTC to back up claims that Facebook controlled 60% of the market for “personal social networking” and that it blocked competition.

In the past, Facebook has defended itself from charges of anti-competitive behavior by pointing to the success of other companies, including new entries like TikTok, as proof that it doesn’t engage in monopolistic practices.

While many of the statistics in the public version of the suit have been redacted because the data are proprietary, the FTC “refuted Facebook’s claims that it has many competitors in social networking, instant messaging, and entertainment,” the Times noted.

 

The company’s closest competitor is Snapchat, which has tens of millions fewer users per month than either Facebook or Instagram, the top social media platforms in the U.S. As for other apps, the FTC asserted they are not comparable to Facebook, which exists in a league of its own.

Because Facebook’s products are for “personal social networking,” the FTC said they are distinct from specialized sites or neighborhood-based apps like LinkedIn and NextDoor. The agency added that Facebook’s products are also “different from messaging services like Signal and iMessage because users don’t typically use those services to send notes to big groups, nor do they use those services to find contacts,” the Times reported.

Finally, the agency said that Facebook must be distinguished from Twitter, YouTube, and TikTok because content on those sites is meant to be consumed by the broader public, including strangers, unlike content created on Facebook, which is typically shared with a smaller circle of friends and family.

“Facebook has today, and has maintained since 2011, a dominant share of the relevant market for U.S. personal social networking services, as measured using multiple metrics: time spent, daily active users, and monthly active users,” the FTC said in its amended complaint. “Individually and collectively, these metrics provide significant evidence of Facebook’s durable monopoly power in social networking services.”

“Without meaningful competition,” the agency added, “Facebook has been able to provide lower levels of service quality on privacy and data protection than it would have to provide in a competitive market.”

As Common Dreams has reported, Facebook and Amazon responded to Khan’s appointment by pressuring her to recuse herself from antitrust cases involving the tech giants, prompting Jayapal and Sens. Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.), and Cory Booker (D-N.J.) to send a letter earlier this month telling the CEOs of the companies to stop trying to “strip… Khan of her authority to enforce antitrust law.”

In their new complaint, the FTC made clear that Khan will not be recusing herself from the lawsuit against Facebook. “As the case will be prosecuted before a federal judge, the appropriate constitutional due process protections will be provided to the company,” the agency said.

Echoing the AELP’s call for lawmakers to strengthen antitrust laws, Mierzwinski said that “Congress still needs to give our antitrust enforcers better tools, but it’s clear that this FTC will fight to protect consumers and competitors with the tools it has.”

Facebook has until October 4 to respond in court to the amended complaint.