Sun, September 26, 2021

business

FTC refiles antitrust case against Facebook, argues no social network comes close to its scale


WASHINGTON - The Federal Trade Commission on Thursday refiled a bolstered version of its antitrust case against Facebook in a last-ditch effort to save what has been described as its most important competition lawsuit in decades.

3

View

Seeking to overcome a judge's stunning dismissal of its original lawsuit because the FTC had not presented ample evidence that Facebook is a monopoly, the FTC argues in its new filing that Facebook is in a class of its own and shouldn't be compared to popular apps such as TikTok, Twitter and Pinterest, which attract a public-facing audience. The complaint argues that Snapchat, with tens of millions fewer monthly users than either Facebook or Instagram, is the company's next-closest competitor.

"Without meaningful competition, 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," the FTC said in the complaint.

Facebook spokesman Christopher Sgro said in a statement that it was "unfortunate" that the FTC decided to proceed with the case. "There was no valid claim that Facebook was a monopolist - and that has not changed," he said. "We fight to win people's time and attention every day, and we will continue vigorously defending our company."

It remains to be seen whether this renewed argument will be enough to persuade the judge, in a legal battle that will be an early and much anticipated assessment of FTC Chair Lina Khan. Khan is under immense political pressure to score a victory in the case, as Facebook's reputation in Washington has deteriorated dramatically in recent years following privacy and other scandals.

"I don't think there's a fundamental change in the structure of the complaint, other than to say that this doesn't just hurt competition but also consumers," said George Hay, a professor at Cornell Law School who served in the Justice Department's antitrust division in 1970s.

Although the filing does not offer profoundly new evidence, it provides a more detailed description of the company's history alongside an explicit explanation of how Facebook's alleged behavior harms consumers. It notably expands on an argument that Facebook's platform, which allows people to maintain relationships with family and friends online, is singular and a wide range of companies that aim to distribute content to strangers should not be considered competitors.

Launched by Khan's predecessor, who was appointed by President Donald Trump, the case is expected to be a years-long, costly battle, and its outcome will be a demonstration of the new chief's ability to use her position to follow through on promises to impose boundaries on the business practices of Silicon Valley giants. The Facebook case is the most high-profile challenge that the agency has brought against a tech company in decades, and it's being watched as a bellwether, not just of the FTC and Khan's performance, but of the growing movement in Washington to curb concentration in the tech industry.

In the suit, the agency seeks to prove that Facebook attempted to control prices and exclude competition, through strategic moves to acquire and neutralize rivals, rather than innovating on their practices.

"In navigating its own transition from small start-up to business behemoth, Facebook's leadership came to the realization - after several expensive failures - that it lacked the business talent required to maintain its dominance amid changing conditions," the suit says. "Unable to maintain its monopoly by fairly competing, the company's executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed."

Following U.S. District Judge James Boasberg's assertion that the FTC's initial complaint did not fully define the company's market share, the new filing argues that Facebook's competition is limited to social platforms that connect users with people they already know. Notably, the agency says that TikTok, which according to one survey overtook Facebook in number of downloads, is not its competition.

Industry-backed groups criticized the FTC's definition of the social networking market, arguing that it defied logic to exclude TikTok and Twitter as rivals of Facebook. Carl Szabo, vice president and general counsel of NetChoice, which represents tech companies including Facebook, argued that when politicians criticize social media, they're usually referring to many companies beyond Facebook.

"Never do they say social media is only Facebook," he said. "They're complaining about all of them because they are interchangeable, because they're competitors."

Charlotte Slaiman, the competition policy director at the consumer group Public Knowledge, said the new filing was a "really strong complaint" and included the data and details needed to respond to the judge's initial concerns about the case.

"It's got those additional details to go further toward proving the case that Facebook has a monopoly," Slaiman said.

This is the latest development in a saga that began in December, when the FTC first filed the suit challenging the company's pattern of acquiring or crushing smaller rivals. Brought under then-FTC Chair Joseph Simons, the suit received bipartisan support as the agency sought to force the company to divest from WhatsApp and Instagram, as well as to prevent Facebook from imposing anticompetitive conditions on software developers.

This widespread support - as well as the fact that state attorneys general from both parties signed on to a related lawsuit - underscored how the company's relationship had deteriorated with both Republicans and Democrats, amid a pandemic and the intense political polarization in the fallout of the 2020 election.

The lawsuit was refiled on a party-line vote, with the commission's two Republicans voting against the case. They both also voted against the initial case under Simons. Republican Commissioner Christine Wilson said in her dissent that she thought it was "bad policy" for the agency to challenge Facebook's previous deals, particularly its acquisitions of Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014, both deals the government might have blocked but did not.

Facebook vowed to vigorously defend itself against the agency's allegations, and subsequently brought a motion to dismiss the agency's suit, which the company said failed to clearly support its claim that Facebook has monopoly power.

Boasberg sided with the company, but he allowed the agency to refile its complaint with additional supporting details.

The decision underscored the strength of the legal resources of the $1 trillion tech behemoth and the challenges ahead for the FTC, especially in a court system that has for decades held a relatively narrow view of antitrust harms. It also sparked calls from lawmakers in both parties to pass legislation to ensure that competition challenges could be brought more easily against tech giants.

Sen. Amy Klobuchar, D-Minn., chairwoman of the House Judiciary antitrust subcommittee, praised the agency for advancing its case. "Facebook's long history of anticompetitive behavior is no secret," she said in a statement. "I'm glad the FTC is taking renewed action to stop Facebook's anticompetitive behavior and I encourage them to continue to consider all available options under the law to hold Facebook accountable."

Khan's allies praised the refiled suit as a signal of the more aggressive antitrust enforcement under Khan, who has promised to crack down on what she says is widespread abuse of corporate power in the tech world.

"It also sends a clear message: Under the leadership of Chair Khan, the agency will no longer be bullied by corporate titans," Sarah Miller, executive director of the American Economic Liberties Project, said in a statement.

The praise comes as President Joe Biden has elevated several Big Tech critics to key roles in his administration. Most recently, he nominated Jonathan Kanter, who has challenged large tech companies including Google in court, to serve as the head of the Justice Department's antitrust division. The Kanter nomination awaits confirmation in the Senate. Biden also named Tim Wu, another prominent tech critic, to serve on the National Economic Council.

Facebook has sought the recusal of Khan from the case, given her criticism of the company and other tech industry giants in academic writing and previous jobs. However, the FTC said in a blog post on Thursday that it had dismissed the petition.

"The FTC's Office of General Counsel carefully reviewed Facebook's petition to recuse Chair Lina M. Khan," the agency said in a statement. "As the case will be prosecuted before a federal judge, the appropriate constitutional due process protections will be provided to the company."

Published : August 20, 2021

By : The Washington Post · Cat Zakrzewski