The Media Today

Facebook asks the court to dismiss the FTC’s antitrust complaint

March 12, 2021

Last fall, after more than a year-and-a-half of Congressional committee hearings and investigations into the power of technology companies such as Google, Facebook, and Twitter, the government released a comprehensive report alleging anti-competitive conduct. The report, which called for a number of “structural remedies”—including that the companies be broken up—also gave momentum to an almost unprecedented number of state and federal antitrust actions. One of those was a lawsuit against Facebook brought by the Federal Trade Commission, backed by an investigation conducted alongside forty-nine states; the suit alleged a wide range of monopolistic behavior. When the case was filed, last December, Facebook responded with a blog post calling the lawsuit “revisionist history” and arguing that it “ignores reality.” On Wednesday, Facebook released a much more comprehensive response: a legal defense and request to dismiss.

“No government lawsuit similar to this one has been brought in the 130-year history of the Sherman Act, and for good reason,” Facebook’s statement begins. The FTC “has not alleged facts amounting to a plausible antitrust case” and “ignores its own prior decisions, controlling precedent, and the limits of its statutory authority.” In order to make a plausible case for antitrust action, Facebook argues, the FTC would have to prove a) that Facebook dominates a defined market, b) that it has the power in that market to raise prices or restrict output, and c) that it has maintained that monopoly power in ways that harm competition and-or injure consumers. The government’s complaint fails, per Facebook, “because the FTC has not pleaded facts sufficient to satisfy any of the three required elements of a claim.”

The FTC, for its part, has no trouble defining the market that Facebook dominates: it’s “personal social networking,” or the sharing of photos and other personal information with family and friends. As some technology journalists have pointed out—including Casey Newton, the author of a Substack called Platformer—FTC’s definition seems shaky, though: for one thing, the FTC’s claim ignores the existence of popular apps like TikTok, which has managed to build a massive amount of market share—eight hundred million users or so by the end of last year. Such success would be impossible according to the FTC’s definition, if Facebook really has managed to squeeze out competitors.

Facebook’s defense also goes after another problematic aspect of the FTC’s claim: the fact that antitrust activity (as it has been defined by the courts for the past several decades) consists of causing harm by restricting choice and-or raising prices. The second of these is difficult to prove on a consumer level because, as Facebook has taken pains to point out, its services are free. That leaves the FTC to argue that price-raising takes place on the advertising side, or that Facebook causes consumers harm in equivalently bad ways—by, say, invading their privacy and sharing their data with advertisers. That argument was advanced in 2019 by Dina Srinivasan, a legal scholar at Yale, in a paper called “The Antitrust Case Against Facebook.” So far, however, it has not been tested in federal court.

The FTC’s case is further complicated by the fact that a substantial amount of its claim rests on the idea that the acquisitions of both Instagram and WhatsApp were anti-competitive in nature, designed to maintain and expand Facebook’s monopoly on social networking. But as Facebook points out in its motion to dismiss, the FTC approved both acquisitions—and expressed no problem with them from a competitive point of view. Although antitrust experts such as Tim Wu—a Columbia Law professor and former advisor to the FTC who was recently named to Joe Biden’s economic advisory council—have said that approving deals does not in any way restrict the FTC from questioning them later, doing so means arguing that the FTC either screwed up the first time around or, perhaps, in Facebook’s terms, is trying to revise history. That doesn’t mean Facebook shouldn’t be scrutinized and kept in check—it certainly has plenty of bad behavior to answer for—but the FTC will likely need to keep searching for another way.

Here’s more on Facebook:

  • Destructive: Dipayan Ghosh is a former Facebook staffer and a former policy advisor to the Obama White House who now runs the Digital Platforms and Democracy Project at Harvard and is the author of a recent book called Terms of Disservice: How Silicon Valley is Destructive by Design. “I believe that Facebook, Google, and Amazon should be seen as out-and-out monopolists that have harmed the American economy in various ways, and have the potential to do much greater harm should their implicit power go uncurbed,” he writes. CJR spoke with Ghosh and a number of other tech experts in a series of interviews using our Galley discussion platform.
  • Insatiable: Karen Hao writes for MIT’s Technology Review about how Facebook’s artificial intelligence algorithms “gave it an insatiable habit for lies and hate speech,” and how the man who helped build them—Joaquin Quiñonero Candela, a former director of the AI group at Facebook—can’t fix the problem because the company essentially won’t let him. “Everything the company does and chooses not to do flows from a single motivation: Zuckerberg’s relentless desire for growth,” she writes. “Quiñonero’s AI expertise supercharged that growth. His team got pigeonholed into targeting AI bias, as I learned in my reporting, because preventing such bias helps the company avoid proposed regulation that might, if passed, hamper that growth.”
  • Slam dunk: Wu thinks the FTC has a “straightforward and easy case.” In an op-ed published in the New York Times shortly after the FTC filed its claim, he argued that Facebook is clearly guilty of “buying its way out of competition” in the same way that John D. Rockefeller did at Standard Oil. Facebook “joins a tradition of such cases, including the antitrust suits against Standard Oil, American Tobacco, Alcoa, IBM, AT&T and Microsoft,” Wu wrote. “None of those cases damaged the American economy. On the contrary, the lawsuits were aimed at monopolies that had squashed competition, and they resulted in revitalized, reorganized and ultimately more innovative industries.”
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Mathew Ingram is CJR’s chief digital writer. Previously, he was a senior writer with Fortune magazine. He has written about the intersection between media and technology since the earliest days of the commercial internet. His writing has been published in the Washington Post and the Financial Times as well as by Reuters and Bloomberg.