Why it would be ‘surprising’ for Facebook to get antitrust suits dismissed
Facebook (FB) asked a federal judge on Wednesday to throw out two major antitrust lawsuits filed against it late last year. But three legal experts said the social media giant faces steep odds in trying to get the litigation killed at this point.
The suits, filed by the Federal Trade Commission (FTC) and 48 attorneys general, allege the social media giant uses its monopoly power to buy up or crush its competition. If successful, the suits serve as existential threats to the company — especially since the FTC suit seeks to force Facebook to break off photo-sharing site Instagram, the messaging app WhatsApp, or both.
“Overall...it would be surprising to see such a high-profile case resolved at this early motion to dismiss stage,” says Temple University’s Beasley School of Law assistant professor Erika M. Douglas, who has performed work for Facebook in the past but has never been an employee of the company.
In its motion to dismiss the FTC’s lawsuit, Facebook argued that the FTC failed to establish minimum standards required to maintain an antitrust case. The FTC, along with the attorneys general, alleges that Facebook acquired major competitors like WhatsApp in 2014 for $19 billion and Instagram in 2012 for $1 billion in order to crush the competition.
But Facebook said the FTC failed to identify a relevant market of plausible substitutes for Facebook, neglected to credibly allege that Facebook had acquired monopoly power over that market, and failed to make reasonable allegations that the company had engaged in unlawful exclusionary conduct. Furthermore, Facebook claimed, the FTC had no authority to sue over “long-past actions” — i.,e., the acquisitions at the heart of the case.
Speaking to Yahoo Finance, Douglas noted that even if Facebook successfully made these arguments, the judge would likely allow the FTC to amend its complaint. “Then the case would continue,” she said.
As expected, Facebook also contended that its service is free and therefore outside the oversight of antitrust regulators. The controversial stance is expected to frustrate the case against Facebook and Big Tech antitrust actions, including those pending against Google (GOOG, GOOGL).
“No court has ever held that such a free goods market exists for antitrust purposes, and the FTC does not allege that one exists here,” Facebook’s motion states.
In a separate argument, Facebook said the FTC should be barred from bringing a lawsuit based on the company’s acquisitions of Instagram and WhatsApp because it previously authorized the transactions following its own antitrust reviews.
“The government ignores these realities and attempts to rewrite history,” a company spokesperson said.
In Facebook’s motion to dismiss the attorney generals’ suit, it also argues that the states and territories lack adequate interest in the matter and therefore should not be able to sue over it, and that the states waited too long to sue over long-past acquisitions.
Facebook objected to claims that it has acquired a market monopoly. "You only have to look at your phone to know that the government’s assertion that Facebook monopolizes ‘personal social networking services’ doesn’t make sense. People use TikTok, iMessage, Twitter, Snapchat, LinkedIn, YouTube and countless others to connect, discover, share, and communicate,” a company spokesperson said.
According to NYU School of Law professor Eleanor Fox, Facebook will likely claim the government is obligated to show consumers made less use of alternate social media platforms, and that they paid higher prices as a result of its acquisitions. Despite government claims that Facebook’s advertisers pay higher prices due to the tie up, the company rejects the idea that its free user platform can form a basis to prove such consumer harm.
“I do not think they have to, and I do not think the court will take on the question at this point in the litigation, but this is where the legal controversy lies and where jurists may have different views, with more conservative judges putting higher burdens on the plaintiffs,” Fox told Yahoo Finance.
According to Douglas, the most interesting substantive question, if the case proceeds, will be whether Facebook had any antitrust duty to deal with rivals by providing access to Facebook’s platform. The FTC alleges that the company harmed competition by providing less than full access to competitors.
It does appear likely the case will proceed. “Courts definitely take motions to dismiss more seriously in antitrust cases than in many other areas,” Stanford Law School Professor Mark Lemley told Yahoo Finance. “But it's hard to imagine the court will throw the case out altogether at this early stage.”
If history is any indication, it could take years to resolve. The Department of Justice sued Microsoft (MSFT) in 1998, claiming it illegally blocked the competition to maintain its software monopoly. While the case went to trial that year, it took until 2001 for the case to be resolved with a settlement imposing various requirements on Microsoft.
Even more recent history shows this case might not be resolved quickly — the government’s antitrust case against Google isn’t set to go to trial until 2023.
Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney.
Follow Alexis Keenan on Twitter @alexiskweed.
Email Daniel Howley at dhowley@yahoofinance.com over via encrypted mail at danielphowley@protonmail.com, and follow him on Twitter at @DanielHowley.