Judicial Gavel and Scales of Justice and Law for FTC Ruling on Subscription and Recurring Revenue Companies

Facebook Scores Major Win Against FTC in Antitrust Case

Federal judge says FTC did not sufficiently prove its case that Facebook holds dominant market power.

Earlier this week, the U.S. District Court of the District of Columbia dismissed an antitrust complaint from the Federal Trade Commission against Facebook. In its initial complaint filed in December 2020, the FTC alleged that Facebook violated Section 2 of the Sherman Act by acquiring competitors, Instagram and WhatsApp, and by adopting policies that effectively prevented other apps deemed to be competitors from working with the Facebook social media platform.

The FTC’s complaint sought equitable relief from the federal court, including forced “divestiture or reconstruction of businesses” and a requirement that Facebook not engage in similar business practices in the future. In his 53-page memorandum opinion, U.S. District Court Judge James E. Boasberg dismissed the FTC’s case against Facebook for lack of evidence. He also dismissed a related case filed by attorneys general in 48 states and territories, alleging Facebook holds an illegal monopoly.

“Although the Court does not agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s Complaint is legally insufficient and must therefore be dismissed,” wrote Judge Boasberg. “The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims – namely, that Facebook has monopoly power in the market for Personal Social Networking (PNS) Services.”

The Court said that the PSN “market” is hard to define and measure, and the FTC did not offer any metric or method to calculate the percentage market share Facebook holds of PSN.

“Because this defect could conceivably be overcome by re-pleading, however, the Court will dismiss only the Complaint, not the case, and will do so without prejudice to allow Plaintiff to file an amended Complaint,” the judge wrote.

If the FTC should choose to amend its Complaint, the judge identified two areas of law that the federal agency should note.

  1. Facebook’s policy of refusing interoperability permission with competing apps is not illegal. While the social media network’s implementation of the policy may have violated Section 2 of the Sherman Act, such behavior occurred seven years before the FTC’s case was filed and, therefore, injunctive relief is not allowable.
  2. The FTC is on “firmer ground” in questioning the acquisitions of Instagram and WhatsApp, because the Court rejects Facebook’s claim that the FTC does not have authority to seek injunctive relief on these acquisitions.

“Whether other issues arise in a subsequent phase of litigation is dependent on how the Government wishes to proceed,” wrote Judge Boasberg.

The FTC has 30 days to amend its complaint.

Legislators respond on Twitter

Representative Ken Buck, a Republican from Colorado, responded to the news on Twitter, reports The Verge.

Senator Amy Klobuchar from Minnesota and Senator Elizabeth Warren from Massachusetts also shared their thoughts on Twitter.

The New York Times quotes a Facebook spokesman who commented on Monday’s decision.

“We are pleased that today’s decisions recognize the defects in the government complaints filed against Facebook. We compete fairly every day to earn people’s time and attention and will continue to deliver great products for the people and businesses that use our services,” said Christopher Sgro.

In reaction to the Facebook ruling, Facebook stock initially spiked from $341.37 per share on June 25 to $355.64 per share on June 28. It has since dipped slightly to $351.89 per share on June 29 for an overall gain of just over $10 per share.

Insider Take

Headlines from major media outlets called the ruling a “major blow,” saying that the FTC “fumbled” its case against Facebook. Other news stories pointed out that pressure on the federal government to identify and implement antitrust reforms grows greater every day. This was the first big case dismissed. Though the FTC is likely to amend its complaint to address the Court’s concerns, the agency has an uphill climb. Meanwhile, the outcome of this case doesn’t bode well for other antitrust allegations made against Facebook and other big tech firms like Amazon, Google and Apple. They will not be slam dunks.

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