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Facebook’s early antitrust win doesn't let it or Big Tech off the hook

·Technology Editor
·6-min read
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Wednesday, June 30, 2021

This article was first featured in Yahoo Finance Tech, a weekly newsletter highlighting our original content on the industry. Get it sent directly to your inbox every Wednesday by 4 p.m. ET. Subscribe

The antitrust battle against Facebook and other tech giants is just getting started

Facebook’s (FB) Mark Zuckerberg may be breathing a sigh of relief thanks to a federal judge’s decision to dismiss two antitrust suits against the social media giant. But legal experts say Zuckerberg and other Big Tech CEOs need to buckle up, because the ride is far from over.

The separate suits filed by the Federal Trade Commission and more than 40 attorneys general were tossed Monday by Judge James Boasberg, a federal judge in Washington, DC. In dismissing the cases, Boasberg said the states waited too long to file their complaint, and that the FTC didn’t adequately address how Facebook had an illegal monopoly over “personal social networking."

But while the attorneys general saw their case dismissed entirely, the FTC’s was dismissed without prejudice, meaning it can amend its complaint within 30 days, and continue fighting on.

And according to George Washington University professor and former FTC chair William Kovacic, that’s exactly what will happen.

“My intuition is that the case is not going to end on a motion to dismiss,” Kovacic told Yahoo Finance. “That by throwing themselves completely into the reformulation of the complaint, they will come up with something that answers a number of the judge’s questions, and gives the judge confidence to say, ‘I'm not going to dismiss the case here.’ ”

That doesn’t mean the road ahead will be easy for either the FTC or Facebook. As for the rest of Big Tech, the early dismissals could give Congress ammunition to roll out stricter antitrust laws.

An early dismissal and an incredibly broad market share

So why was the FTC’s suit dismissed? According to NYU Law School professor Eleanor Fox, it's difficult to prove that any of the Big Tech firms has monopoly power. That includes Amazon (AMZN), Alphabet (GOOG, GOOGL), Apple (AAPL), or Facebook.

“This is a soft spot in all of the Big Tech cases, because in all of the cases the companies say, ‘I do not have market power,’ and Google says, ‘The competition is a click away.’ Amazon says ‘I've never had even 50% of the market,’” Fox said.

Instagram Chief Executive Officer and co-founder Kevin Systrom speaks during the launch of a new service named Instagram Direct in New York December 12, 2013. Photo-sharing service Instagram unveiled a new feature on Thursday to let people send images and messages privately, as the Facebook-owned company seeks to bolster its appeal among younger consumers who are increasingly using mobile messaging applications. The new Instagram Direct feature allows users to send a photo or video to a single person or up to 15 people, and have a real-time text conversations. REUTERS/Lucas Jackson (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS)
Instagram co-founder Kevin Systrom during a 2013 product launch. Facebook purchased the photo-sharing app in 2012. REUTERS/Lucas Jackson

In dismissing the suit, the judge found that the FTC didn’t provide enough context as to the size of Facebook’s market share, alleging only that it has more than 60% of the market.

That nebulous 60% of market share of what the FTC refers to as “personal social networks” is one of the case’s biggest tripping points, and the problem the FTC will have to figure out next.

“The judge says, ‘I want to know about that other 40%. And who's out there competing with that other 40%? They might be competing hard, and if they do and they're able to compete hard, that would deprive Facebook of monopoly power,’ ” Fox explained.

Still, she said it’s “outrageous” that Judge Boasberg dismissed the case so early on.

“The idea that [there] is not enough in that complaint for an inference that Facebook has monopoly power is rather far fetched to me,” Fox said. “The law is very, very sympathetic to dominant firms.”

The FTC will fix its complaint and put Facebook back in the crosshairs

Still, according to Penn State Law professor John Lopatka, this isn’t the end of the line for the FTC’s case.

“I think the FTC absolutely has a chance going forward,” Lopatka said. “What the court essentially says is ‘If you come up with more specific allegations, you get over that hurdle.’ So, you know, I would think that the FTC is going to be able to come up with an amended complaint that cures the defect that the court saw.”

Where the FTC could get tripped up, Lopatka says, is the part of its complaint alleging that Facebook’s decision to not allow competing apps to use its application program interfaces (APIs) was meant to stifle smaller firms. The issue there, however, is that those moves happened years ago and, according to the court, don’t amount to anticompetitive practices, since Facebook more or less has a right to restrict access to its APIs.

While that’s certainly a win for Facebook, the court might still be open to breaking up Facebook — which is a key goal of the FTC. Two major deals in question include Facebook's purchase of photo-sharing site Instagram for $1 billion in 2012 and messaging service WhatsApp for $19 billion in 2014

(COMBO) This combination of pictures created on July 07, 2020 shows (L-R) Facebook CEO Mark Zuckerberg in Paris on May 23, 2018, Google CEO Sundar Pichai Berlin on January 22, 2019, Apple CEO Tim Cook on October 28, 2019 in New York and Amazon Founder and CEO Jeff Bezos in Las Vegas, Nevada on June 6, 2019. (Photos by AFP) (Photo by BERTRAND GUAY,TOBIAS SCHWARZ,ANGELA WEISS,MARK RALSTON/AFP via Getty Images)
Facebook's legal troubles could open the door to new legislation that hurts its cohorts in Big Tech. (Photo by BERTRAND GUAY,TOBIAS SCHWARZ,ANGELA WEISS,MARK RALSTON/AFP via Getty Images)

Facebook now says too much time has passed to undo the transactions, but Lopatka believes the court might still be willing to force the social network to divest those subsidiaries.

“I think if you read the tea leaves, I think the court would be favorable to the claim with respect to the acquisitions of WhatsApp and Instagram,” he explained. Unwinding Facebook’s acquisitions of WhatsApp and Instagram would be a massive blow to the social networking giant.

That would also satisfy lawmakers and regulators, who have been calling for a breakup of Facebook since their antitrust crusade original began. But, getting to that point will still be incredibly difficult for the FTC, according to Kovacic.

“The judge has indicated to the commission that it will have a different difficult trail to travel to their intended goal,” he said. “I'm sure they've received that message loud and clear.”

A win for Facebook is a win for lawmakers looking for tougher laws

While Facebook may be celebrating a temporary win, the antitrust fight is far from over for Big Tech. That’s because lawmakers critical of the country’s tech giants are already using the Facebook cases’ dismissals to push for tougher antitrust legislation.

“The victory could lend support to the view of advocates who believe that the only appropriate solution is new legislation,” Kovacic said. “And my intuition is that the result gave a boost to the authors of legislation in both the House and the Senate.”

Indeed, right after the court’s announcement on Monday, Rep. Ken Buck (R-CO) released a statement calling for Congress to provide “additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anticompetitive conduct.”

And that could prove a much larger threat to Big Tech in the long run than litigation.

“I think the broader lesson here is that while Congress and the administration are interested in expanding antitrust enforcement, they will confront decades of extremely restrictive precedents and very skeptical judges when they get to court,” Stanford Law School professor Mark Lemley said. “In the long run, reining in the tech giants may require new legislation.”

By Daniel Howley, tech editor. Follow him at @DanielHowley

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