Antitrust Attorneys: FTC Can Follow Judge’s Road Map for Facebook Case

U.S. District Judge James Boasberg was right to dismiss the FTC’s antitrust case against Facebook (see 2106280057), but he created a road map for the agency to replead its monopoly case against the social network, antitrust attorneys said in interviews.

The agency has until Thursday to file an amended complaint. Boasberg granted the agency three additional weeks from the original deadline to file with the U.S. District Court for the District of Columbia, after FTC Chair Lina Khan took office.

The agency can cure the defects in the complaint, which “should be easily fixed,” said Doyle Barlow’s Andre Barlow, who worked for DOJ under President Bill Clinton. The agency can address this with more explicit definitions of the market, he added, noting the FTC failed to prove Facebook has monopoly power. Boasberg’s dismissal noted Facebook’s two-sided market with consumers on one end and advertisers/suppliers on the other. Barlow noted Boasberg said the agency “alleged that personal social network services involve posting videos, pictures and messages but then used advertising revenues to measure market share when the revenues were generated on the advertising side.”

The FTC “can fill the gap that the judge identified,” said Constantine Cannon antitrust attorney Ankur Kapoor. If it repleads, the FTC will need to show Facebook’s supposed competitors, whether TikTok or other social media platforms, don’t “constrain” Facebook’s pricing, he said. In other words, the agency needs to allege Facebook users wouldn’t flee the service for other platforms if Facebook significantly deteriorated the quality of its product, he said. Boasberg was right to dismiss the case, given the difficulty in defining the digital market, but he didn’t identify an “incurable flaw” in the agency’s case, Kapoor said. The FTC hasn’t “announced one way or another” whether it plans to refile, emailed an agency spokesperson Friday.

The judge “gave them a road map about how to replead,” said Mintz’s Bruce Sokler, citing the potential for a more narrow definition of market and participants. Sokler noted Boasberg told the agency it’s alright to challenge Facebook’s nearly decade-old WhatsApp and Instagram transactions as part of the case. Thirty days to replead wasn’t enough time with a new chair, he said: The FTC “may be considering taking somewhat of a different approach, but the 60 days gives them the opportunity to do so. I would be surprised if they don’t refile.” The agency will need to find a metric to calculate Facebook’s alleged monopoly, he said.

The agency has no “defensible concept or measurement of monopoly,” so it has no case, said Cato Institute Senior Fellow Alan Reynolds. Instagram and WhatsApp weren’t direct competitors to Facebook, but they potentially competed with the platform for messaging services, for which many texting and email services also compete, he said. He noted it might not “hurt Facebook to spin off Instagram any more than it hurt Rockefeller and Standard Oil to spin off what is now Exxon-Mobil, among others. But they'd have to do it on their terms.”

The FTC’s dismissal was the “right result,” said Wilson Sonsini’s Tina Sessions, arguing the agency’s case wasn’t “well-pleaded.” Focusing on “long-ago,” consummated deals “as a means to achieve other results doesn’t seem like where we should be putting our resources,” she said. “I would expect they’re going to make an attempt to replead that complaint, and if they wanted to make it narrower, there’s probably a claim that would get past a motion to dismiss there.”

Facebook is facing renewed antitrust pressure in the U.K. The Competition and Markets Authority on Thursday announced its finding that Facebook’s buy of Giphy, a GIF service, “will harm competition between social media platforms and remove a potential challenger in the display advertising market.” If the findings are confirmed, CMA could “require Facebook to unwind the deal and sell off Giphy in its entirety,” it said.

Facebook disagrees with the preliminary findings, “which we do not believe to be supported by the evidence,” a Facebook spokesperson emailed. “As we have demonstrated, this merger is in the best interest of people and businesses in the UK -- and around the world -- who use GIPHY and our services.”