The FTC refiles its case against Facebook

The FTC refiles its case against Facebook
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After an initial setback, the Federal Trade Commission’s antitrust case against Facebook, which recently renamed itself Meta, is going ahead.

Back in June, a US federal judge ruled that the FTC’s initial argument accusing Facebook of being a monopoly was too vague. But the agency refiled the case, and now, the same judge has ruled that the FTC’s amended case against Facebook is “more robust and detailed than before” and can go ahead. The court rejected Facebook’s request to dismiss the case altogether, a decision that dealt a blow against Facebook’s ongoing battle with government regulators over its market power.

The FTC is one of the most powerful US regulatory agencies. If it wins its case against Facebook, there could be major negative implications for the social media company.

“FTC staff presented a strong amended complaint, and we look forward to trial,” said Holly Vedova, director of the FTC Bureau of Competition, in a statement to Recode.

Facebook, meanwhile, said it believes it will ultimately succeed in its battle against the FTC.

“We’re confident the evidence will reveal the fundamental weakness of the claims. Our investments in Instagram and WhatsApp transformed them into what they are today. They have been good for competition, and good for the people and businesses that choose to use our products,” said Meta company spokesperson Chris Sgro, in part, in a statement to Recode.

In June, a federal judge dismissed the FTC’s initial lawsuit, which at the time was a big win for Facebook. In response, the FTC has refiled its lawsuit — and instead of taking a new approach, it stuck with its main arguments against Facebook, this time supporting them with more detail. It’s yet another sign that the regulatory push to rein in the power of Facebook and other major tech companies like Amazon and Apple isn’t slowing down when it encounters hurdles.

The amended suit included new evidence about how the company allegedly engages in monopolistic behavior to crush its competitors and keep its users hooked on its platform without adequate pressure to improve the quality of its products. The crux of the FTC’s argument is that Facebook has failed to make meaningful innovations on its mobile app on its own in the past several years. Instead, it resorted to what the FTC says is an illegal “buy-or-bury” strategy in which it either shut out outside apps by limiting their access to the Facebook platform or acquired apps like Instagram and WhatsApp that were successful competitors.

The lawsuit also alleged that Facebook “lured” in third-party app developers that were competitive threats, such as Path and Circle, by inviting them to be a part of Facebook’s open platform. Once these developers became dependent on access Facebook had offered them, Facebook would then reverse course, the suit claims. Ultimately, the FTC alleges, all this harms consumers by keeping them trapped in Facebook’s social media ecosystem, with fewer alternative apps. On this claim, the federal judge ruled that the FTC did not have enough evidence. But it did say that the FTC could proceed with its claims that Facebook engaged in anti-competitive business practices when it bought competitors like Instagram and WhatsApp.

“Facebook lacked the business acumen and technical talent to survive the transition to mobile. After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat,” said Vedova in a press release announcing the amended lawsuit in August.

A few hours after the amended suit was filed in August, Facebook tweeted a thread in response.

The company argued that there is no “valid claim” that Facebook is a monopolist, and pointed out that the FTC cleared the company’s WhatsApp and Instagram acquisitions when they originally happened.

“It is unfortunate that despite the court’s dismissal of the complaint and conclusion that it lacked the basis for a claim, the FTC has chosen to continue this meritless lawsuit,” Facebook wrote.

The company also planned a splashy product release of its new virtual reality work conferencing app — complete with Facebook CEO Mark Zuckerberg doing a hit on CBS — on the same morning that this new lawsuit was expected to drop. Ironically, Facebook’s new virtual reality conference tool is similar in many ways to existing software from smaller companies, which goes to show how existing antitrust laws don’t stop tech companies from copying each other in real time.

The revised lawsuit also responded to Facebook’s petition for Lina Khan, the chair of the FTC, to recuse herself because of what the tech company claims to be a conflict of interest due to her past academic work criticizing the market power of tech companies like Amazon. Some lawmakers like Sen. Elizabeth Warren (D-MA) have criticized the push against Khan as an attempt to “bully” the FTC. But it doesn’t seem to be working — the FTC reiterated in the amended suit that it doesn’t plan for Khan to recuse herself. The federal judge ruled on Tuesday that there is insufficient basis for Khan’s recusal.

In the past, Facebook has said that the success of companies like TikTok and Snap proves there is healthy competition in the social media industry. This amended lawsuit, however, claims that TikTok is not actually Facebook’s competitor because it’s used primarily to “share video content to an audience that the poster does not personally know, rather than connect and personally engage with friends and family.”

It’s still far too soon to say if this lawsuit will succeed, and how meaningfully it may impact Facebook’s business. Facebook, which has ample resources to fight the case, will come up with the most compelling defense it can as to why it’s not actually a monopoly. But the court’s dismissal of Facebook’s attempt to stop the case shows that the FTC — with Khan at the helm — is not backing down.

Update January 11, 2022, 3:00 pm PT: This article was updated to include new legal proceedings in the case.

Update August 19, 12:27 pm PT: This article was updated to include comment from Facebook, which it posted to Twitter.

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