Mark Zuckerberg, CEO and Founder of Facebook, leaves the Merrion Hotel in Dublin after meeting with Irish politicians to discuss social media regulation, transparency in political advertising and the safety of young people and vulnerable adults. On Tuesday 2nd April 2019, in Dublin, Ireland.
Artur Widak | NurPhoto | Getty Images
The Federal Trade Commission has a second chance to prove to a federal judge that Facebook illegally maintained a monopoly.
The agency has to file an amended lawsuit by Thursday if it wants to pursue its claims against Facebook in a federal court.
That’s because a judge dismissed the FTC’s original complaint, saying it hadn’t done enough to show that Facebook was illegally maintaining monopoly power to justify continuing the case. But he gave the FTC the opportunity to make stronger arguments in a new filing.
In addition to filing an amended complaint, the FTC has several options for how to proceed. It might choose to drop the matter altogether. Or she could take the case to her internal administrative judge instead.
The former seems unlikely, given the scale of the case, for the agency and its newly confirmed chairwoman Lina Khan, who has criticized digital platforms and urged stronger antitrust law enforcement.
The latter is made more difficult by the fact that Facebook has demanded Khan’s rejection of his case because of its past criticism. Khan did not respond to the request, but if she wanted to participate in the case, it would likely be easier if her participation included a vote on filing a complaint in a federal court rather than serving as a judge in the FTC’s internal process.
Here’s what the FTC needs to address in its amended complaint if it hopes to continue its battle with Facebook in federal court.
Narrow down the market definition
One of the key issues US District Judge James Boasberg questioned in the FTC’s first complaint was market definition. This is a common point of contention in antitrust cases, as the authority must demonstrate that a company has monopoly power in a particular market. While there isn’t necessarily a percentage of the market that a monopoly must hold in order to be viewed as such, it is often well over half.
The FTC claimed Facebook had monopoly power in the personal social networking, or PSN, category. That definition claimed to exclude platforms primarily used for streaming video, like Google’s YouTube, and interest-based platforms like Microsoft’s LinkedIn or the Strava social fitness network, which some might view as worthy competitors of Facebook. The FTC claimed that Facebook’s share of this market is more than 60%.
Boasberg criticized the lack of clarity on how the FTC got more than 60%, saying it was “too speculative and conclusive to move forward”.
He asked which competitors made up about 30-40% of the PSN market, as the FTC claimed Facebook owned more than 60% of it. In the filing, he asked why the FTC would not be ready to claim that Facebook had even more market share if it were unable to name other competitors in this area who neither no longer exist nor are too small.
“Such an unsupported claim could (hardly) suffice in a case in Section 2, which concerns a more traditional commodity market, in which the court could reasonably infer that the market share was measured in terms of revenue, units sold or some other typical metric” said Boasberg of the claim of more than 60% market share with reference to Section 2 of the Sherman Antitrust Act. “But in this case it’s not an ordinary or intuitive market. Instead, PSN services can be used free of charge and the exact limits of what constitutes a PSN service at all – ie which functions of the mobile app or website of a company are included in this definition and which are excluded – are hardly crystal clear. “
But he wrote, “This deficiency could possibly be overcome by a renewed plea.”
“While there are certainly bones to crack with the FTC’s market definition allegations, the court does not find them fatally meatless,” he wrote.
Change or cancel the interoperability argument
Boasberg said that even if the market definition were set, the FTC’s claim that Facebook’s use of its interoperability permissions helped maintain monopoly power would not stand up to scrutiny.
The FTC argued that Facebook was using its core service to prevent competitors from accessing features on its platform through its application programming interface (API) to prevent them from becoming real threats.
The judge wrote that even if the way Facebook used the policy violates Section 2 of the Sherman Act by maintaining an illegal monopoly, the FTC has no legal authority to seek an injunction because of the alleged violation took place seven years prior to the filing of the lawsuit. Boasberg cited an earlier court ruling that Section 13 (b) of the FTC Act, which gives the FTC its powers, “does not allow the FTC to bring a lawsuit based on longstanding conduct without evidence that the accused ‘is’ . commit another violation or ‘about to’ commit another violation. ‘”
In addition, Boasberg said that a previous court precedent made it “clear at first glance” that Facebook was not obliged to share aspects of its platform with competitors. To correct his argument, Boasberg said the FTC needed to prove that Facebook had a scheme in which it enforced its platform access policy against a rival it had previously dealt with while continuing to deal with others. It would also have to show that Facebook did this at a short-term loss for its own gain, with no clear business reason other than to evict a competitor.
Based on Boasberg’s assessment, the FTC would likely have to either remove this section from its reasoning or prove to the court that Facebook is currently or will soon be committing another such violation and that it meets the criteria it has set out.
Boasberg wrote that the FTC “is on firmer ground in considering the Instagram and WhatsApp acquisitions as the court rejects Facebook’s argument that the FTC has no authority to seek injunctive relief against these purchases.” One of the main anti-trust criticisms of Facebook is the takeover of Instagram and WhatsApp to eliminate potential rivals on social networks.
The court concluded that this aspect of the case “either does not constitute exclusive conduct in violation of Section 2 of the Sherman Act or, to the extent possible, does not constitute the basis for an injunction under Section 13 (b) of the FTC Law “. . “
Question of cancellation
Another question that the FTC has to ask is whether Khan should pull out of the case. If it doesn’t, some antitrust experts could issue a statement explaining their decision.
Some court precedents would support the idea that Khan could vote to bring the case to federal court, even if she has made critical statements about the industry in the past. A court might consider whether Khan has already ruled on Facebook’s liability as less of a priority if she votes for a lawsuit in court rather than serving as a judge in the FTC’s internal proceedings.
Khan stated at her confirmatory hearing in the Senate that she did not believe she had financial conflicts that would require her to be rejected under ethics laws.
If Khan pulls out of the Facebook case, the agency could stall its decision to re-file the complaint as the two Republican commissioners voted against bringing the original lawsuit.
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