Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC responds to Facebook’s motion seeking dismissal of amended antitrust complaint, (Nov 19, 2021)

By E. Darius Sturmer, J.D.

Agency’s brief argues that the amended pleading now sufficiently alleges social media giant’s monopoly power and details how it has maintained that monopoly position through anticompetitive Instagram and WhatsApp acquisitions as well as exclusionary agreements with developers.

The FTC filed a brief in the f ...

By E. Darius Sturmer, J.D.

Agency’s brief argues that the amended pleading now sufficiently alleges social media giant’s monopoly power and details how it has maintained that monopoly position through anticompetitive Instagram and WhatsApp acquisitions as well as exclusionary agreements with developers.

The FTC filed a brief in the federal district court in Washington, D.C. opposing Facebook, Inc.’s motion to dismiss the Commission’s amended antitrust complaint against the social media giant. The brief, responding to Facebook’s contention that the FTC has not satisfied its burden of alleging a factual basis for its claim that the company has the power to increase prices or restrict output without losing market share, argues that the agency’s 2-count amended complaint adequately alleges Facebook’s monopoly power in personal social networking (PSN) services and details how Facebook has maintained its monopoly position in that market through an anticompetitive course of conduct that includes acquisitions of former rivals Instagram and WhatsApp and exclusionary agreements with developers. The brief also challenges Facebook’s positions that Sec. 13(b) of the FTC Act provides a basis to dismiss the claims and that FTC Chair Lina Khan’s participation in the vote authorizing the amended complaint was improper (FTC v. Facebook, Inc., Civil Action No. 1:20-cv-03590 (JEB)).

Amended complaint. The FTC’s amended complaint provided greater details to support the agency’s allegation of monopoly power that previously was rejected by the district court. The case remains primarily focused on Facebook’s acquisitions of Instagram and WhatsApp to support allegations of anticompetitive conduct, but the Commission’s amended complaint bulks up its description of the industry and adds information on the defendant company’s market share, claiming newly provided metrics provide significant evidence of its monopoly power in PSN services. Facebook’s motion to dismiss the amended complaint, however, argues that the amended pleading still falls short because the FTC ignores commercial reality and purports to define a free “personal social networking” user market with only the vaguest of limits and without reference to what consumers consider acceptable substitutes.

Monopoly power. The FTC’s brief insists that the amended complaint adequately alleges Facebook’s monopoly power in PSN services through both indirect and direct evidence. Facebook’s attacks on the amended complaint’s market share allegations are unfounded, the brief asserts. According to the Commission, the amended complaint shows—through reliable metrics assessing several key measures of output—that Facebook has a dominant share of the U.S. PSN services market. It includes, too, detailed allegations describing significant barriers to entry in the PSN services market that protect Facebook’s position. The brief adds that the amended complaint also “alleges ‘direct’ evidence that Facebook is a monopolist with the power to profitably reduce quality (which is equivalent to a price increase) and exclude competition.”

Maintenance of monopoly position. The Commission’s brief next addresses how Facebook allegedly has maintained its monopoly power unlawfully through a decade-long course of exclusionary conduct. Count 1 of its amended complaint, the agency says, pleads “ample” facts to establish that the acquisitions of Instagram and WhatsApp constituted anticompetitive conduct, “harm[ing] the competitive process by eliminating nascent threats.” The social media giant’s “rehashed arguments” to the contrary are unavailing, the brief states. Moreover, the amended complaint’s allegations regarding “other acquisitions” provide supporting factual context, according to the Commission.

Further, the agency argues, the second count of the complaint sufficiently alleges an ongoing monopoly maintenance offense comprising not just anticompetitive acquisitions but also its adoption and enforcement of agreements with developers that deterred competition and impeded potential rivals’ ability to distribute and promote their apps. Factual assertions in the pleading regarding Facebook’s agreements with developers support a claim for monopoly maintenance. The agreements are not unilateral refusals to deal, the brief states, but even if they were so labeled, the agency’s allegations still meet the standards applicable to unilateral refusals to deal.

Basis for dismissal. The FTC’s opposition brief also contests Facebook’s arguments that Sec. 13(b) of the FTC Act and the law of the case provide separate grounds to dismiss the second count of the complaint, which charges a violation of the Sherman Act. Sec. 13(b) authorizes the FTC to obtain injunctive relief to remedy Facebook’s ongoing violation of federal antitrust laws, the brief explains. Moreover, it notes, the FTC Act authorizes both counts of the complaint, and the allegations supporting each cause of action must be considered as a whole. The brief adds that the amended complaint plausibly pleads that Facebook’s illegal platform conduct is likely to recur.

Recusal. Finally, the FTC brief challenges Facebook’s contention that FTC Chair Lina Khan improperly participated in the vote to file the amended complaint, thereby invalidating that vote. Facebook’s recusal argument fails, the brief states, “because in this case the Commission is acting as a plaintiff or prosecutor rather than performing a judicial or quasi-judicial function, and Facebook identifies no factors that would require recusal in such circumstances.”

The case is No. 1:20-cv-03590-JEB.

Attorneys: Daniel John Matheson for the FTC. Mark Charles Hansen (Kellogg, Hansen, Todd, Figel & Frederick, PLLC) for Facebook Inc.

Companies: Facebook Inc.

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