Politics

How the Facebook case will test the limits of antitrust law

The FTC and state attorneys general could force the courts to drag antitrust law into the 21st century.

Mark Zuckerberg standing in front of his own face on a screen

Facebook has pledged to fight the case aggressively in court and could file a motion to dismiss it entirely.

Photo: Chip Somodevilla/Getty Images

Does Facebook monopolize the "personal social networking" market?

Does that market even exist?

Is Facebook really free, or do people pay for the site with their data and attention?

Those are some of the questions at the center of the sweeping antitrust cases from the FTC and state attorneys general filed on Wednesday. And together their answers will determine, once and for all, whether the country's centuries-old antitrust laws are equipped to wrangle in the disruptive tech industry — or whether new laws are needed entirely.

The federal government and states are alleging that Facebook abused its dominance in the digital marketplace and violated the law with acquisitions of two nascent competitors, Instagram and WhatsApp. The cases, alongside the DOJ's case against Google, could enable the courts to finally drag antitrust law into the 21st century, recognizing that data has monetary value and consumers are harmed when their online privacy is eroded.

For decades, major antitrust cases have revolved around evidence that companies are unfairly raising prices for consumers. That "consumer welfare" standard has made it harder than ever to bring significant antitrust action against some of the country's most powerful companies, especially in the tech industry, where many of the most important products are free and harms can be less tangible than price increases.

But government regulators and state attorneys general leading the charge against Facebook are arguing money isn't the only commercial exchange that matters — in fact, data is an equally valuable resource, and Facebook harmed its users as it gobbled up more and more information about them.

"It's the first monopoly case to ever directly involve exchange of attention or data for a product," said John Newman, an associate professor of law at the University of Miami and former DOJ antitrust lawyer.

Facebook has pledged to fight the case aggressively in court and could file a motion to dismiss it entirely. "We disagree with the government's allegations and we plan to fight this in court," Mark Zuckerberg said in a letter to employees on Wednesday night. But experts said the cases against Facebook, which are expected to be consolidated, are strong and straightforward antitrust complaints with good prospects in court, meaning they could actually result in the unwinding of the Instagram and WhatsApp mergers and disrupt Facebook's central business model.

But before that happens, they'll have to surmount significant hurdles in court.

The first, and always the most consequential for antitrust cases, will be their definition of the market that Facebook monopolizes. "For almost a decade, Facebook has had monopoly power in the personal social networking market in the United States," claims the case from the state attorneys general. "As set forth in detail below, Facebook illegally maintains that monopoly power by deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers."

Facebook insists that it competes directly with platforms like TikTok, YouTube and Snap. But the case argues that those apps don't have the ability to connect directly with families and friends that Facebook offers. A judge will have to believe that "social networking" is its own market in order to even move forward with the case. "This is a category of market where competition is particularly difficult and particularly rare," said Charlotte Slaiman, an antitrust attorney with the advocacy group Public Knowledge.

If the judge agrees to that market definition, the government will then have to prove that consumers, including users and advertisers, were harmed as Facebook abused its dominance to buy up Instagram and WhatsApp while kneecapping potential rivals by leveraging the power of their APIs. In their suit, the states are claiming that Facebook's conduct deprives users of product improvements, including better privacy options.

David Dinielli, a former special counsel with the DOJ's antitrust division who has pushed for the government to bring a case against Facebook, said he thinks it will be necessary to "educate" the judge on how Facebook monetizes user data, but he remains optimistic that the claims can pass the stress test.

After years of hand-wringing over the limitations of the law, the case could mark a turning point when it comes to antitrust enforcement in the U.S., proving once and for all that the government has all the tools it needs to take on the Silicon Valley giants.

"There has been tons of public discussion over the last several years about ways we should think about updating the antitrust laws and ways we should grant new powers to regulators," said Dinielli. "What I think is interesting about these cases is they rely on tried-and-true theories of antitrust law."

Ultimately, supporters of the case have emphasized that the conduct at the center of the complaint amounts to a basic violation of the Sherman and Clayton Acts, as well as the FTC Act. The cases allege that Facebook has used exclusionary conduct to grow or maintain its monopoly power, a textbook violation.

"The theory itself is the most straightforward antitrust theory there is: You're buying your rival," Newman said.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins