Bulletins

FTC vs. Facebook is back on, and it's going deep on mobile stumbles

One of the first major tests for Lina Khan's commission comes in response to a judge's ruling that the FTC's first complaint did too little to measure Facebook's market share.

FTC building exterior

The FTC refiled its complaint against Facebook.

Photo: bpperry/Getty Images

The U.S. Federal Trade Commission on Thursday took another stab at its massive antitrust lawsuit against Facebook as it filed an amended complaint seeking the company's breakup, following a judge's June dismissal of the government's first attempt.


The FTC filed its original complaint last December, in which it focused on Facebook's allegedly anticompetitive acquisitions of Instagram and WhatsApp. Although industry watchers considered the suit to be aggressive, District Judge James Boasberg in a June decision said the FTC had not done enough to measure Facebook's market share. Boasberg also raised questions about how the commission even defined the company's market — a key first step in many competition cases. Boasberg, however, left the commission the opportunity to refile with a complaint that addressed his concerns.

The new filing is an early test for an FTC that has turned dramatically toward tech skepticism with the change in administration. The commission's new 3–2 Democratic majority is led by chair Lina Khan, who helped build a movement advocating for reforming and increasing antitrust enforcement, in part to take on Big Tech.

In the renewed complaint, which runs more than 25 pages longer than the original, the FTC included more details about which other companies, such as Snapchat, it believes are in the same market as Facebook, and how their user bases and the amount of time users spend on their sites compare. The agency cites use information from sources such as Comscore in some cases, and extends its scope even to consider older Facebook competitors such as Google+ and MySpace. The FTC meanwhile said some social services, such as Reddit and TikTok, are not part of the same market segment as Facebook because they don't focus on personal connections from outside the platform — like family and friends.

The amended complaint also includes figures on issues like smartphone adoption rates. Worries about the performance of the original Facebook site and app on mobile phones, for instance, made the company particularly concerned about competitors, including Instagram and WhatsApp, that were native to smartphones and performed well on the go, the FTC contends.

"After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat," Holly Vedova, the acting director of the FTC's Bureau of Competition, said in a statement. Vedova said Facebook's action's "degraded the social network experience, subjecting users to lower levels of privacy and data protections and more intrusive ads."

The commission previously approved both Facebook's 2012 Instagram acquisition and its 2014 WhatsApp acquisition, but the complaint includes numerous instances of Facebook leadership, including CEO Mark Zuckerberg, positioning the company for those deals explicitly because of concerns they could pose a threat.

Facebook hits back

"The company's acquisitions of Instagram and WhatsApp have made the digital landscape less competitive, ultimately harming consumers," Democratic Sen. Amy Klobuchar, who chairs a subcommittee on competition law, said in a statement. "Big technology companies like Facebook should not have free [rein] to impose their will on the market, and they must be held accountable when they attempt to do so."

John Newman, an antitrust scholar at the University of Miami School of Law, tweeted that "the relevant market participants appear to be more clearly identified" in the new complaint. Supporters of increased antitrust enforcement also celebrated the refiling, with an official from the consumer group Public Citizen approvingly calling Khan "a new sheriff in town."

Facebook has contended the deals for Instagram and WhatsApp were positive for consumers, as they have created functions users enjoy, and that the apps' success is the result of Facebook's investments rather than a sign that the services would have been formidable competitors if left on their own.

Christine Wilson, a Republican commissioner who voted against issuing both the original and the renewed complaint, said in a statement that the new charges could "undermine the integrity of the premerger notification process" Facebook used to alert the government to the purchases of Instagram and WhatsApp. NetChoice, a trade group that counts Facebook as a member, said the FTC was "refusing to accept the existence of vibrant competition in the social media market."

The new filing comes from an FTC that looks dramatically different than it did when the lawsuit first landed in 2020. In addition to the Democratic majority, Khan has made internal changes that could make it easier for the FTC to go after a broader array of potentially anticompetitive conduct.

Facebook has specifically argued that Khan's record in academia, think tanks and Congress means that she should recuse herself from the matter, claiming she has pre-judged the company's case.

In a statement alongside the filing, the FTC said its Office of General Counsel "carefully reviewed Facebook's petition to recuse" and that the commission's lawyers concluded the judge would provide "the appropriate constitutional due process protections" to Facebook. The FTC dismissed the petition.

During her confirmation process, Khan had said she didn't have the financial conflicts that generally prompt recusals, and defenders have argued her expertise shows she should be in charge of the case rather than made to step away from it.

Court troubles

The FTC has had a chance to refile in this instance, but courts in recent months have handed the FTC several other losses. In April, for example, the Supreme Court ruled unanimously that the commission had overstated its authority to quickly secure money for consumers, including victims of fraud.

The FTC had actually invoked the same provision, under which the commission claims a variety of powers, in its original Facebook complaint. The first filing also alleged Facebook maintained exclusionary policies toward rivals. Facebook invoked the agency's Supreme Court loss in its petition to have the case dismissed.

Boasberg said in his dismissal that the FTC had erred in trying to challenge Facebook's platform rules under that provision, but added the agency could proceed in challenging the acquisitions. The FTC in its second filing repeated some of the charges against Facebook's platform rules, alleging that its conduct is not in the past but is instead ongoing.

More than 45 states also filed suit against Facebook concurrently with the FTC in 2020. Boasberg in June dismissed the states' complaint, which featured similar allegations to the federal suit. The states are appealing the move.

Latest Bulletins

Crypto broker Voyager Digital has filed for bankruptcy protection, days after suspending all trading and withdrawals on its service.

Keep Reading Show less

In order to hobble China’s ability to produce computer chips, U.S. officials are in talks with their counterparts in Holland to block a semiconductor manufacturing tool maker based there from exporting its machines to China, Bloomberg News reported on Tuesday.

Keep Reading Show less

Stock and crypto trading service eToro has called off a SPAC merger and will stay private, the company said Tuesday. The company is also laying off about 6% of its staff.

Keep Reading Show less

Crypto lender Nexo announced Tuesday that it has signed a term sheet to acquire fellow lender Vauld for an undisclosed sum. While Nexo currently manages assets for about four million users, Vauld manages assets for about 100,000 people, according to the company’s estimates last year.

Keep Reading Show less

Twitter on Tuesday filed a suit against the Indian government in an attempt to limit government oversight over politically charged content moderation decisions. The lawsuit, filed in the Karnataka High Court, also alleges abuse of power by elected officials in India.

Keep Reading Show less

Tesla has lost its spot as the world's largest electric vehicle maker to BYD, the Chinese automaker backed by Warren Buffett's Berkshire Hathaway.

Keep Reading Show less

Ending a project that once sought to build a world-spanning financial network, Meta announced on the Novi website Friday that the pilot test of its blockchain-based money-transfer app would end in September.

Keep Reading Show less

In the wake of privacy concerns following Roe v. Wade being overturned, Google said Friday that it will start automatically deleting location history related to potentially sensitive places.

Keep Reading Show less

Voyager Digital said Friday it is suspending trading, deposits and withdrawals, in the latest sign of the deepening crisis in the crypto markets. Voyager said the move is meant to give the major crypto broker “additional time” to look for “strategic alternatives” as the company grapples with the impact of the market slump, CEO Stephen Ehrlich said in a statement.

Keep Reading Show less

BlockFi CEO Zac Prince said his company has signed a deal giving FTX the option to buy the crypto lender for up to $240 million as part of a credit financing agreement.

Keep Reading Show less

Tesla is facing yet another racial discrimination lawsuit, this one brought by 15 Black current and former employees who are suing the company in California.

The workers said the company’s culture allowed for “blatant, open and unmitigated race discrimination” and most of the alleged behaviors are said to have occurred at the company's factory in Fremont.

Keep Reading Show less

Klarna is close to raising new funding at a valuation of about $6.5 billion, which would be far below its last round raised last year, according to the Wall Street Journal. The move is the latest sign of the effects of inflation and the economic downturn on the fintech sector and "buy now, pay later" in particular.

Keep Reading Show less

Crypto companies will have to disclose just how much climate damage is tied to the tokens they're hawking. At least in Europe, that is.

Keep Reading Show less

Gene Levoff, Apple's former director of Corporate Law, pleaded guilty to insider trading, the Department of Justice announced Thursday.

Keep Reading Show less

New York state environmental regulators have declined to extend a key permit to a controversial cryptocurrency mining operation in the state's Finger Lakes region.

Keep Reading Show less

FTX is reportedly close to gobbling up BlockFi for about $25 million, though BlockFi's CEO has dismissed the talk as "market rumors."

Keep Reading Show less

The CFPB said it has terminated a sandbox deal that gave earned wage access provider Payactiv “temporary safe harbor from liability” under key lending regulations.

The CFPB granted Payactiv “special regulatory treatment” in December 2020 to offer “earned wage access” products that would allow employees to obtain wages they already earned before payday.

Payactiv gets paid back through a payroll deduction from the employee’s next paycheck. The company makes money through fees.

The CFPB said it had informed Payactiv early this month that it was “considering terminating the approval order in light of certain public statements the company made wrongly suggesting a CFPB endorsement of its products.”

The company requested that the CFPB end the sandbox order after notifying the agency that it planned to modify its product fee model, the CFPB said.

The move underlined the CFPB’s increasingly critical view of sandbox deals that the agency said “proved to be ineffective.”

Safwan Shah, Payactiv's founder and CEO, is credited with coining the term "earned wage access," which has been criticized by consumer advocates as being potentially predatory, especially when it comes to workers who don’t make much money.

Shah has argued that it benefits ordinary workers, citing a dieting principle: "The less you are paid, the more frequently you should be paid," he told Protocol in a 2021 interview. "If you're going to eat 500 calories, don't eat them in one sitting. Spread them throughout the day."

Correction: This story has been updated to correct the spelling of Payactiv's name. This story was updated June 30, 2022.

Samsung announced Wednesday that it has taken a significant step toward rolling out a next-generation manufacturing technology that has the potential to reshuffle the chip industry.

Keep Reading Show less

Amazon has censored search results related to LGBTQ+ products in the United Arab Emirates after being pressured by the government.

Keep Reading Show less

Grayscale is suing the U.S. Securities and Exchange Commission after the regulator denied the company's bid to convert its bitcoin trust into an exchange-traded fund.

Keep Reading Show less

App developers in South Korea can now use third-party payment systems, Apple announced in a blog post Thursday.

Keep Reading Show less

An employee working for OpenSea's email delivery vendor misused their customer data access to download and share email addresses with an "unauthorized external party," the NFT marketplace wrote in a company blog post Wednesday. The employee worked for Customer.io.

Keep Reading Show less

Javier Soltero is leaving Google Workspace, Google Cloud CEO Thomas Kurian announced Wednesday in an email to staff viewed by Protocol. Soltero will leave his role effective July 15.

Keep Reading Show less

San Francisco-based game development tools provider Unity is laying off hundreds of employees, according to a report from Kotaku.

Keep Reading Show less

Niantic is reportedly cutting between 85 and 90 staff members, or 8% of its workforce.

Keep Reading Show less
Bulletins