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.

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