Policy

Facebook’s antitrust win could backfire on all of tech

Companies said the Big Tech lawsuits showed the U.S. doesn't need new competition laws, but Facebook's wins may put momentum behind reform.

A digital billboard reading "Welcome to Facebook" displayed above a wide sidewalk with several pedestrians walking down it.

Facebook recently hit a $1 trillion valuation.

Photo: Christoph Dernbach/Picture Alliance via Getty Images

Facebook won two big victories in district court on Monday — for now, at least — when a federal judge dismissed both state and federal antitrust claims against it. Would-be antitrust reformers say the dismissals show why the law needs to change to rein in Big Tech.

"This decision underscores the dire need to modernize our antitrust laws to address anticompetitive mergers and abusive conduct in the digital economy," Democratic Reps. Jerry Nadler and David Cicilline, who have led congressional efforts to change antitrust laws as a way to tackle Facebook, Amazon, Apple and Google, said in a joint statement.

The decisions in the lawsuits brought by the U.S. Federal Trade Commission and a coalition of 48 state and territorial attorneys general were a shocking rebuke to the antitrust momentum against Big Tech, but raised the possibility that Facebook's victory could prove temporary by spurring the forces that seek to bring more competitive scrutiny onto the four giant companies.

The market rewarded Facebook by pushing its valuation past $1 trillion, but its victory wasn't total. The district court judge, James Boasberg, ruled that the FTC might be able to lay down a viable lawsuit and challenge Facebook's acquisitions of Instagram and WhatsApp if it gets more specific about why the company is a monopoly. Showing what market a company allegedly monopolizes is key to any case. The FTC now has until July 29 to bolster its argument.

The judge also decided, though, that the FTC's complaints about Facebook shutting rivals out of data sharing is all but dead, as is the states' case, in part because the federal government has "unique authority" to try to remedy allegations of long-past anticompetitive conduct.

A new FTC

Prominent tech critic Lina Khan just became the FTC chair, and she is unlikely to let the agency's case about Facebook fade into obscurity. She has already called an open meeting for Thursday at which the FTC will take the rare step of publicly debating whether to rescind its 2015 policy of limiting the use of its power to police "unfair methods of competition."

Because of the potential breadth of that language, and the FTC's authority to tackle competition concerns under other statutes, the agency had sought to focus on those cases with economic harm such as raised prices and to invoke the powers against unfairness only where those other laws didn't seem to apply.

Many of the provisions mirrored legal guardrails the FTC must observe under other statutes or court decisions, although tech skeptics have said the agency was pulling its punches in the fight against consolidation.

Since the theories of the conservative jurist Robert Bork began to take hold in the 1980s, courts have limited the interpretation of antitrust laws. Judges almost always interpreted the statutes in ways that were friendly to corporate defendants, requiring a high degree of economic rigor from the government and entertaining a variety of theories of companies' potential justifications for their conduct. Enforcers at the FTC and elsewhere generally embraced the approach and narrowed their own procedures, as they did in 2015.

Without the self-imposed restraints, the FTC might have more legal theories at its disposal for pursuing a case such as the one against Facebook. The agency could also expand the allegations in the complaint and seek to bring its charges before an "in-house" court that is perceived to be more deferential to the agency.

"The only thing that would really surprise me is if this is the end of the road," said Alex Petros, policy counsel at Public Knowledge, which supports increased antitrust enforcement. "We're going to see further actions."

Congressional efforts

Defenders of the antitrust status quo have said for months that the investigations of all four tech giants, and lawsuits against all but Amazon, showed that government enforcers didn't need new laws — a pushback aimed at the bipartisan group trying in Congress to expand antitrust law.

Now those who want change are pointing to the court's two rulings to suggest that reform was needed all along. A package of six major antitrust overhaul bills pushed to the House floor last week by Nadler, Cicilline and others seeks to do just that.

"Congress needs to provide additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anticompetitive conduct," Rep. Ken Buck, the top Republican on the subcommittee that advanced the bills, said in a tweet.

Other tech critics in Congress, advocates who want to see antitrust law expanded and even an official at another social media company all said the decision could put wind into the sails of congressional efforts, although opposition has risen alongside the unexpected success of the push for a revamp.

"The House's antitrust bills already had a bipartisan sheen and I bet this FTC dismissal only helps its proponents," tweeted Billy Easley, the U.S. policy manager for Reddit. "They'll argue it illustrates how the antitrust status quo isn't good enough to recognize a 'clear' monopoly."

While the congressional antitrust proposals might not resuscitate the Facebook cases exactly, they could spell plenty of trouble for the company and the other tech giants, allowing enforcers to get at much of the same conduct that the FTC and states sought to challenge.

One particularly controversial bill, for instance, could allow the government to go to court to try to force Facebook to spin off Instagram or WhatsApp if it finds there are "conflicts of interest" inherent in its ownership of the apps.

"It would probably be a much, much easier case to win than the case that the FTC is bringing now," Petros said.

Another bill would force Facebook to share data with smaller companies that could challenge its dominance, after the FTC alleged that cutting off the would-be rivals was part of Facebook's efforts to maintain a monopoly. (The court ruled Facebook has broad latitude to choose which companies to do business with.) A third measure, sponsored by Cicilline, would force Facebook not to discriminate against rivals.

House Speaker Nancy Pelosi has spoken positively about the six antitrust bills, but she hasn't promised to take them up and some of her fellow California Democrats have been trying to slow the bills that are aimed at major employers in their state.

Other proposals could also change the companies' fortunes in a future case. Democratic Sen. Amy Klobuchar, who chairs the antitrust subcommittee and is pushing ahead with her own efforts to change competition law, has previously introduced a bill eliminating many requirements to define markets as painstakingly as Boasberg demanded.

"After decades of binding Supreme Court decisions that have weakened our antitrust policies, we cannot rely on our courts to keep our markets competitive, open, and fair," Klobuchar said in a statement.

Facebook said in a statement that it competes "fairly every day to earn people's time and attention and will continue to deliver great products for the people and businesses that use our services."

A tech trade group, NetChoice, which counts Facebook as a member, argued that the decision illustrated that the FTC had overstepped and hardly needed to be more empowered.

"Activists might say we need new antitrust laws, but the Federal Trade Commission's departure from tradition into subjective antitrust enforcement has illustrated the very need for our laws to continue to be applied objectively and fairly," said Carl Szabo, the group's general counsel.

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