Right after Thanksgiving in 2011, the Federal Trade Commission announced it had caught Facebook in several lies about privacy occurring over the prior two years. The company, it said, had agreed to a settlement and would be making changes going forward to protect users’ data.
The agreement, to put it mildly, doesn’t seem to have gone as the FTC planned. One $5 billion fine for privacy abuses and an unending stream of scandals later, the FTC is in the middle of litigation with the company now known as Meta over alleged antitrust violations, which were long thought to belong to an entirely separate area of law.
In a judge’s recent ruling in the competition case, though, the FTC may have found a surprising lever to get a handle on Big Tech’s data practices.
On Jan. 11, Judge James Boasberg denied Meta’s motion to dismiss the suit, essentially finding that if everything in the FTC’s complaint turns out to be true, the commission has put together a legally sound case. It’s an admittedly plaintiff-friendly standard, and proving all the claims are indeed true may well still be a “tall task” for the FTC once Meta can present its own evidence and arguments, Boasberg wrote. Still, at least as far as he was concerned, the FTC wasn’t invoking absurd or discredited legal theories.
That’s where privacy comes in: While the FTC alleges that Meta's acquisitions of Instagram and WhatsApp were anticompetitive, the commission also contends that the company’s shoddy privacy record arose because it faces no meaningful competition from rivals that might offer better data protections.
Other antitrust cases have looked at data as an asset, or complained that privacy protections are a pretext for anticompetitive behavior. In the lead-up to the FTC’s filing of the case in 2020, though, antitrust traditionalists and even some sympathetic experts essentially dismissed the novel notion that an enforcer could invoke privacy as a casualty of tech consolidation. They said it was academic at best — and at worst, a harebrained effort to cram the two main objections to Big Tech into one case.
Since the 1980s, judges in antitrust cases have looked for plaintiffs to focus on measurable price increases to consumers or, occasionally, to quantifiably decreased output. Privacy is neither, traditionalists pointed out, though it could be theoretically possible to analyze privacy as a type of product quality, and plaintiffs do sometimes invoke worse offerings to show harm. But even then, traditionalists said courts haven’t liked substituting their judgments about product quality for consumers’ opinions.
Jim Tierney, who had previously spent a decade overseeing tech-sector antitrust enforcement at the Justice Department, said at the time that a lawsuit “based on a data privacy theory of harm is not in the cards.” (Tierney was in private practice, and his law firm, Orrick Herrington & Sutcliffe, did work for Facebook, though he said he in particular didn’t.)
The FTC didn’t listen to the naysayers. In its original complaint, which was filed by a Republican-led commission during the Trump administration, the FTC cited potential benefits of more competition, including a boost in the “availability, quality, and variety of data protection privacy options for users, including, but not limited to, options regarding data gathering and data usage practices.”
Boasberg eventually dismissed that complaint, though he let the FTC try again and expressed no concerns about the claims regarding data protection. In the meantime, Lina Khan, a well-known critic of tech companies — and of the bipartisan focus, dating to the Reagan era, on prices in antitrust cases — had taken over the commission as chair.
Khan made clear in her academic writing, before joining the FTC, that she sees a nexus between privacy and competition. In fact, academics in general had been interested in the link between competition and privacy. Even some Republican enforcers — like Makan Delrahim, head of the DOJ Antitrust Division during the Trump administration — floated similar notions, which found their way into the antitrust complaint he filed against Google.
The revised FTC complaint, which Khan led, landed last summer and zeroed in on these issues, detailing how Facebook allegedly worsened privacy among other, more traditional harms.
“Facebook has also engaged in other activities that have degraded the user experience, including the misusing or mishandling of user data,” the revised complaint said, citing both the FTC’s 2011 privacy order and the 2019 mega-fine. “Facebook’s ability to harm users by decreasing product quality, without losing significant user engagement, indicates that Facebook has market power.”
‘Consumers care’
Despite the academic interest, and prosecutors’ claims in their lawsuits, there isn’t much modern precedent in the U.S. directly justifying Khan’s move. Even in the EU, where antitrust enforcement is relatively stronger, especially against tech, the question is fraught.
Meta wasn’t shy about pointing out the lack of prior rulings. “No court has ever endorsed the theory the FTC espouses here: that the amount of ‘privacy’ on a service can demonstrate monopoly power,” the company wrote when asking to have the new complaint dismissed. Indeed, Meta suggested, privacy can’t even be measured, and consumers have proven they like the status quo of free, ad-powered services.
That’s the motion that failed earlier this month when Boasberg said the FTC’s case could continue.
Boasberg cited existing statutes relating to spam to point out that actually, people might care deeply about such things. “The advent of federal legislation addressing various privacy and advertising concerns related to consumer technology is consistent with the intuitive notion that consumers care about these issues and may prefer stronger protections” in social networking, he wrote.
His ruling doesn’t seem to have been a one-off in federal courts, either. Three days after it came down, a U.S. judge in California denied part of Meta’s motion to dismiss a different antitrust lawsuit. That complaint comes from a group of consumers and advertisers whose allegations, as Judge Lucy Koh put it, include the notion that, “without competition, Facebook can extract additional ‘personal information and attention’ from users.”
Koh, too, allowed the privacy claims to proceed, writing: “Consumers have adequately alleged that their injury ‘flows’ from Facebook’s anticompetitive conduct.”
Alex Harman, competition policy advocate at liberal consumer advocacy group Public Citizen, said the FTC’s handling of privacy in the Meta case shows why enforcers should push the boundaries of competition law rather than relying on old interpretations that might not account for current business models.
“You might lose, but you might also win, and then you expand the coverage of the law,” he said, adding that the U.S. might have stopped Google’s acquisition of Fitbit and other deals if there had been better precedent.
Harman said that if that part of the FTC’s case ultimately prevails (in what could be a years-long process), it could be a boon not only to enforcers and other plaintiffs who want to bring cases based on privacy concerns with Big Tech, but also all kinds of product issues.
“The implication is far beyond just the biggest tech companies,” he said. “You could sub in any feature or benefit that is being anticompetitively squeezed out as a result of a consolidation.”
