Judge dismisses state, federal antitrust suits against Facebook

A judge said that the US Federal Trade Commission failed to meet the burden for establishing that Facebook has a monopoly in social networking.

The Facebook lawsuits were filed in December as part of a widening crackdown on United States tech giants [File: Nina Riggio/Bloomberg]

Facebook Inc. won the dismissal of two antitrust cases filed by the federal government and a coalition of states when a judge threw out the lawsuits. Shares of the social-media platform rose.

U.S. District Judge James Boasberg in Washington on Monday granted Facebook’s request to dismiss the complaints, filed last year by the U.S. Federal Trade Commission and state attorneys general led by New York’s Letitia James.

The judge said in the opinion that the FTC failed to meet the burden for establishing that Facebook has a monopoly in social networking. He said the agency could refile the complaint within 30 days.

“Although the court does not agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s complaint is legally insufficient and must therefore be dismissed,” Boasberg wrote.

Facebook shares rose as much as 4.4% in New York following the ruling.

With the ruling, Facebook has escaped — at least for now — the most significant regulatory threat to its business to emerge out of the wider crackdown on U.S. technology giants.

The decision delivers a blow to the FTC and the states, which claimed Facebook violated antitrust laws by buying photo-sharing app Instagram and messaging service WhatsApp in order to cut off emerging competitive threats and protect its monopoly.

It puts new emphasis on antitrust legislation advanced by the Judiciary Committee last week that would make it easier for enforcers to challenge anticompetitive conduct by the biggest tech platforms.

Antitrust Hurdles

Boasberg’s decision to toss the Facebook complaints shows the hurdles U.S. antitrust enforcers face in trying to take on the internet giants. Officials on their own can’t break up companies or impose other remedies, but instead must persuade judges to take action. The process can take years.

The Facebook lawsuits were filed in December as part of a widening crackdown on America’s tech giants. The cases followed a Justice Department complaint against Alphabet Inc. for allegedly monopolizing internet search, and the findings of a House investigation that accused tech companies of abusing their dominance. Lawmakers have since proposed a pile of bills that would cast a broad regulatory net over the companies.

The Facebook lawsuits centered on the 2012 acquisition of Instagram and the 2014 takeover of WhatsApp. Officials say Facebook made the deals because it saw both companies as threats to its business. Rather than compete with its own products, Facebook followed Chief Executive Officer Mark Zuckerberg’s mantra: “it is better to buy than compete,” according to the FTC complaint.

Facebook offered $1 billion for Instagram when it had only 25 million users and no revenue, but had already started to capture the market for mobile photo-sharing. Zuckerberg said the threat from Instagram was “really scary,” according to the FTC complaint. The company paid $19 billion for WhatsApp because it saw messaging apps as another danger to its business. A Facebook executive said the apps “might be the biggest threat we’ve ever faced as a company,” the FTC complaint said.

Facebook attacked the complaints on several grounds. One of its key arguments was that the FTC investigated both acquisitions when they were announced and allowed both deals to proceed. While antitrust enforcers can challenge completed mergers, Facebook argued the FTC’s case was unprecedented and the agency never explained why its prior decisions approving the purchases were mistaken. The government simply wants a “do-over,” Facebook said.

The company also had argued that a U.S. Supreme Court ruling in April that curtailed the FTC’s authority to recover money for defrauded consumers required that the complaint be dismissed.

The case is Federal Trade Commission v. Facebook Inc. 20-cv-3590, U.S. District Court, District of Columbia (Washington).

Source: Bloomberg