In a significant legal win for
a U.S. District Court judge dismissed parallel antitrust complaints against the company that had been filed by the Federal Trade Commission and a group of 48 state attorneys general.
The FTC alleged last December that Facebook was “illegally maintaining its personal social networking monopoly through a yearslong course of anticompetitive conduct.” The complaint said Facebook had a “systematic strategy” to maintain monopoly power, including the acquisitions of Instagram in 2012 and WhatsApp in 2014. The FTC’s proposed remedies included forcing the divestitures of both Instagram and WhatsApp, while requiring Facebook to seek prior notice for future deals.
But Judge James Boasberg of the U.S. District Court for the District of Columbia rejected the arguments made in the FTC complaint, as well as those from the states.
“Although the Court does not agree with all of Facebook’s contentions here, it ultimately concurs that the [FTC’s] complaint is legally insufficient and must therefore be dismissed,” he writes in his decision. “The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its … claims—namely, that Facebook has monopoly power.”
“We are pleased that today’s decisions recognize the defects in the government complaints filed against Facebook,” a Facebook spokesperson said in a statement. “We compete 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.”
Facebook shares jumped on the news and closed up 4.2%, to $355.64, pushing the company’s market value above $1 trillion for the first time ever.
(AMZN) all rose about 1%, while Google-parent
(GOOGL) was essentially flat.
In response to the court decision, an FTC spokesperson said, “The FTC is closely reviewing the opinion and assessing the best option forward.”
A spokesperson for the New York attorney general’s office said: “We are reviewing this decision and considering our legal options.”
Judge Boasberg, who was appointed to the district court by President Barack Obama in 2011, says the complaint makes the “naked allegation” that Facebook has a dominant share of the market in excess of 60%. He finds the claim “unsupported,” though, and notes that it would be hard to measure, given a lack of revenue, units sold, or other typical metric. “The FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague ‘60%-plus’ assertion too speculative and conclusory to go forward,” he writes.
The judge left the door open to a revised filing—he dismissed the complaint, but not the case—allowing the FTC to file an amended complaint.
In the ruling, the judge also found fault with the claim that there is anything illegal about Facebook’s policy of not allowing interoperability with other services ”[E]ven if the FTC had sufficiently pleaded market power, its challenge to Facebook’s policy of refusing interoperability permissions with competing apps fails to state a claim for injunctive relief,” he writes “[T]here is nothing unlawful about having such a policy in general.”
The court did leave the door open to revisiting the Instagram and WhatsApp deals, though. “The agency is on firmer ground in scrutinizing the acquisitions of Instagram and WhatsApp, as the Court rejects Facebook’s argument that the FTC lacks authority to seek injunctive relief against those purchases,” he writes. “Whether other issues arise in a subsequent phase of litigation is dependent on how the Government wishes to proceed.”
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