Judge dismisses FTC and state antitrust complaints against Facebook

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CNBC 28 June, 2021 - 03:48pm 63 views

FTC complaint against Facebook struck down in court

NBC News 28 June, 2021 - 04:00pm

The U.S. District Court for the District of Columbia dismissed the Federal Trade Commission's antitrust complaint against the social media giant, calling it "legally insufficient." It also dismissed a similar case brought by the attorneys general of 46 states.

"The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims -- namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services," U.S. District Judge James E. Boasberg wrote in his ruling.

Facebook had filed to have the suits dismissed in March, arguing that the FTC had failed to adequately define a market where the company had monopoly power.

Boasberg appeared to agree with that argument. But while he dismissed the complaint, he did not dismiss the case entirely, inviting the FTC to amend its complaint and bring the case back to court.

The judge also told the FTC that it was "on firmer ground" scrutinizing Facebook's acquisitions of Instagram and WhatsApp than it was in pursuing Facebook's refusal to allow for interoperability, which would allow users to take their data to other platforms.

The case brought by the 46 states had focused on those acquisitions but was dismissed because too much time had elapsed since the events in question. 

The FTC, now headed by Biden-appointee Lina Khan, is now likely to return with a new lawsuit that focuses more directly on Facebook's acquisition history. Khan has built her reputation on scrutinizing Big Tech.

Facebook stock jumped nearly 5 percent after the ruling, sending its valuation above $1 trillion.

“We are pleased that today’s decisions recognize the defects in the government complaints filed against Facebook,” a company spokesperson said. “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.”

The ruling comes as many politicians on both sides of the aisle have looked to rein in tech companies, though usually for different reasons. Sen. Josh Hawley, R-Mo., an outspoken Facebook critic, tweeted that the ruling was "deeply disappointing" since the court noted the company's market power "but essentially shrugged its shoulders."

Rep. Ken Buck, R-Colo., tweeted that the ruling showed "antitrust reform is urgently needed."

"Congress needs to provide additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anticompetitive conduct," he wrote.

Facebook wins dismissal of antitrust suits brought by FTC, AGs

Yahoo Finance 28 June, 2021 - 02:40pm

Facebook's (FB) stock price was higher in late-afternoon trading, pushing the company's market valuation past $1 trillion for the first time.

The FTC case was dismissed without prejudice, meaning the government can file an amended antitrust suit against Facebook within the next 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," U.S. Judge James Boasberg of the District of Columbia wrote in Monday's opinion granting Facebook's motion to dismiss.

The FTC sued Facebook in December, alleging the social media giant is violating antitrust law by buying up competitors and depriving consumers of alternatives that would better protect their privacy. The lawsuit came the same day Facebook was hit with a similar antitrust lawsuit by 48 attorneys general.

At the heart of both lawsuits are claims that Facebook’s acquisitions of Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion, as well as other smaller technology companies, were carried out in order to quash competition. 

In the lawsuit, the FTC alleged that Facebook used its dominant position to quash threats from WhatsApp and Instagram by buying them up. The FTC, however, was also the entity that allowed Facebook to make those purchases.

Despite that, the agency has also taken the social network to task. In 2019, the commission slapped Facebook with a $5 billion penalty for allowing Cambridge Analytica, a data firm conducting election research on behalf of then candidate Donald Trump’s campaign, to access private data of 87 million Facebook users. In a settlement agreement, the FTC also mandated that Facebook implement new privacy safeguards, including obtaining users' consent before sharing information beyond their privacy settings.

Critics of the FTC’s fine were underwhelmed. The $5 billion sum, they said, was nothing more than a slap on the wrist for the company that reported $70.7 billion in revenue in fiscal 2019. 

On Monday, Rep. Ken Buck (R-CO), the ranking member of the House Judiciary Committee's subcommittee on antitrust, responded to news of the judge's dismissal by calling for stronger antitrust laws.

"Today’s development in the FTC’s case against Facebook shows that antitrust reform is urgently needed," Buck said in a statement. "Congress needs to provide additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anticompetitive conduct.”

The FTC's suit against Facebook is only one of a number of ongoing actions and investigations into Big Tech. Earlier this month, Buck and members of the House antitrust subcommittee introduced six antitrust bills that take direct aim at America's most valuable tech companies. 

The bills call for curbing the ability for companies to favor their own services — think searching for video on Google (GOOG, GOOGL) and being pointed to YouTube. The proposed legislation would also prohibit companies from requiring clients to use their secondary services to use their platforms — think Amazon (AMZN) forcing third-party sellers to use its logistics platform.

Penalties for violating the bills vary from forcing companies to pay as much as 30% of their U.S. revenue during the period of the violation or 15% of the prior year’s total revenue, to requiring firms to divest entire business lines.

Google is already contending with a series of antitrust lawsuits filed by the Justice Department and attorneys general related to its advertising and search dominance. Google is also expected to be hit with an antitrust suit related to its Play Store as soon as this week.

Amazon, meanwhile, was recently struck with a suit by Washington, D.C. Attorney General Karl Racine alleging that the e-commerce giant acts as an illegal monopoly by forbidding third-party sellers from offering cheaper rates for their products on competing websites.

Apple (AAPL) is also dealing with its own antitrust issues via a lawsuit filed by Epic Games that claims the company abuses its control over the App Store. A ruling in that case is expected this summer.

Yahoo Finance has reached out to Facebook for comment on the dismissal and will update this post with any comment we receive.

Editor's note: This story was updated to note that the separate case by attorneys general was also dismissed.

Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.

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