On Tuesday, Federal Judge James E. Bosberg ruled that the Federal Trade Commission’s efforts to sabotage Facebook could proceed. The matter is far from settled in itself. But by blessing the FTC’s theory that a monopoly can harm consumers even if its product is free, the judge has indicated that Facebook and other tech platforms are not invincible.
This is a big change from last summer. In June, Bosberg, a judge in the United States District Court for the District of Columbia, approved Facebook’s motion to dismiss the case. (The company has since rebranded itself as Meta Platform, but Facebook remains the designated defendant.) The problem, he said, is the FTC—which is trying to reverse Facebook’s acquisitions of Instagram and WhatsApp. – has not provided any evidence that the company had a monopoly. But in the same ruling, Bosberg gave a clear blueprint for reviving the case. The only proof the government had to provide was the dominance of Facebook in the social networking market.
Two months later, the agency filed a new complaint filled with data points from comScore, an analytics firm that Facebook itself uses, suggesting the company dominates the market under a variety of metrics: daily active users, monthly Active users, and user time spent. The new evidence seems to have impressed Bosberg. “In short,” he writes in latest decision, “The FTC has done its homework this time.”
Market-share data doesn’t quite settle matters by itself. The FTC, Bosberg notes, also has to show that Facebook’s alleged monopoly has been bad for consumers. This is where the verdict gets interesting. From the start, the movement to enforce antitrust laws against companies like Facebook and Google has faced one major obstacle: How do you show that consumers are harmed by companies whose core offerings are free? (Or, in Amazon’s case, famously cheap?) Antitrust law isn’t technically about prices, but since the late 1970s, judges have tried to interpret it as if it were. The standard way to argue against a corporate merger is to show that it will drive up prices. (see, for example, beef industry,
In recent years, legal thinkers, including FTC Chair Lena Khan, have been developing another way to think about the pitfalls of technological monopolies: When there is no competition, companies will be free to do the things that users do. For example, scholar Dina Srinivasan has argued that Facebook lowered its user privacy standards after defeating early rivals such as MySpace. The FTC incorporated that principle in its brief, as well as many others. Facebook’s dominance, he argued, has allowed the company to pack users’ feeds with more ads. And, the FTC noted, Facebook killed its own in-house photo-sharing app after it bought Instagram, suggesting that consumers would have more options if the two companies remained rivals.
Until now, it has been an open question whether these non-value theories will succeed in court. Which is why it’s a big deal that Bosberg has accepted them. “In short,” he wrote, “the FTC alleges that even though Facebook’s acquisition of Instagram and WhatsApp did not increase prices, they led to poor services and fewer options for consumers.”
This is a very dry sentence, but it may prove to be a milestone.
“It’s a really prominent, important and unusual endorsement of that non-value market idea,” said Vanderbilt Law School professor Rebecca Allensworth. “I think it’s very disastrous for Facebook.”
Note that Bosberg mentions the FTC “allegation”. The agency will still have to prove its case at trial in Bosberg’s court. Whether it can do so, the judge said, is “anyone’s guess,” and may come down to which side holds the more credible expert witnesses. Facebook would argue that its acquisition has benefited consumers. “Our investments in Instagram and WhatsApp have transformed them into what they are today,” the company said in a statement. “They’ve been good for the competition, and good for the people and businesses who choose to use our products.”
What’s important for now is that a judge in one of the nation’s most important federal courts has at least put his stamp of approval on it. Theory non-price loss. If other courts follow suit, its impact will not be limited to Facebook. The underlying argument about the lack of competition for free or cheap services may apply to Google Search, Amazon Retail, or Apple’s App Store—all of which are in the midst of defending themselves from various antitrust suits—or few yet. The trial is going on major forum.
Paul Swanson, an antitrust attorney in Denver, said, “The court was not complicit in the fact that Facebook’s offering is ‘free. “This is an important principle for antitrust enforcement against Big Tech.”
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