Advertiser Sues Facebook for Antitrust Violations Resulting in High Prices

On Wednesday, an advertiser filed a putative class-action complaint in the Northern District of California against Facebook, alleging that Facebook engaged in anticompetitive practices to gain monopoly power in the social advertising market, thus enabling it to charge advertisers supra-competitive prices to place ads on Facebook for targeted audiences.

According to the complaint, “Facebook is the dominant online social network in the United States and in the world,” which the plaintiff argued Facebook originally gained by deceiving consumers about its privacy policies and the information it collects, as well as misusing consumer data to learn about potential threats. As a result, Facebook has a monopoly in the personal social networking services market in the United States, the plaintiff stated.

The plaintiff claimed that “Facebook monetizes its personal social networking monopoly principally by selling advertising, which exploits a rich set of data about users’ activities, interest, and affiliations to target advertisements to users.” Moreover, the plaintiff stated that Facebook “specializes in selling social advertising, a unique market for advertising built around the very specialized and granular data that Facebook is able to collect on its users and their contacts in light of its monopoly in the personal social networking space.” The plaintiff contended that social advertising enables Facebook to identify a targeted audience for an advertiser and it is then able to evaluate advertisement results based on user interaction with the advertisement, allowing tweaks to the advertisement or target audience. The plaintiff added that because of the vast amounts of data Facebook collects on users, it has significant market share and power, thus allowing it to monetize this information. Specifically, in 2020 Facebook generated more than $70 billion in advertising revenue of which more than $18.5 billion was profit.

As a result, the plaintiff averred that Facebook has engaged in various anticompetitive practices to maintain its monopoly power in the social networking and social advertising markets. In particular, Facebook allegedly engages in conduct “with the aim of suppressing, neutralizing, and deterring serious competitive threats to Facebook.” This conduct has purportedly included: “utilizing data from third parties to identify burgeoning competitive threats, acquiring potential competitors before they can actually compete, and utilizing anticompetitive terms and practices with respect to application programming interfaces (‘APIs’) that are made available to third-party software applications.” Additionally, the plaintiff claimed that Facebook uses the APIs to gather data in order to assess possible threats and then to suppress these potential threats or prevent them from becoming a threat, which again, enabled it to gain and maintain its monopoly power. Thus, this has allegedly harmed competition. Therefore, the plaintiff averred that she and the putative class were forced to pay supra-competitive prices for advertisements on Facebook.

The proposed class includes: “All persons and/or entities who purchased advertising directly from the Defendant in the United States during the Class Period,” which is from Oct. 1, 2012 “until the effects of Defendant’s anticompetitive conduct ends.”

Facebook is accused of violating Section 2 of the Sherman Act for its purported monopolization and attempted monopolization. The plaintiff has sought for the instant action to be maintained as a class action and for the plaintiff and her counsel to represent the Class; for the alleged conduct to be adjudged and decreed in violation of Section 2 of the Sherman Act; an award for damages, including treble damages, as well as costs and fees; a permanent injunction; pre- and post-judgment interest; and other relief. The plaintiff is represented by Girard Sharp LLP.

Lately, Facebook has had numerous antitrust lawsuits filed against it, including a suit filed by Federal Trade Commission and 48 Attorneys General and a Facebook user lawsuit claiming market monopolization. In addition, Facebook recently opposed a motion to relate various user and app developer or advertiser antitrust lawsuits filed against it.