Facebook Secures Dismissal of FTC’s Landmark Divestiture Suit

On Monday, Judge James E. Boasberg ruled against both a coalition of states and the Federal Trade Commission (FTC) after finding that the government failed to plausibly allege that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services. The upshot of the decision against the FTC and the companion ruling issued in the state attorneys’ general case is that only the FTC may re-plead its allegations. 

In his introduction to the FTC case, Judge Boasberg implied that the case compares to “the last great antitrust battle in our courthouse,” between the United States and Microsoft Corporation that concluded in 2001. The District of Columbia opinion detailed the factual allegations of the FTC’s complaint before turning to their sufficiency.  

The court noted that “this case involves no ordinary or intuitive market,” and defining the boundaries of the PSN Services market is a slippery task. Judge Boasberg reasoned that the FTC’s allegations fall short because although “the contours of the asserted product market (are) plausible, the Complaint is undoubtedly light on specific factual allegations regarding consumer-switching preferences.”

As for market share, the opinion remarked that the FTC’s insistence that Facebook holds about 60% of the PSN Services market without identifying which competitors hold the remaining percentage is “striking.” Combined with the plaintiff’s “refusal to offer any clue as to how it calculated its noncommittal market-share number,” the court held that the agency’s contentions do not meet the federal pleading standard.

The FTC’s refusal to deal claims lacked evidence of Facebook’s actionable conduct, the opinion said. “(W)hile it is possible that Facebook’s alleged scheme of revoking API access from competitor apps could form the basis of a plausible refusal-to-deal claim,” the court did not reach the question. It explained that even if plausible, the injunctive relief sought is unavailable at the motion to dismiss stage owing to the legal nature of the inquiry. 

The court addressed a final point raised by the FTC in considering whether Section 13(b) of the FTC Act permits the agency to attack Facebook’s acquisitions of Instagram and WhatsApp. Judge Boasberg held, without stating any more, that the provision “is a theoretically available remedy in a Section 2 challenge to long-ago mergers so long as the defendant still holds the purchased assets or stock.”

The FTC has until July 29 to re-plead its complaint. It is represented by its own counsel and Facebook by Kellogg, Hansen, Todd, Figel & Frederick P.L.L.C.

The same day, House Judiciary Committee Chairman Rep. Jerrold Nadler (D-N.Y.) and Antitrust Subcommittee Chairman Rep. David N. Cicilline (D-R.I.) issued a joint statement about the decision, amidst a flurry of legislative activity aiming to harness Big Tech’s power.

“This decision underscores the dire need to modernize our antitrust laws to address anticompetitive mergers and abusive conduct in the digital economy,” the statement said. “Last week, the Committee voted in favor of an historic package of bipartisan legislation to address this problem and create a stronger online economy. In the weeks ahead, we will work to advance this legislation to restore choice, innovation, and opportunity for American businesses and consumers.”