FTC Alleges Facebook Resorted to Extreme Measures to Crush Competition in Amended Pleading

On Thursday, the Federal Trade Commission (FTC) filed an amended complaint against Facebook Inc., marking its second attempt to make the social media company answer for alleged monopolization and abuse of market power in the personal social networking (PSN) services market. The refreshed filing beefs up allegations that the company resorted to an illegal “buy-or-bury” scheme to cement its dominance and adds data and evidence in support of contentions that Facebook acquired and maintains power sufficient to manipulate the market.

Earlier this summer, Judge James E. Boasberg dismissed the complaint for want of proof that Facebook has monopoly power in the market for PSN services. Among other deficiencies, the court questioned the plausibility of the FTC’s claim that Facebook holds about 60% of the market without identifying which competitors hold the remaining percentage. The judge then permitted Facebook to amend its complaint, unlike the companion case filed by a multitude of states, and extended the deadline for the FTC’s revised pleading.

This week’s redacted complaint features the theory that Facebook “unlawfully acquired innovative competitors with popular mobile features that succeeded where Facebook’s own offerings fell flat or fell apart.” Relatedly, the company allegedly attracted app developers to the platform, monitored them for signs of success, and then hatcheted them once they became competitive threats.

As for dominance, the complaint now provides “new direct evidence” that Facebook’s power enables it to control prices, exclude potential or extant competitors, and reduce the quality of its offerings to users without experiencing a reduction in user base or engagement. As for other competitors in the PSN services market, the FTC claims that the next largest is Snapchat, which has tens of millions fewer monthly users than either Facebook or Instagram. 

The complaint states two counts for relief under the Sherman Act Section 2. Among other requests, it asks for divestiture, including that the company be required to spinoff Instagram and/or WhatsApp.

The FTC’s press release notes that the oversight body voted 3-2 to file the amended complaint after dismissing a petition by Facebook asking for the recusal of new Chairwoman Lina Khan. In a dissenting statement, Commissioner Christine Wilson explained that as with the first complaint, she disagreed on factual, legal, and policy bases.

Her dissent elucidated a specific policy concern, that allegations in the complaint premised on Facebook’s FTC-approved acquisition of Instagram and WhatsApp represent “bad policy.” Taking aim at the company after regulatory approval “undermine[s] the integrity of the premerger notification process established by Congress and the repose that it provides to merging parties that have faithfully complied with its requirements,” Wilson wrote.