Once Again, FTC Opposes Dismissal in Facebook Divestiture Suit

The Federal Trade Commission (FTC) has locked horns with tech goliath Facebook again over allegations that it monopolizes the personal social networking (PSN) services market. Wednesday’s opposition to Facebook’s motion to dismiss contends that the FTC’s amended complaint (AC) builds on allegations about the PSN services market and bolsters its contentions with new indirect and direct evidence of the company’s monopoly power.

Last month, Facebook pressed the District of Columbia court to dismiss the complaint once again, contending that the FTC’s refreshed arguments do not make the lawsuit seeking the divestiture of assets like Instagram LLC and WhatsApp Inc. any more viable. The company also argued that the vote to file the amended complaint was tainted by the publicly demonstrated bias of FTC Chairwoman Lina Khan.

The FTC now contends that its AC “provides reliable metrics establishing that Facebook controls a dominant share of the market and detailed allegations describing the significant entry barriers that protect Facebook’s position.” In particular, the AC avers that the social media giant has at all relevant times, held a dominant portion of the domestic PSN services market as defined by three parameters: time spent using the services, Daily Active Users (DAUs), and Monthly Active Users (MAUs).

New allegations also pad arguments that the company erected significant barriers that cemented its position “in the form of direct network effects and switching costs,” among other things. As for direct evidence, the FTC first alleges that “Facebook, lacking a PSN services competitor of significance, has been able to cause significant user dissatisfaction, without losing significant user business.” 

Next, the agency argues that it pleaded facts indicating Facebook’s ability to exclude competitors and impede competition. The filing also notes that Facebook’s sustained and substantial profit margins have well-eclipsed those of its nearest rivals for years.

As for its claims for relief, the FTC asserts that its first count establishes that Facebook maintained its monopoly with its acquisition of Instagram and WhatsApp, which reportedly had the effect of eliminating fledgling competitors. Its second count alleges that “Facebook’s course of monopoly maintenance includes not only the acquisitions, … but also its adoption and enforcement of agreements with developers that deterred competition and impeded potential rivals’ ability to distribute and promote their apps.” In this vein, the agency contends that these agreements and practices are exclusionary and lack a procompetitive justification.

The FTC also defends against bias allegations leveled at Chairwoman Khan. Her alleged  “prejudgment” of the defendant does not form a basis for recusal from FTC vote authorizing federal court litigation, the filing says. In any event, the court cannot “remand” the case to FTC because “the Commission’s rules provide only for disqualification motions in connection with an adjudicative or rulemaking proceeding,” the opposition says.

Facebook’s reply is due December 1.

The FTC is represented by its own counsel and Facebook by Kellogg, Hansen, Todd, Figel & Frederick P.L.L.C.