Federal Trade Commission v. Facebook Inc.

CourtDistrict Court, District of Columbia
DecidedJune 28, 2021
DocketCivil Action No. 2020-3590
StatusPublished

This text of Federal Trade Commission v. Facebook Inc. (Federal Trade Commission v. Facebook Inc.) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Federal Trade Commission v. Facebook Inc., (D.D.C. 2021).

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

FEDERAL TRADE COMMISSION,

Plaintiff, v. Civil Action No. 20-3590 (JEB)

FACEBOOK, INC.,

Defendant.

MEMORANDUM OPINION

At the time of the last great antitrust battle in our courthouse — between the United

States and Microsoft — Mark Zuckerberg was still in high school. Only after his arrival at

Harvard did he launch “The Facebook” from his dorm room. Nearly twenty years later, both

federal and state regulators contend, in two separate actions before this Court, that Facebook is

now the one violating the antitrust laws. The company, they allege, has long had a monopoly in

the market for what they call “Personal Social Networking Services.” And it has allegedly

maintained that monopoly, in violation of Section 2 of the Sherman Act, through two different

kinds of actions: first, by acquiring firms that it believed were well positioned to erode its

monopoly — most notably, Instagram and WhatsApp; and second, by adopting policies

preventing interoperability between Facebook and certain other apps that it saw as threats,

thereby impeding their growth into viable competitors. Both suits seek equitable relief from this

conduct, including forced “divestiture or reconstruction of businesses” as well as orders not to

undertake similar conduct in the future. See ECF No. 3 (Redacted Compl.) at 51–52. (The

1 Court here cites a copy of the FTC’s Complaint that has minor redactions to protect confidential

business information, and it mentions certain redacted facts only with the parties’ permission.)

Facebook now separately moves to dismiss both the State action and the FTC action.

This Opinion resolves its Motion as to the FTC’s Complaint, and the Court analyzes the States’

largely parallel claims in its separate Opinion in No. 20-3589. Although the Court does not

agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s Complaint

is legally insufficient and must therefore be dismissed. The FTC has failed to plead enough facts

to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook

has monopoly power in the market for Personal Social Networking (PSN) Services. The

Complaint contains nothing on that score save the naked allegation that the company has had and

still has a “dominant share of th[at] market (in excess of 60%).” Redacted Compl., ¶ 64. Such

an unsupported assertion might (barely) suffice in a Section 2 case involving a more traditional

goods market, in which the Court could reasonably infer that market share was measured by

revenue, units sold, or some other typical metric. But this case involves no ordinary or intuitive

market. Rather, PSN services are free to use, and the exact metes and bounds of what even

constitutes a PSN service — i.e., which features of a company’s mobile app or website are

included in that definition and which are excluded — are hardly crystal clear. In this unusual

context, the FTC’s inability to offer any indication of the metric(s) or method(s) it used to

calculate Facebook’s market share renders its vague “60%-plus” assertion too speculative and

conclusory to go forward. Because this defect could conceivably be overcome by re-pleading,

however, the Court will dismiss only the Complaint, not the case, and will do so without

prejudice to allow Plaintiff to file an amended Complaint. See Ciralsky v. CIA., 355 F.3d 661,

666–67 (D.C. Cir. 2004).

2 To guide the parties in the event amendment occurs, this Opinion also explains two

further conclusions of law. First, even if the FTC had sufficiently pleaded market power, its

challenge to Facebook’s policy of refusing interoperability permissions with competing apps

fails to state a claim for injunctive relief. As explained herein (and in the Court’s separate

Opinion in the States’ case), there is nothing unlawful about having such a policy in general.

While it is possible that Facebook’s implementation of that policy as to certain specific

competitor apps may have violated Section 2, such finding would not change the outcome here:

all such revocations of access occurred in 2013, seven years before this suit was filed, and the

FTC lacks statutory authority to seek an injunction “based on [such] long-past conduct.” FTC v.

Shire ViroPharma, Inc., 917 F.3d 147, 156 (3d Cir. 2019). Regardless of whether the FTC can

amend its Complaint to plausibly allege market power and advance this litigation, then, the

conduct it has alleged regarding Facebook’s interoperability policies cannot form the basis for

Section 2 liability. Second, the agency is on firmer ground in scrutinizing the acquisitions of

Instagram and WhatsApp, as the Court rejects Facebook’s argument that the FTC lacks authority

to seek injunctive relief against those purchases. Whether other issues arise in a subsequent

phase of litigation is dependent on how the Government wishes to proceed.

3 Table of Contents I. Background ............................................................................................................................. 5 A. Social Networking .............................................................................................................. 5 B. Facebook Blue .................................................................................................................... 6 C. Alleged Monopoly Maintenance......................................................................................... 7 1. Instagram ........................................................................................................................ 8 2. WhatsApp ..................................................................................................................... 10 3. Interoperability Permissions ......................................................................................... 11 a. Facebook Platform .................................................................................................... 11 b. Conditioning Access ................................................................................................. 13 D. Procedural History ............................................................................................................ 15 II. Legal Standard ...................................................................................................................... 16 III. Analysis ................................................................................................................................. 17 A. Monopoly Power ............................................................................................................... 18 1. Market Definition ......................................................................................................... 19 a. Legal Framework ...................................................................................................... 19 b. Market-Definition Allegations .................................................................................. 21 c. Analysis..................................................................................................................... 23 2. Market Share ................................................................................................................. 27 B. Platform Policies ............................................................................................................... 33 1.

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