Meta Prevails in U.S. Antitrust Case ⇥ cnbc.com

Jonathan Vanian, CNBC:

Meta won its high-profile antitrust case against the Federal Trade Commission, which had accused the company of holding a monopoly in social networking.

In a memorandum opinion released Tuesday, Judge James Boasberg of the U.S. District Court in Washington, D.C., said the FTC failed to prove its argument. The case, initially filed by the FTC five years ago, centered on Meta’s acquisitions of Instagram and WhatsApp.

“Whether or not Meta enjoyed monopoly power in the past, though, the agency must show that it continues to hold such power now,” Boasberg said in the filing. “The Court’s verdict today determines that the FTC has not done so. A judgment so stating shall issue this day.”

Briefly, I think the personal jabs at former FTC Khan by Adam Kovacevich, CEO of the lobbying group Chamber of Progress, are worth addressing:

A decisive, but not remotely surprising, loss for one of Lina Khan’s most prominent anti-big tech cases.

[…]

Brutal loss for Khan.

Kovacevich has a real axe to grind. In his first X thread about the suit — originally filed under the first Trump administration — Kovacevich does not take such a personal tone. In fact, he never mentioned then-FTC chair Joseph Simons on X during Simons’ entire tenure. But he tweeted about Khan by name incessantly during and after her time running the Commission. Strange guy.

As for the case itself, there are two things I think are true: the FTC’s argument was improbable at best, and Boasberg’s decision (PDF) is kind of bananas. (In case that link disappears, I have also put it on Dropbox.) You can read it for yourself; it is not a particularly dense text. While the judge accepts loads of evidence from Meta’s side with little snark, he undermines the credibility of C. Scott Hemphill, an expert witness who offered testimony, on the basis that he advocated for this very investigation of Meta’s market power. It is pretty clear throughout he barely believes the FTC’s argument is valid. And, based on the way it was presented, I find it difficult to disagree.

The thing that unlocked for me in reading this opinion is that the FTC created a market definition in which few platforms other than classic Facebook and Instagram lived which, almost by definition, meant that Meta monopolized the market. (What about WhatsApp? you might ask; the judge argues the FTC’s own definition of the market excludes WhatsApp from consideration.) Meta’s argument, though, is that the company no longer exists in that market at all. Its competitors are not Snapchat and MeWe; they are TikTok and YouTube. Meta is now fully an entertainment company whether users like it or not:

Nor is it clear that users want more friend posts. True, they report on surveys that they do. […] But their actions tell a different story.

What follows on page 33 is an almost entirely redacted paragraph, aside from the following lines:

[…] Instead, what users really seem to want is Reels. Meta measured the effect of Reels […] An equivalent experiment on Facebook found […]

My single ellipses are for readability but do not tell the story of how much text is redacted. Just imagine several lines of black bars in their place each time. The paragraph ends:

So whatever users might say they desire, what seems to draw them to Meta’s apps is not marginal posts from marginal friends, but unconnected videos picked just for them. Meta’s shift to the latter does not reveal monopoly power so much as a profit-maximizing corporation giving its customers what they want.

We have no idea if Meta’s experiments measured qualitative or more quantitative data. I suspect it is the latter since that is what Meta focuses on; it has reported more time spent (PDF) in its apps thanks largely to Reels. What Meta has built with the results of these experiments is personalized television. Facebook and Instagram began as utilities, and they are now fully entertainment, thereby justifying their legal claim. And, yeah, absolutely — that is the choice Meta made. The judge writes of the “small fortune in dollars and resources” (page 54) it cost Meta to change strategy, spending “around $4 billion on Reels last year and is on track to spend about $4.5 billion this year” without accounting for its reduced ad load.

What the FTC unsuccessfully tried to argue is, more or less, that Meta could only have mounted this competitive defence because it purchased Instagram in 2012, even as it maintains a monopoly in the market segment the FTC created. Boasberg did not buy this argument in part because competition for users’ time is finite, and the data shows users would rather scroll through videos than to briefly check friends’ updates and then go do something else (pages 64–65):

True enough, but TikTok has a social graph, too. It lets users follow people they know and has tried to make mapping those offline connections a bigger part of the app. It prompts users to import their list of Facebook and Instagram friends as well as their phone contacts […] TikTok has also added a Friends tab, which contains only posts created or reshared by accounts that the user follows and that follow the user back.

To be sure, TikTok’s social graph has not achieved great success. A TikTok executive estimated that fewer than 10% of users import their contacts. Meanwhile, users spend only about 1% of time on the app watching videos in the Friends tab.

Then again, these features are now also ancillary on Facebook and Instagram. […]

To be sure, TikTok is not used in remotely the same way as Facebook and Instagram were, but I will still use it as a retort to the FTC because Facebook and Instagram are now TikTok clones anyway. It is a bad argument, but it is more compelling than the one the FTC presented.