Pixel Envy

Written by Nick Heer.

U.S. Judge Dismisses Two Antitrust Suits Against Facebook, Invites FTC to Refile

Hannah Murphy and Kiran Stacey, Financial Times:

A judge has dismissed two antitrust lawsuits against Facebook, one from the Federal Trade Commission and another by a coalition of US states, dealing a significant blow to regulators and sending the social media group’s share price to record levels.

In an opinion on Monday, Judge James Boasberg in Washington, DC said the FTC’s lawsuit was “legally insufficient” and the federal agency had “failed to plead enough facts to plausibly establish” that Facebook had monopoly power over the social networking market.

However, the FTC will have 30 days to file a new complaint, he added.

Diane Bartz and Elizabeth Culliford, Reuters:

Facebook shares rose more than 4% after the ruling. The share price rise put Facebook’s market capitalization over $1 trillion for the first time.

[…]

The judge said that the FTC did not adequately support its assertion that Facebook has more than 60% of the market. But Boasberg said the agency could potentially fix the issue in a refiling.

Just three years ago, Apple became the first publicly-traded American company to hit the trillion-dollar market cap mark. As of this writing, all five “big tech” companies are part of that club, plus Saudi Aramco, the sole non-tech, non-U.S. entry. It is a hell of a time to be part of the shareholder class, I imagine.

Matt Stoller:

That said, I’m not sure panic is warranted. I talked to a bunch of smart lawyers, and I’m told that what matters about today’s decision are four things. First, the judge dismissed the way the FTC characterized the market, which sounds bad, but isn’t that big a deal. In his dismissal, moreover, the judge told the FTC how to fix its complaint, which it can do by refiling in 30 days with more market share data. (As antitrust scholar Daniel Crane notes, the FTC will almost certainly refile.) That’s a huge loss for Facebook, since market definition is perhaps the most important legal battlefield and the judge will probably come to accept the government’s framework.

Second, the judge said the FTC’s biggest claim — that Facebook’s acquisition of Instagram and WhatsApp were done to foster monopoly — can go forward. That’s another big loss for Facebook. […]

Ever since speculation began about a forced divesture of Instagram, a narrative has spread among some tech commentariat that everyone mocked the acquisition at the time as a stupid move that would inevitably flop. That is completely wrong; contemporaneous publications from the tech-centric to the bloggy to the mainstream praised the deal.

If I am speculating cynically, I might guess that one reason startup founders and venture capital types have been eagerly spreading this narrative is because their ability to turn theoretical value into real money partly hinges on the possibility of selling unprofitable high-valuation companies to bigger technology conglomerates. But who knows? Maybe they really do believe that the Instagram purchase was widely seen as a tossing away a billion dollars, only for all those haters to flush beet red after being outsmarted by Mark Zuckerberg, smoked meats demigod.

Stoller, continued:

[…] Third, he tossed the FTC’s allegations of anti-competitive conduct, saying that Facebook as a monopoly is allowed to crush anyone it wants. That’s a loss for the government. And fourth, he also dismissed the state AG cases entirely on the doctrine of ‘laches,’ a bureaucratic limit which will constrain state antitrust action going forward (unless Congress fixes it). Another loss.

The first — or, well, third — thing that Stoller is referring to here is how the judge was comfortable with the idea that Facebook could shut off a competitor’s platform access. In the case of this suit, it is referring to Vine’s terminated access to Facebook’s friend-finding API. The ACCESS bill in the big tech company antitrust package requires API interoperability, and Rep. Cicilline’s bill prohibits limitations that do not apply to the platform owner. If the ACCESS bill becomes law, I am intrigued by a web where our social graph becomes truly portable and cross-communicative. I do not think it would have kept Vine alive; its closure reflects some truly Twitter-specific product focus problems.