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‘Mass Exodus’

Federal Judge Questions Facebook Monopoly, Citing User Decline

A federal judge questioned whether Facebook has monopolized the social media market, citing reports about hundreds of thousands of users leaving the platform. DOJ and New York Attorney General Letitia James (D) asked the U.S. Court of Appeals for the D.C. Circuit to revive an antitrust lawsuit against parent company Meta (see 2208240027), filed by 48 states and territories. U.S. District Judge James Boasberg dismissed the case in June 2021 (see 2106280057), saying the states waited too long to file the claim.

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Judge Raymond Randolph asked Meta attorney Aaron Panner, of Kellogg Hansen, during oral argument Monday about reports of a “mass exodus” from Facebook. “I would only comment that sometimes facts that are good for an antitrust defense are bad for the business,” Panner told the three-judge panel, noting Meta addressed reports of declining user numbers in public statements. It’s correct Facebook operates in an “extremely competitive environment,” where users can switch platforms with ease, said Panner. He listed TikTok, YouTube, Twitter, Snap and Pinterest as some of Meta’s competitors in a “dynamic market with substantial entry.” He argued the alleged anticompetitive conduct cited by New York and DOJ happened as early as 2011, but enforcers didn’t challenge Meta’s acquisitions of Instagram in 2012 and WhatsApp in 2014.

State enforcers lacked sufficient information to block Facebook’s buys of Instagram and WhatsApp, partly because the platform misrepresented its intentions, the AGs argued in April (see 2204150037). Panner responded Monday, saying that argument “has no substance whatsoever.” The supposedly misleading statement about WhatsApp has nothing to do with the alleged anticompetitive nature of the acquisition, he said.

Meta argues that laches, a legal doctrine preventing individuals from suing after unreasonable delay, bars the states from moving forward with their claim. New York attorney Barbara Underwood argued Monday that laches doesn’t apply to the federal government and shouldn’t apply to state enforcers. States filed their lawsuit in 2020, alongside a parallel FTC complaint, which caused no more harm to Facebook than if the AGs had filed the case a few years sooner, said Underwood. The FTC’s case, which isn’t barred by laches, challenges the same acquisitions and effectively seeks the same relief, she said: As a result of the FTC’s case, the acquisitions aren’t in “repose,” and the company can’t point to any incremental harm from the filings.

Divesting Instagram and WhatsApp aren’t the only potential remedies, Underwood said. Other potential remedies for anticompetitive conduct include: requiring Facebook to separate data it collects from each company, blocking future anticompetitive acquisitions, and barring Facebook from taking action that limits user choice. She argued the delay in bringing the cases wasn’t unreasonable because social media markets weren’t well understood at the time of the purchases. There are plenty of reasons to think Facebook’s anticompetitive conduct will happen again, she said.

Facebook exhibited the same type of anticompetitive behavior that Microsoft engaged in before it settled its monopoly case in 1994, said DOJ attorney Daniel Haar. Microsoft’s practices were found to be anticompetitive because they disabled cross-platform functionality, he said: States argue Facebook took similar action aimed at preventing app developers from doing business with rival networks.

The motion to dismiss stage isn’t the right point to resolve allegations of whether Facebook blocked apps from engaging with other third-party apps, argued Underwood: Factual allegations are disputed, so the case should proceed. It’s undisputed that Facebook took related actions against Google, which launched its Google+ social media platform, which ultimately failed, she said.