Wrath of Khan: Judge gives green light to FTC’s Facebook faceoff

By Eric Johansson

Facebook’s lawyers have a fight with the Federal Trade Commission (FTC) and its crusading chairperson Lina Khan on their hands. The social media advertising giant has just failed to prevent a lawsuit launched against it by the FTC from going to trial.

This is despite Facebook arguing that the entire case should be thrown out because Khan, known to be an adversary of Big Tech, had participated in the vote to file the suit.

The Menlo Park-headquartered company argued that her long history of criticising Silicon Valley Goliaths disqualified her from making any impartial decisions. Since she still participated in the decision to file the suit, the web giant’s lawyers argued that the entire case should’ve been dismissed.

However, US district judge James Boasberg disagreed.

“The Court believes that such contention misses its target, as Khan was acting in a prosecutorial capacity, as opposed to in a judicial role, in connection with the vote,” Boasberg wrote in court filings on Tuesday.

The case highlights the growing pushback from regulators, lawmakers and the general public against Big Tech monopolies.

Second time around for the FTC’s Facebook suit

The case itself is not technically new. In fact, it’s the second attempt by the FTC to get the anti-monopoly suit against Facebook off the ground.

The first attempt was rejected by a court in June 2021. The court essentially told the regulator that it hadn’t made a strong enough case that Facebook had monopolised the social media industry.

“It is almost as if [the FTC] expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist,” the court said in a filing at the time.

However, the court did give the FTC an opportunity to save face and face Facebook again, provided that the market watchdog could provide more details on how Menlo Park was choking competition in an unfair fashion.

In August, the FTC announced that it would take another swing at Mark Zuckerberg’s brainchild. It accused Facebook of having asserted its market dominance by scooping up competitors like Instagram and WhatsApp as well as it essentially bullying software developers with unfair conditions in order to eliminate threats to its business.

According to GlobalData’s deals database, Facebook has acquired more than 50 companies since it snapped up Instagram for $1bn in 2012.

Boasberg has now approved the updated argument. The judge noted that while the argument that Facebook is choking competition is basically the same in the updated lawsuit, the arguments “are far more robust and detailed than before, particularly in regard to the contours of Defendant’s alleged monopoly.”

The judge did, however, dismiss the FTC’s claims that Facebook’s interoperability policies for developers on its platform helped it maintain its dominance, saying these polices had officially been abandoned in 2018 and not enforced for a long time before that.

The judge’s decision means that the case can move on to discovery, the formal process of exchanging information between the parties about the witnesses and evidence they’ll present at trial.

Meta, Facebook’s parent company, is so far unhurt by the case’s move forward. The stock of the $930.1bn company barely moved following news of Judge Boasberg’s decision.

“Today’s decision narrows the scope of the FTC’s case by rejecting claims about our platform policies,” a Meta spokesperson said in a statement to CNBC. “It also acknowledges that the agency faces a ‘tall task’ proving its case regarding two acquisitions it cleared years ago.

“We’re confident the evidence will reveal the fundamental weakness of the claims. Our investments in Instagram and WhatsApp transformed them into what they are today. They have been good for competition, and good for the people and businesses that choose to use our products.”

Lina Khan: Big Tech’s enemy number 1

Khan was appointed as FTC chair in June 2021. At age 32, the UK-born legal scholar is the youngest person to take the role. However, she has already established herself as Big Tech’s nemesis.

For instance, Khan’s paper Amazon’s Antitrust Paradox, published for the Yale Law Review in 2017, argued that evaluating antitrust complaints based solely on the harm to consumers – essentially prices – was no longer fit for the modern economy.

Unsurprisingly, both Facebook and Amazon filed petitions for her recusal in any future antitrust cases, arguing that her previous criticism would prevent her from being impartial in any future cases. So far, those demands haven’t really gone anywhere.

Not just Facebook vs FTC: The world is starting to look hard at the Big Tech monopolies

The FTC case against Facebook is the latest example of how regulators and the general public around the world have had enough of Big Tech firms’ anti-competitive behaviour. British regulators have similarly launched antitrust probes into Facebook’s $315m acquisition of Giphy.

A recent thematic research report from GlobalData suggests that more antitrust cases are coming as market watchdogs and lawmakers increasingly put their foot down.

“Many are accused of trampling on competitors to maintain their dominance,” the analysts wrote. “While regulators have attempted to take on Big Tech before, there is a growing consensus that new antitrust rules and approaches are needed to address the complexity of the digital economy.”

Lawmakers on both sides of the Atlantic are penning new laws to prevent Silicon Valley behemoths from throttling competition by buying up rivals. However, some analysts believe this won’t prevent these big firms from buying smaller companies anytime soon.

“I would imagine that if they want to acquire a company and they can see a strategic reason for acquiring it, then they won’t shy away from doing it,” David Bicknell, principal analyst at Globaldata’s thematic research team, told Verdict last week.

“And if and when the regulation really sort of happens, then they’ll cross that bridge when they come to it. But if there’s a strategic decision they want to make and they feel like they need to acquire [that company], then I think maybe the mindset is, ‘well, we’ll acquire it. And if we need that for our business, then we’ll do it. And then we’ll see what happens down the line.’”