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Lina Khan’s first big test as FTC chief: Defining Facebook as a monopoly

All eyes are on the Federal Trade Commission as it approaches a deadline to refile the Facebook lawsuit, a bellwether of Washington’s big swing at tech

(Washington Post photo illustration; An Rong Xu for the Washington Post; iStock)

Just two months into her tenure as chair of the Federal Trade Commission, Lina Khan already is facing a moment that could end up defining her legacy as the U.S. government’s top antitrust arbiter.

Thursday is the deadline for the FTC to refile its antitrust case against Facebook, the agency’s highest-profile competition case in years, and how that case proceeds will determine if Khan can follow through on her tough rhetoric to curb concentration in the tech industry.

Khan inherited the case from her Trump-appointed predecessor. But observers say it is Khan’s actions that will be closely watched as she manages what is likely to be a costly, years-long legal battle. On the line is the widespread sentiment in Washington that something must be done to rein in Big Tech after years of what critics would summarize as election interference, misinformation, privacy breaches and predatory business practices. “This is the most important case you have,” said William E. Kovacic, a former Republican FTC chair, of Khan’s priorities.

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The FTC first brought its lawsuit in December 2020, under former Republican chair Joseph J. Simons, in a move that was hailed by both Democrats and Republicans as a sign of tough enforcement. Just a year earlier, critics derided the agency’s record-setting $5 billion penalty as a slap on the wrist for the company, now valued at more than $1 trillion.

At the time, Facebook’s reputation in Washington was spiraling and the lawsuit amounted to the most significant political and legal threat to Facebook’s business in company history, symbolizing the dramatic deterioration of the company’s relationship with both parties in Washington. The lawsuit was warmly received by lawmakers from both parties, particularly as they were reeling amid the coronavirus pandemic and in the heated, contested 2020 presidential election.

But that was unsettled in June when U.S. District Judge James E. Boasberg dismissed the case, saying the FTC hadn’t proved that Facebook was a monopoly.

In the case, the agency argues that Facebook’s pattern of buying up or crushing smaller rivals has resulted in a monopoly, allowing the company to rake in more advertising dollars while users have fewer options for social networks. The agency asks the court to force Facebook to divest from WhatsApp and Instagram, to prohibit Facebook from imposing anticompetitive conditions on software developers and seeks to require approval for future mergers and acquisition.

Facebook has argued that the FTC has “not alleged facts amounting to a plausible antitrust case,” and said that the case ignores the realities of competition that it faces.

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But the movement to break up large tech companies faces natural hurdles in the U.S. court system, an institution that many experts say is ill-equipped to enforce such broad change. For decades, courts have held a relatively narrow view of antitrust harm, largely focusing on whether it results in higher prices for consumers in contrast to Khan’s sweeping vision of competition enforcement.

Since the agency began its probe two years ago, the video app TikTok has exploded and reportedly surpassed Facebook Messenger last year as the most downloaded app in the United States. The app’s rise shows how quickly the social media landscape can change, signaling the challenges of defining how much power one social network has relative to competitors.

The FTC isn’t the only regulator that has faced a setback in its efforts to challenge Facebook’s power. The judge also dismissed a similar lawsuit from more than 40 state attorneys general, filed in tandem with the FTC’s. The judge said the states waited too long to bring their case, but they plan to appeal his decision.

“The states are sovereign enforcers of federal antitrust law and deserve to be heard,” said Colorado Attorney General Phil Weiser at a conference on Sunday. “I believe at the end of the day, whatever process that takes, that’s where we need to and should end up.”

Court says FTC hasn’t provided evidence Facebook is a monopoly, dismisses lawsuit

Amid that backdrop, Congress has been considering a bipartisan package of bills that would result in major changes to tech companies’ operations. There are also efforts across the Justice Department and state attorneys’ general offices; Google is the target of a DOJ antitrust lawsuit, as well as multiple state antitrust lawsuits.

Liberals working on antitrust issues see the Facebook case as just the beginning of a renewed effort by the FTC and others to hold companies like Facebook accountable for alleged anticompetitive behavior. One former Senate aide working on antitrust issues who requested anonymity to speak candidly about the case said the political environment has changed dramatically in recent years, ushering in a new era of enforcement.

“The courts can be an impediment to strong antitrust enforcement, but there are a lot of smart people and there is a lot of political energy focused on how to overcome it,” the aide said. “The energy on Facebook and other Big Tech platforms is going to increase and increase until something meaningful happens in Washington to rein in their power and to stop anticompetitive behavior. There’s rising antitrust pressure coming at Facebook from a huge number of directions right now and clearly the momentum is not on their side.”

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From Capitol Hill to the states, advocates for greater antitrust enforcement are closely watching the FTC’s response to the federal judge. Boasberg was detailed and prescriptive in his dismissal, giving the FTC a clear road map to bring a stronger case. He asked the agency to provide more evidence to prove its assertion that Facebook controls 60 percent of the social media market, including showing its calculations, and criticized arguments the agency made about how Facebook abused smaller rivals by controlling their access to data.

But Boasberg indicated that the agency could answer these questions and move forward.

“While there are certainly bones that one could pick with the FTC’s market-definition allegations, the Court does not find them fatally devoid of meat,” he wrote.

Some legal experts think that the FTC will be able to address these criticisms from the judge to ensure that the case is not completely dismissed. But it’s no easy task for a relatively small agency, which sought several extra weeks to respond to the judge’s issues with the case after an initial July 29 deadline.

“There’s multiple signals that FTC is serious about doing their job of investigations and bringing these cases and fighting them hard,” said Charlotte Slaiman, competition policy director at the consumer group Public Knowledge.

Though the most significant, the Facebook case is but one of a wide range of issues on Khan’s plate. A month after she assumed office, the Biden administration issued a sweeping competition executive order, which called for her agency to take a tougher line on concentration throughout the economy.

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So far, Khan has taken a series of steps to signal a shake-up has arrived at the FTC. She’s started hosting open meetings to open the agency’s business to the public, and she’s warned that greater scrutiny of mergers is on its way.

But the challenge will be for the agency to remain focused on the most important cases, including Facebook, Kovacic said. “She has a downpour of demands from both ends of the avenue,” he said.

And none of her other efforts will matter if she can’t show that she can win against companies, including Facebook, in court.

“The real measure to business decision-makers of your effectiveness and seriousness is your ability to prosecute and win cases,” Kovacic said.

Tyler Pager contributed to this report