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‘Second time lucky?’ FTC’s case against Facebook can move forward, federal judge rules.

The decision is a reversal of fortune for the agency after its first complaint was thrown out last year

Lina Khan, now the chair of the Federal Trade Commission, at her Senate confirmation hearing in April. (Graeme Jennings/Pool/Washington Examiner/AP)
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A federal judge on Tuesday ruled that the Federal Trade Commission’s antitrust case against Facebook could proceed, a reversal of fortune for the agency after its first challenge against the social network was thrown out last year.

In a colorful order, U.S. District Judge James E. Boasberg wrote that an amended complaint the agency filed in August offered “more robust and detailed” evidence to suggest Facebook has an alleged monopoly. In the filing, the FTC argued that Facebook is in a class of its own and should not be compared to other social apps such as TikTok.

“Second time lucky?” Boasberg wrote in the opening of the complaint, noting that the commission’s first suit “stumbled out of the starting blocks.”

FTC refiles antitrust case against Facebook, says no other social network comes close to its scale

First filed under a Republican-led FTC in 2020, the Facebook antitrust suit is widely viewed as a bellwether of Washington’s ability to rein in Silicon Valley, after years of a hands-off approach to tech regulation.

The suit is symbolic of a broader political movement aimed at increasing antitrust enforcement against tech giants. But competition suits against these companies face major hurdles in the U.S. court system, which for years has held a relatively narrow view of harm, largely focusing on whether consumers face higher prices because of corporate behavior.

Facebook and Instagram are free to consumers and monetized through advertising revenue. However, the FTC argues that Facebook’s dominance has led to a lack of innovation, decreased privacy protections and a general decline in choice for services that has harmed consumers.

While the judge’s decision acknowledges the agency has overcome some of the shortcomings of the initial suit, Boasberg signaled it may be challenging for the FTC to ultimately prove Facebook is a monopoly. It’s “anyone’s guess” whether the agency will prevail, he wrote.

“Although the agency may well face a tall task down the road in proving its allegations, the Court believes that it has now cleared the pleading bar and may proceed to discovery,” Boasberg wrote, setting the stage for what is likely to be a years-long courtroom battle between the FTC and Facebook.

The decision is a blow to Facebook, which sought a repeat of its early court victory by appealing the FTC’s new complaint. The company argued in October that the suit had “no valid factual basis.”

“We’re confident the evidence will reveal the fundamental weakness of the claims,” Chris Sgro, a spokesman for Facebook parent company Meta, said in a statement. “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.”

Despite the judge’s skepticism, advocates for antitrust enforcement in the tech industry expressed optimism about Tuesday’s decision.

“A few years ago, the thought of Facebook actually being broken up in courts was seen as nuts,” said Sarah Miller, executive director of the American Economic Liberties Project, an anti-monopoly advocacy group. “Today a judge is saying it is anyone’s guess whether this corporation is going to continue to operate under the same structure. I am pretty energized by that.”

The Facebook suit is advancing amid a multi-pronged regulatory battle over the future of U.S. tech giants. Google also faces a Justice Department antitrust suit, and a bipartisan group of lawmakers has introduced bills addressing alleged anticompetitive behavior in the sector, though they face an uncertain future in Congress.

The judge’s decision is being hailed by some tech critics as an early victory for FTC Chair Lina Khan, who is widely expected to increase regulation of Silicon Valley. The FTC’s core argument against Facebook remained largely unchanged from its first complaint, but the agency included more-extensive evidence in its case for unwinding the company.

“FTC staff presented a strong amended complaint, and we look forward to trial,” Holly Vedova, director of the FTC Bureau of Competition, said in a statement.

The revised complaint included enough facts to “plausibly establish” that Facebook has a monopoly in personal social networking, referring to services that allow people to maintain relationships with family and friends online, Boasberg said. Boasberg said the “Achilles’ heel” of the FTC’s first complaint was that it was devoid of data supporting its claim that “no other social network of comparable scale exists in the United States.” The revised complaint included data from the analytics firm ComScore and argued that Facebook’s share of daily active users of apps providing personal social networking in the United States has exceeded 70 percent since 2016.

“In short, the FTC has done its homework this time around,” Boasberg wrote.

Regulators want to break up Facebook. That’s a technical nightmare, insiders say.

It also overcame the deficiencies of the first complaint by “adequately” alleging that barriers to entry protected that dominance, and by demonstrating that Facebook maintained its monopoly power through “anticompetitive conduct — specifically, the acquisitions of Instagram and WhatsApp,” Boasberg wrote.

In one bright spot for Facebook, Boasberg rejected the agency’s argument that Facebook illegally cut off companies it viewed as growing rivals from accessing data from its platform. Boasberg said that those arguments would not proceed, because Facebook changed its interoperability policies in 2018.

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

Boasberg rejected the company’s argument that Khan, who was appointed chair by President Biden and who voted along party lines to refile the complaint against the social network, should be recused because of her past work and academic writing. The analysis could have implications beyond the Facebook case, as Amazon has also sought Khan’s recusal from antitrust matters. (Amazon founder Jeff Bezos owns The Washington Post.)

“Although Khan has undoubtedly expressed views about Facebook’s monopoly power, these views do not suggest the type of ‘axe to grind’ based on personal animosity or financial conflict of interest that has disqualified prosecutors in the past,” he wrote.

He also noted that Khan “was presumably chosen to lead the FTC in no small part because of her published views.”