Facebook Can’t Fence Off FTC Antitrust Suit, But It Narrows Scope

A U.S. judge granted the Federal Trade Commission (FTC) a second chance to continue with its allegations of illegal monopolization against Facebook (now Meta), after it rejected the company’s motion to dismiss the lawsuit in a new filing on Tuesday.

The rejection of Facebook´s motion to dismiss is a victory for the FTC after its original lawsuit was dismissed by the same judge last year for not bring enough evidence to “plausibly establish” the company’s monopoly power.

“The facts alleged this time around to fortify those theories . . . are far more robust and detailed than before, particularly in regard to the contours of defendant’s alleged monopoly,” the judge wrote in his opinion.

“The agency has also explained that Facebook not only possesses monopoly power, but that it has willfully maintained that power through anti-competitive conduct — specifically, the acquisitions of Instagram and WhatsApp.”

The FTC is seeking to force Facebook to unwind its acquisition of Instagram and WhatsApp as, in its opinion, they were part of an attempt to monopolize the market. With this victory, the FTC can proceed to the discovery and the trial. However, the FTC will face an uphill road to prove these allegations in the court, as the judge expressed in his opinion, “whether the FTC will be able to prove its case and prevail at summary judgment and trial is anyone’s guess.”

Not everything was bad news for Facebook: The judge rejected allegations around its platform policies, narrowing the scope of the lawsuit, and he also noted that “the complaint raises many difficult factual issues, and the FTC might not prove all of the facts necessary to prevail in the case.”

Monopolization cases under section 2 of the Sherman Act are difficult to prove in court, probably even more in a merger case where regulators had the opportunity to review the acquisition and chose not to challenge it in court at that time.

Facebook’s acquisitions of WhatsApp and Instagram have raised concerns since they occurred as they have cemented Facebook’s dominance in social medial. However, regulators didn’t find enough evidence at the time to prohibit the transactions and approved the deals years ago.

In Europe, the European Commission (EC) approved Facebook’s acquisition of WhatsApp in 2014, but it then fined the companies EUR 110 million in 2017 for providing incorrect or misleading information during the original review. The EC didn’t go as far as ordering to unwind the merger, as it stated that the missing/misleading information had no impact on the decision to clear the merger, but it was the first time that the EU regulator imposed a fine for providing misleading information. Nonetheless, this was proof of how difficult it is to challenge a merger approval even if new evidence arises.

The U.K., which at the time of the original review didn’t have authority to review a deal with EU scope, decided to order a post-merger analysis to determine whether the Facebook-WhatsApp merger, and other mergers, should have been prohibited or assessed differently. The study provided sufficient economic evidence on multisided platforms, but the conclusion was that “despite some gaps in the way that Authorities analyzed these cases, it is not clear whether competitive harm has arisen as a result of such gaps.” In other words, the report found that the authorities could have done a better job, but that was not enough to question their decisions.

See Also: Facebook’s Appeal of UK CMA’s Decision on Giphy Deal Is Not Just About the Case

While the lawsuit between the FTC and Facebook will be fact-specific and under U.S. antitrust rules, these international precedents show the difficulty of challenging a merger that was not challenged or prohibited when it was filed. Facebook will have now until January 25 to file a response to the FTC’s complaint.