AAI Applauds States’ and FTC’s Major Antitrust Cases Against Facebook
The American Antitrust Institute (AAI) applauds the broad coalition of 48 states and territories (states) and the Federal Trade Commission (FTC) for their unified, bipartisan support for strong antitrust enforcement against Facebook. On December 9th, the FTC and states, led by New York, filed major antitrust cases against Facebook. The suits seek to bring Facebook to account for previous illegal acquisitions and anticompetitive conduct that has harmed competition and consumers, advertisers, and developers.
“The lawsuits highlight the essential role of antitrust, delivering the message that law enforcers will stand up for competition and consumers and protect our markets and the U.S. economy,” said AAI President Diana Moss.
A Unified and Bipartisan Approach to Antitrust Enforcement
The FTC and the states filed separate complaints. The states’ complaint alleges violations of Section 2 of the Sherman Act and Section 7 of the Clayton Act. The FTC’s complaint alleges violations of Section 5 of the FTC Act.
Both complaints allege that Facebook maintained its monopoly in personal social networking services in two ways. First, Facebook acquired actual and potential competitors. Second, the social media company limited or cut off—or threatened to limit or cut off—access to the platform’s interconnections. Such exclusionary conduct hindered or deterred rival app developers from competing with the Facebook platform’s proprietary services.
“The state and federal complaints have different points of emphasis, but this is clearly a unified and coordinated approach,” said AAI’s Vice President of Policy, Laura Alexander. Notably, AAI was the first organization to produce empirical research showing that the U.S. antitrust agencies’ record of merger enforcement in digital technology has been extraordinarily weak. Only one reportable acquisition, Google-ITA, was challenged by the U.S. Department of Justice (DOJ) over the last two decades.
A Suite of Comprehensive Remedies
The complaints seek a suite of remedies for Facebook’s alleged anticompetitive conduct. This includes an injunction against ongoing anticompetitive conduct, divestiture of illegally acquired businesses, a notification process for future acquisitions, and monitoring of the company.
“The remedies sought by the states and FTC are perhaps some of the most comprehensive we have seen proposed to address alleged anticompetitive conduct in digital technology markets,” said Moss.
For example, the FTC complaint seeks a permanent injunction prohibiting anticompetitive conditions on app developers’ access to interconnections and data, as well as reporting and monitoring obligations to ensure compliance. The FTC also wants conditions that would require notice and approval for all future Facebook acquisitions. The states seek to unwind Facebook’s acquisitions of Instagram and WhatsApp. They would require only notice for acquisitions in excess of $10 million, but they specify that they would require the same disclosure obligations required by the Hart Scott Rodino Act.
At bottom, both complaints ask the court for any appropriate equitable relief necessary to restore the competition lost by Facebook’s alleged anticompetitive acquisitions and restrictive access policies.
Unique Features of the Facebook Cases That Could Signal a Strengthening of Antitrust Enforcement
The FTC’s and states’ cases against Facebook have several unique, important components.
For example, the complaints allege that users of personal social networking services have been harmed through non-price terms, including degraded privacy, loss of choice, and less innovation. The complaints also allege that businesses that purchase Facebook’s advertising services were denied lower advertising prices, choice, quality, and innovation in social advertising markets. And the complaints allege that app developers operating on the Facebook platform were denied opportunities to compete through interoperability restrictions.
“Putting aside what the complaints mean for the Facebook ecosystem and social media markets, they have the potential to effect lasting changes in antitrust legal doctrine,” said AAI’s Vice President of Legal Advocacy, Randy Stutz.
Stutz noted several key issues, including potential litigation over the anticompetitive effects of “open-early, closed-late” strategies by digital platforms, the scope of the Supreme Court’s heavily criticized two-sided market rule in the Amex case, and defining markets for user attention as inputs into online advertising. “All of these factors promise to advance current discussions among scholars and antitrust advocates,” added Stutz.
Biden Antitrust Enforcers Will Inherit the Google and Facebook Antitrust Cases
Earlier this year, AAI expressed skepticism about the Trump Administration’s commitment to strong Section 2 enforcement. This was based on Trump enforcers’ track record and previous filings, which AAI chronicled in its April 2020 report The State of Antitrust Enforcement and Competition Policy in the U.S.
The FTC’s case, filed over the dissents of two Republican commissioners who did not issue statements, is the second major monopolization case to be filed in less than two months. The DOJ filed a major Section 2 case against Google in October of 2020. The DOJ’s messaging on Section 2 has been mixed. It made doctrinaire arguments in actively attempting to thwart its sister agency’s Section 2 victory over Qualcomm, which it successfully helped overturn in August.
The current administration deserves credit for bringing big cases that have the potential to make significant improvements to the competitive landscape in digital technology markets. “They are handing the Biden administration antitrust enforcers both a great responsibility and a great opportunity,” AAI’s Alexander said.
Although the leadership at the Antitrust Division will be overhauled when President-Elect Biden assumes office, the FTC has been structured by Congress to provide stability and bipartisanship during times of transition. Commissioner terms last seven years and are staggered, allowing for the decision-makers who bring a case to take responsibility for seeing it through.
“The FTC’s and the states’ complaints advance the ball in unprecedented ways,” noted AAI’s Moss. “Key questions about how antitrust law applies in digital technology markets have been vigorously debated, but these cases may well bring some of these questions into courtrooms for the first time,” she said.