The Federal Trade Commission has sharpened its antitrust case against Facebook, re-filing a complaint accusing the social networking giant of illegal monopoly behavior in a suit that ultimately could force a spinoff of its popular Instagram and WhatsApp services.
In the revised complaint, filed Thursday, the FTC adds detail to earlier allegations that Facebook grew its market power by buying up or bullying potential rivals. By allegedly doing so at a critical time — just when mobile devices were becoming popular — Facebook “eliminated the possibility that rivals might harness the power of the mobile internet to challenge Facebook’s dominance,” the FTC argued.
In addition to acquiring smaller rivals, such as Instagram, Facebook kneecapped potential competitors by restricting third-party developers who built software that connected to Facebook’s platform, the FTC alleged Thursday.
Facebook’s initial policy of open access to its software “drove developer and user engagement with Facebook, which in turn helped to fuel Facebook’s massive advertising profits. But as developers expanded popular offerings, Facebook came to view them as a threat,” the FTC complaint said. Facebook soon demanded that developers not compete with Facebook or help potential competitors; those that did not comply with these demands lost access to the platform and some went out of business, the FTC said.
Facebook said in a series of tweets that the government doesn’t have a valid claim, and that its acquisitions of Instagram and WhatsApp were reviewed and cleared by the FTC years ago.
“The FTC’s claims are an effort to rewrite antitrust laws and upend settled expectations of merger review, declaring to the business community that no sale is ever final,” Facebook said. “It is unfortunate that despite the court’s dismissal of the complaint and conclusion that it lacked the basis for a claim, the FTC has chose to continue this meritless lawsuit.”
The company’s stock price was unaffected by the suit, hovering at $355 a share on Thursday afternoon.
A federal judge had dismissed the government’s earlier complaint against Facebook in June, but gave the FTC a chance to try again. U.S. District Judge James Boasberg said the initial complaint fell short of demonstrating that Facebook holds monopoly market power and failed to provide an estimate for the company’s market share over the past decade. The judge outright dismissed a parallel lawsuit from state attorneys general that accused Facebook of anticompetitive practices.
The FTC and 48 states sued Facebook in December 2020, seeking remedies that could include a spinoff of Facebook’s Instagram and WhatsApp divisions.
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The FTC voted 3-2 to refile the suit, with Democrat-appointed commissioners in favor of proceeding and Republican members voting against. Commissioner Christine Wilson filed a dissent in the case.
The FTC also dismissed a petition that Facebook filed in July asking that newly appointed FTC Chair Lina Khan recuse herself from the antitrust case against the company. Facebook had claimed that Khan’s previous public criticism of its market power made it impossible for her to be impartial.
In dismissing the petition, the FTC said that “the case will be prosecuted before a federal judge” and “the appropriate constitutional due process protections will be provided to the company.”
Antimonopoly activists praised the government’s move.
“The Federal Trade Commission, led by Lina Khan, will not be intimidated and will not stand down in the face of judicial obstacles to take on the power of Big Tech monopolies like Facebook,” Alex Harman, competition policy advocate for Public Citizen, said in a statement. “The decision to re-file this case should be a message to Facebook and other monopolists that there is a new sheriff in town and the party is over.”
The Biden Administration has trained its focus on increasing competition in the economy, issuing an expansive executive order last month aimed at reducing the influence of large tech companies.
The revised complaint comes as Facebook is shifting its focus to something founder and CEO Mark Zuckerberg calls the “metaverse,” which encompasses augmented and virtual reality with new ways of connecting. Zuckerberg said he expects it to be the next stage of how people experience the internet.