U.S. District Courtroom Dismisses Authorities Actions In opposition to Fb | Troutman Pepper

On June 28, while both congressional bodies continued to propose and review numerous bills to “reform” and change the existing legal analytical framework, the US District Court for the District of Columbia dismissed two high-profile antitrust proceedings that were being brought about by Federal Trade. were submitted to the Commission (FTC) and 46 states. In both cases, it was alleged that Facebook illegally maintained a monopoly in the social networking arena by acquiring emerging competitors, including WhatsApp and Instagram, as well as restrictions on developers accessing its networks.

The main difference between the decisions is that the court allowed the FTC to amend its complaint to better counter the alleged monopoly of Facebook. While the states’ case is closed (unless they appeal), the FTC retains a number of options, including attempting to strengthen its monopoly or pursuing the case through the FTC administrative process.

Members of both political parties and from both chambers of Congress condemned the decisions:

The FTC should be pursuing this case, but we shouldn’t rely on regulators and the courts alone to save us. So that our markets remain competitive, open and fair? It requires Congress to act. See https://t.co/P4fUeYeDMM.

– Amy Klobuchar (@amyklobuchar) June 29, 2021

Facebook is clearly a monopoly. The District Court ruling shows that Congress needs to reform antitrust laws. Our bipartisan bills provide law enforcement with additional resources and bring more scrutiny to mergers. We have to act now.

See https://t.co/5aO4RfuZGi.

– Rep. Ken Buck (@RepKenBuck) June 29, 2021

Discussion of the decisions

The FTC and 46 states separately sued Facebook in December 2020, alleging that Facebook’s alleged “buy-or-bury” strategy of acquiring Instagram (2012) and WhatsApp (2014) and adopting guidelines that would allow app Developers prevented violating Section 2 of the Sherman Act, which Facebook sees as a potential competitive threat from accessing Facebook’s platform interfaces (API guidelines). The states have also sought legal aid under Section 7 of the Clayton Act, which prevents acquisitions that tend to significantly reduce competition.

District Court Judge James Boasberg dismissed the cases for a number of reasons:

The FTC case. Judge Boasberg rejected the FTC’s monopoly lawsuit because it failed to make plausible facts that Facebook had monopoly power. [1] The FTC defined the relevant product market served by Facebook as one for “Personal Social Networking Services,” which the FTC referred to as “online services that enable and are used by people to maintain personal relationships and experience with friends, family and friends to exchange with other people “. Connections in a common social space. ” [2] The FTC claimed that Facebook had “over 60%” market share and that there was no substitute for Facebook. The decision criticized the FTC for not offering any measures or metrics for this analysis or even naming a single Facebook competitor. The court therefore found that “[i]It’s almost like that [FTC] expects the court to simply nod at the conventional wisdom that Facebook is a monopoly. After all, no one who hears the title of the 2010 film ‘The Social Network’ wonders which company it is. ” [3]

The court also expressed concern about the FTC’s allegations regarding Facebook’s API guidelines, warning the FTC that antitrust law in general does not impose any obligation to deal with monopolists. [4] Although the court clarified that the FTC “certainly alleged several specific denials of deals that might actually hit”. [antitrust law’s] Requirements “for making a claim, the court stated that an injunction is not available under Section 13 (b) of the FTC Act because the FTC does not allege ongoing or imminent anti-competitive behavior. [5]

The fall of the states. The states similarly based their claims on Facebook’s alleged monopoly, but Judge Boasberg found additional grounds for a biased layoff under the doctrine of laughter, which does not apply to the US government. Specifically, the court found that Laches excluded state claims because it considered the Clayton Act’s four-year statute of limitations as an “initial presumption” for an aggrieved plaintiff to file a complaint. [6] The court then noted that states had waited six and eight years, respectively, to claim the WhatsApp and Instagram acquisitions were antitrust law, and found “no case … in which any plaintiff other than the United States.” (against whom Laches does not apply), be it a state or a private party, was granted fair discharge after such long delays after the acquisition when filing the lawsuit. ” [7]

The court stated that Laches was particularly appropriate because (1) the Instagram and WhatsApp acquisitions were widespread at the time; (2) it was well known at the time that Facebook was “the dominant actor” in online social networking; (3) the FTC’s additional review of the Instagram transaction has been made public; (4) Analysts had explicitly stated that Facebook is acquiring WhatsApp in order to “eliminate”[e] a potential competitor ready to challenge Facebook’s monopoly ”; and (5) significant prejudice against Facebook was evident as states sought divestments of Facebook’s long-standing core assets. [8]

Two important takeaways

1. Laughs apply to everyone but the US government

The court found that the United States – and not the states – was properly enforcing state antitrust laws because when Congress passed the Clayton Act, it did not establish a specific role for states in enforcing those laws, which resembled private plaintiffs, against which just objections have been made. [9] In fact, states had tacitly admitted this before Facebook’s decision, as the National Association of Attorney Generals recently asked Congress to expand the states’ role as antitrust authorities. [10] In contrast, at no point did the court question the FTC’s ability to complain about Facebook’s takeover of competitors long before the Clayton Act’s four-year statute of limitations. Eventually, timing may affect the FTC if it reciprocates its refusal to process claims or makes other claims based on non-recent or ongoing conduct that is inconsistent with the acquisition.

2. The FTC’s next move could imply Chair Khan’s new playbook

The court criticized the FTC for finalizing Facebook’s 60% “market share” claim, but also noted that it “believes the agency may be able to” heal “. [the] Defects “by reply.” To bolster its allegations of market power, the FTC would likely need to add additional information to the basis of its market share calculation, claims about whether Facebook’s market share has remained constant or otherwise since 2011 (the period in which the FTC itself refers), the identity of at least some of the other companies that make up the remaining 30-40% of the market, and the evidence that people value Facebook more than its social media substitutes, combining the popularity of Facebook’s social media services to the advertising money generated by popularity to be generated.

The decision could also result in the FTC moving under new chairman Khan. While the FTC has filed the case in federal court, it could also have chosen to commence a lawsuit as part of its internal administrative process, where the FTC commissioners themselves would review an FTC administrative judge order and make a decision against the appeal Federal courts can be lodged. Such a strategic decision could go hand in hand with the withdrawal of the FTC’s 2015 guidance on the independent use of Section 5 of the FTC Act, which prohibits “unfair competitive practices” – a broader standard than antitrust claims under Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. See FTC Meeting Opens the Door at a Time of Greater Uncertainty.

[1] FTC Op. on 30-31.

[2] I would. on 21-22.

[3] I would. on the 31st

[4] I would. at 39-41. In particular, the court found that “in order for such a system to be challengeable, it must include certain instances where this Policy has been enforced (i) against a rival with whom the monopoly previously dealt; (ii) while the monopoly.” continue with others in the market; (iii) with a short-term loss of profit for no other conceivable cause than long-term out of business a competitor.

[5] I would. at 42-44.

[6] States Op. at 41.

[7] I would. at 44.

[8] I would. at 44-45.

[9] I would. at 48-49.

[10] See www.stateagreport.com/news/full-slate-of-state-attorneys-general-urges-congress-to-strengthen-state-antitrust-enforcement-abilities/#page=1.