Facebook is asking a D.C. federal judge to dismiss two government suits that allege its acquisitions of Instagram and WhatsApp gave it a monopoly on the personal social networking market in violation of antitrust laws — arguing that such a claim “utterly ignores the reality of the dynamic, intensely competitive high-tech industry in which Facebook operates.”
In December, the Federal Trade Commission and a group of state attorneys general each sued the social media giant, claiming the company is engaging in anticompetitive conduct in order to snuff out potential rivals and maintain monopoly power.
In a motion to dismiss the FTC claim, Facebook argues the agency has failed to state a claim and didn’t meet any of the three elements required under the Sherman Act. The company also notes that the FTC reviewed and greenlit its acquisitions of Instagram and WhatsApp before they closed.
“The agency offers no basis for disregarding its own contemporaneous conclusions that the acquisitions would not violate the antitrust laws; remarkably, it does not even mention them,” writes attorney Marc Hansen in the motion. “The agency has not alleged that it was misled or otherwise lacked access to the relevant information. It just ignores its own decisions, failing to offer any valid explanation for its about-face — making implausible any claim of reasonably likely harm in 2012 and 2014.”
With regard to claims challenging a 2011 policy change regarding third-party app developers’ access to user data and a set of tools dubbed “Platform,” Facebook argues it has no antitrust obligation to let rivals use its technology to lure away its users.
Facebook also argues that the FTC hasn’t alleged any harm to consumers (which is also central to its defense against the attorneys general) and emphasizes that the agency has failed to identify the market it’s allegedly harming.
“The FTC’s market definition is no more than a description of part of what Facebook provides; the allegations do not provide a basis for determining which of the many products vying for user time and attention are in or out of the supposed market,” writes Hansen. “The FTC does not make any factual allegations regarding ‘cross-elasticity of demand’ or consumer switching in response to price increases — a failure that reflects the agency’s unprecedented attempt to define a market for a product provided to users for free and in unlimited quantities. Furthermore, the FTC’s alleged ‘personal social networking’ test does not exclude other alternatives that consumers could substitute for the same purpose (‘reasonable interchangeability’).”
As a result of this, Facebook argues, it’s unclear whether companies like Twitter, Snapchat, TikTok and Pinterest are included in, or excluded from, the relevant market.
“The complaint is not just impermissibly vague: It is nonsensical,” writes Hansen, who argues the FTC failed to even allege which Facebook features qualify as “personal social networking” in the market. For example, is passive consumption of video included? If so, how are Netflix, Hulu and YouTube not competing for its users?
He argues simply cherry-picking emails from Facebook execs isn’t sufficient proof that Instagram or WhatsApp posed a unique threat that other companies didn’t. Writes Hansen in the motion, which is embedded below, “Lacking facts to establish either unlawful conduct or harm to consumers, the FTC attempts to bolster its claims with a grab-bag of selectively quoted internal emails and messages from Facebook executives, which are offered to show that Facebook was concerned about competitive threats from Instagram and WhatsApp but also many, many other firms.”
In the case brought by the attorneys general, Facebook argues the complaint should be dismissed because they lack standing to sue on behalf of citizens who haven’t been injured, and that they waited too long to file a complaint over the Instagram and WhatsApp deals.
“We have found no case in which a court has permitted a state or any other private party to challenge an acquisition consummated more than four years before suit was filed,” writes Hansen. “The States acknowledge that Facebook has spent many years growing and investing in Instagram and WhatsApp. That expenditure of time and resources, as well as Facebook’s reliance on the passage of time in forming and executing its business strategy, would be gutted by the relief sought in this untimely action.”
Again, Facebook shuts down the notion that acquiring a company that may have hypothetically some day become a direct competitor is sufficient proof of anti-competitive conduct, challenges why the attorneys general don’t view similar existing companies as competitors and argues the attorneys general failed to sufficiently allege that it has the power to control prices or exclude competition.
“The States focus on the acquisitions of Instagram and WhatsApp, along with a handful of others, and Facebook’s Platform-related conduct, claiming that Facebook followed a ‘buy-or bury strategy,'” writes Hansen. ”The States, unlike the FTC, suggest that the whole is greater than the sum of its parts, such that Facebook’s ‘buy-or-bury strategy’ can be exclusionary even if each of the underlying acts is not. But this rhetoric cannot transform acts that are competitively valid individually into an unlawful course of conduct.”