Reason Roundup

Facebook Faces Federal Monopoly Lawsuit Again

Plus: Warren versus grocery stores, Cruz versus the FBI, DOJ's new domestic terror unit, why so many people are quitting their jobs, and more...

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(Artur Widak/ZUMAPRESS/Newscom)

The federal government's monopoly lawsuit against Facebook is back. The past few years have made it abundantly clear that the feds have it out for Facebook, what with the plethora of congressional hearings about the social media giant's practices and an antitrust lawsuit against it filed in December 2020. The lawsuit, from the Federal Trade Commission (FTC), alleged Facebook was an illegal monopoly and argued for its forced breakup.

It came to a somewhat embarrassing pass last summer, when the U.S. District Court for the District of Columbia ruled that the FTC had failed to actually show that Facebook was a monopoly. "The FTC has failed to plead enough facts to plausibly establish … that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services," Judge James E. Boasberg wrote in a June 2021 opinion.

He granted Facebook's motion to dismiss—but left room for the FTC to try again with an amended complaint. The agency did so, and Facebook once again asked for it to be dismissed.

This time, Boasberg said no.

The FTC's amended complaint contained "significant additions and revisions aimed at addressing the shortcomings identified in the Court's prior Opinion," writes Boasberg in his new memorandum opinion. "The core theory of the lawsuit remains essentially unchanged" but "the facts alleged this time around to fortify those theories, however, are far more robust and detailed than before, particularly in regard to the contours of Defendant's alleged monopoly."

The government "may well face a tall task down the road in proving its allegations," notes Boasberg."Ultimately, whether the FTC will be able to prove its case and prevail at summary judgment and trial is anyone's guess." 

But Boasberg believes there is enough there to proceed with the case rather than dismissing it out of hand. "That holding flows from several conclusions," he explains:

First, the FTC has now alleged enough facts to plausibly establish that Facebook exercises monopoly power in the market for PSN services. Second, it has adequately alleged that the company's dominant market share is protected by barriers to entry into that market. Third, the agency has also explained that Facebook not only possesses monopoly power, but that it has willfully maintained that power through anticompetitive conduct — specifically, the acquisitions of Instagram and WhatsApp. The Court will not, however, allow the allegations surrounding Facebook's interoperability policies (also known as the Platform policies) to move forward; they
founder for the same fundamental reasons as explained before: Facebook abandoned the policies in 2018, and its last alleged enforcement was even further in the past.

You can read the whole opinion here.

For more background on the bipartisan antitrust crusade against Facebook and other big tech companies, check out my cover story from Reason's July 2021 issue. It delves into why both Democrats and Republicans are backing antitrust action against tech companies and why many of their arguments are overblown or bunk.

In other antitrust news:

• Sen. Elizabeth Warren (D–Mass.) is expanding her antitrust obsession to grocery stores, accusing lack of competition in the industry of being behind inflation, which is at its highest point in 40 years. (Talk about scapegoating business for government failure…). As many people have pointed out, grocery stores have extremely low profit margins. Warren's argument also fails in the face of the fact that people have more options for where to buy groceries than ever before.

• The American Innovation and Choice Online Act is getting the Senate Judiciary Committee workup this week. Bill co-sponsor Amy Klobuchar (D–Minn.) says it will "implement common sense rules" for tech platforms. Read our previous criticism of that idea (and other popular antitrust legislation) here and more concerns about the bill here.

FREE MINDS

This can't be good for civil liberties: The Department of Justice (DOJ) is launching a new domestic terrorism unit. "This group of dedicated attorneys will focus on the domestic terrorism threat, helping to ensure that these cases are handled properly and effectively coordinated across the Department of Justice and across the country," Matthew G. Olsen of DOJ's national security division told the Senate Judiciary Committee yesterday.

The committee hearing on domestic terror threats led to a heated exchange between Sen. Ted Cruz (R–Texas) and the FBI's Jill Sanborn, with Sanborn refusing to say whether FBI agents participated in the January 6 Capitol riot last year:

Cruz "lambasted Olsen and Jill Sanborn, the head of the FBI's national security branch, for not answering certain questions about Jan. 6-related criminal charges or about whether any FBI informants encouraged or participated in the violence," notes The Washington Post:

"Your answer to every damn question is 'I don't know, I don't know, I don't know,' " Cruz railed at Olsen. To Sanborn, he suggested that undercover FBI agents or informants may have spurred on the rioters — an assertion for which there is no known evidence but which Sanborn would not categorically rule out.

"Ms. Sanborn, a lot of Americans are concerned that the federal government deliberately encouraged illegal violent conduct on January 6th," Cruz said, asking her whether that was true.

"Not to my knowledge, sir," she replied.

FREE MARKETS

Labor market puzzles. How do we explain the high numbers of people who have been quitting their jobs? "At present, there are a lot of conjectures floating around," writes Douglas Holtz-Eakin of the American Action Forum, a center-right think tank focused on economic policy. "At the peak of the stimulus payments, there was conjecture that people were quitting to live on their checks. There is also anecdotal evidence of early retirements and reallocations as people moved to new locations during the pandemic. There is a lot of chatter about people re-thinking their priorities and quitting for a job that has a better 'fit' in light of pandemic lessons learned."

"But the main story is likely to be much simpler," suggests Holtz-Eakin. "People quit when the labor market gets tight enough that employers are competing for workers and offering more – more wages, more benefits, more flexibility, more whatever – in order to hire them."

Nick Bunker, director of economic research at the Indeed Hiring Lab, told something similar to CNBC in November: "The 'Great Resignation' is more a story about strong demand for workers, rather than a rethink of work among higher-income workers."

However, government data suggest that there are a large number of people who left the labor market and aren't currently looking for a new job.

QUICK HITS

• Some interesting new COVID research: "Hemp compounds identified by Oregon State University research via a chemical screening technique invented at OSU show the ability to prevent the virus that causes COVID-19 from entering human cells."

• Two Los Angeles police officers who chose Pokémon Go over responding to a robbery have lost their appeal to keep their jobs.

• "The transition to endemicity was always going to be in part a psychological one," suggests The Atlantic's Sarah Zhang, "in which people slowly let go of the idea that COVID must or can be avoided forever. Omicron has simply made that clear very quickly."

• The Centers for Disease Control and Prevention may update guidance to say that not just any old masks will do.

• "A ransomware attack last week has left an Albuquerque area jail without access to its camera feeds and rendered automatic door mechanisms unusable," The Verge reports.

• North Carolina voters are trying to prevent Republican Rep. Madison Cawthorn—an ardent Trump supporter and the youngest member of the current Congress—from running again. "A group of 11 North Carolina voters filed a legal challenge to disqualify Rep. Madison Cawthorn from running for a second term, arguing his involvement in a rally preceding the Jan. 6, 2021, riot on Capitol Hill constitutionally bars him from waging another campaign," according to The Hill.