Reason Roundup

The FTC Fails To Prove Facebook Is a Monopoly

Plus: Retaliatory action in Syria, developments with the delta variant, Clarence Thomas on marijuana, and more...

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(Avishek Das/ZUMAPRESS/Newscom)

Judge says FTC failed to show that Facebook has a social media monopoly. A federal district court has dismissed the Federal Trade Commission's (FTC) antitrust complaint against Facebook.

The complaint—and a similar action filed by state attorneys general—argued that Facebook has a monopoly in "personal social networking services" and illegally maintained that monopoly in violation of federal antitrust laws. Specifically, the feds objected to Facebook's acquisition of smaller companies, including Instagram and WhatsApp, and to it blocking interoperability between Facebook and some other apps. Among other remedies, the FTC sought to force the breakup or reconstruction of Facebook.

The case is part of a major, misguided, and bipartisan anti-tech antitrust effort spanning congressional committees, the Department of Justice, the FTC, state prosecutors' offices, and—recently—a flurry of legislation. (See my story from yesterday on six new antitrust bills moving forward in Congress.)

Opponents of these efforts often point out that the new antitrust crusaders' definition of monopoly is lacking, considering that consumers and businesses have plenty of options when it comes to social media and other tech services in question. Now, on the Facebook front, a federal judge has agreed.

"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," wrote Judge James E. Boasberg of the U.S. District Court for the District of Columbia in a June 28 opinion, granting Facebook's motion to dismiss the FTC and the states' complaints.

"Although the Court does not agree with all of Facebook's contentions here, it ultimately concurs that the agency's Complaint is legally insufficient and must therefore be dismissed," ruled Boasbert. "The Complaint contains nothing on that score save the naked allegation that the company has had and still has a 'dominant share of th[at] market (in excess of 60%).'" The ruling continues:

Such an unsupported assertion might (barely) suffice in a Section 2 [of the Sherman Antitrust Act] case involving a more traditional goods market, in which the Court could reasonably infer that market share was measured by revenue, units sold, or some other typical metric. But this case involves no ordinary or intuitive market. Rather, PSN services are free to use, and the exact metes and bounds of what even constitutes a PSN service —i.e., which features of a company's mobile app or website are included in that definition and which are excluded —are hardly crystal clear. In this unusual context, the FTC's inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook's market share renders its vague "60%–plus" assertion too speculative and conclusory to go forward. Because this defect could conceivably be overcome by re–pleading, however, the Court will dismiss only the Complaint, not the case, and will do so without prejudice to allow Plaintiff to file an amended Complaint.

While the FTC is free to file an amended complaint, it would have significant hurdles to overcome. The agency's failure to show a Facebook monopoly wasn't the lawsuit's only problem, the court ruled.

"Even if the FTC had sufficiently pleaded market power, its challenge to Facebook's policy of refusing interoperability permissions with competing apps" was lacking, since "there is nothing unlawful about having such a policy in general," noted Boasberg.

While it is possible that Facebook's implementation of that policy as to certain specific competitor apps may have violated Section 2, such finding would not change the outcome here: all such revocations of access occurred in 2013, seven years before this suit was filed, and the FTC lacks statutory authority to seek an injunction 'based on [such] long–past conduct.' Regardless of whether the FTC can amend its Complaint to plausibly allege market power and advance this litigation, then, the conduct it has alleged regarding Facebook's interoperability policies cannot form the basis for Section 2 liability.

Boasberg added that "the agency is on firmer ground in scrutinizing the acquisitions of Instagram and WhatsApp, as the Court rejects Facebook's argument that the FTC lacks authority to seek injunctive relief against those purchases. Whether other issues arise in a subsequent phase of litigation is dependent on how the Government wishes to proceed."

Boasberg didn't invite state attorneys general to refile their complaint.

Since the court issued its ruling, Facebook's stock value has jumped. "Facebook Inc. vaulted into trillion-dollar territory Monday as a late-afternoon stock rally helped power the company past the milestone valuation mark," reports MarketWatch. "Facebook closed the trading day with a market cap of $1,008,404.77, according to Dow Jones Market Data, becoming just the fifth U.S. company to cross the $1 trillion valuation threshold."

The others that have crossed this threshold include Apple, Microsoft, Amazon, and Google. "It's been a momentous past few days for Big Tech market-cap milestones, as Microsoft broke through the $2 trillion barrier last week," notes MarketWatch.

Yesterday's decision is a win for Facebook, certainly, but also potentially good news for Google, Apple, Amazon, and other tech companies at whom authorities have been slinging dubious monopoly labels.

But new blows keep on cropping up for these companies. Yesterday, Politico reported that a new executive action on antitrust may be coming soon. It's unclear what direction that order would take specifically. Nonetheless, it would "mark a big shift in the government's approach to the concerns about monopolies that have swelled during the 21st century: No longer content to just enforce antitrust laws, the Biden administration would use federal power to actively spark competition in a vast array of businesses," Politico says. However, "the order isn't final and hasn't yet been presented to Biden," and "the White House said Monday that the president has made no decisions about signing such an order."

So far, the Biden administration has been taking a radical approach to competition and tech policy, appointing activist scholars like Tim Wu (now part of the White House economic council) and Lina Khan (now chair of the FTC) known for their anti-corporate and anti-tech company sentiments and far-left reformist approach to regulatory policy.

FOLLOWUP

Swift retaliatory action following U.S. airstrikes in Iraq and Syria. "U.S. troops based at an oil field in northeastern Syria came under rocket attack Monday," reports CBS News. "There are no injuries and damage is being assessed" and "it was not immediately clear the specific source of the attacks against U.S. forces in Syria." The rocket attack comes one day after the U.S. launched multiple airstrikes near the Iraq-Syria border.

FREE MINDS

Marijuana prohibition may be unconstitutional, says Supreme Court Justice Clarence Thomas. "Once comprehensive, the Federal Government's current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana," Thomas writes. "This contradictory and unstable state of affairs strains basic principles of federalism and conceals traps for the unwary." More from Reason's Damon Root:

Thomas' statement came in response to the Supreme Court declining to hear arguments in the case of Standing Akimbo v. United States. Standing Akimbo is a medical marijuana dispensary in Denver that operates legally under Colorado law. Yet, as Thomas points out, the company is still acting illegally under federal law, which means, among other things, that the company is at odds with the Internal Revenue Service over whether or not "their intrastate marijuana operations will be treated like any other enterprise that is legal under state law."

Thomas also describes other problems that similar enterprises still face thanks to the federal marijuana ban remaining on the books, even if the ban itself is rarely enforced

FREE MARKETS

The delta variant of COVID-19 is giving public health authorities a new reason to ramp up recommendations. For instance, "the Los Angeles County Department of Public Health is recommending that all residents wear masks in public indoor spaces — regardless of whether they've been vaccinated for COVID-19," the Los Angeles Timesreports. This comes despite the fact that "officials have said the available vaccines appear to offer strong protection" against the delta variant. For now, the recommendations remain voluntary.

QUICK HITS

• Scientists say they've developed a blood test that can detect Alzheimer's disease with over 96 percent accuracy.

• The Supreme Court yesterday declined to hear two high-profile cases. One was a Virginia school board appeal of a ruling against its transgender bathroom ban. The other involved a teleworker tax dispute between New Hampshire and Massachusetts.

• A border update:

The Biden administration is preparing to close some emergency shelters for unaccompanied migrant children just weeks after considering expanding one of the sites. The move comes in the wake of testimonials from kids that shed light on the subpar conditions at some of the sites and that have opened up the administration to criticism from immigration advocates and attorneys.

• Today in content moderation mishaps:

• Kat Rosenfield tackles the Victoria's Secret rebrand and "a culture that flattens everything from personal relationships to aesthetic taste into a political framing."

• "Texas Republicans and antiabortion leaders who cheered when [Gov. Greg] Abbott signed" new anti-abortion legislation "know that scores of volunteer detectives and antiabortion lawyers are hungry to do the work that typically belongs to police and prosecutors," writes University of Illinois, Urbana-Champaign professor Leslie J. Reagan in a Washington Post op-ed. The new Texas law not only bans abortion at six weeks but lets third parties sue if they think abortion has happened in violation of this rule.

• California has added five more states (Arkansas, Florida, Montana, North Dakota, and West Virginia) to those "which it is restricting government-financed travel because of laws deemed to discriminate based on sexual orientation or gender identity," reports Reuters. That brings the total number of states on California's travel ban list to 17.

• How the critical race theory debate misses the mark.