Facebook's Antitrust Defense and Shifting Legal Landscape

Facebook is contesting the Federal Trade Commission’s (FTC) antitrust lawsuit, employing a well-established strategy that questions the agency’s definition of market monopolies. However, the traditional arguments of “no price increases” and “no allowance of competition” may soon encounter challenges from evolving legal doctrines and the current administration.

Facebook's Position

In a recently filed document, Facebook presents its case, portraying itself as the aggrieved party. The company asserts that the FTC’s lawsuit should be dismissed on three primary grounds.

Defining a Relevant Market

Firstly, Facebook contends that the FTC has failed to “allege a plausible relevant market.” A monopoly requires a defined market to dominate. Facebook argues the FTC only proposes a vague “personal social networking” market, asserting that “no court has ever held that such a free goods market exists for antitrust purposes.”

Furthermore, the company highlights the “relentlessly competitive” advertising market, which generates its revenue. This suggests that even if a social media market is undefined, the advertising market should be considered. Facebook attempts to navigate the gaps in existing regulations by arguing its business doesn’t neatly fit into established categories.

The "Free" Product Argument

Secondly, Facebook claims the FTC “cannot establish that Facebook has increased prices or restricted output” because its products are free and readily available. The logic is that a provider cannot abuse a monopoly if the product is offered without charge to consumers.

Even if the FTC asserts Facebook controls 60% of the social media market, Facebook argues this is meaningless – 60% of zero dollars remains zero. This challenges the traditional focus on consumer pricing in antitrust cases.

Past Approvals and Current Standing

The third argument centers on Facebook’s acquisitions of competitors. The company maintains these purchases were legal and previously approved by the FTC. It also asserts the agency lacks the standing to challenge them now, lacking evidence of specific illegal activity.

However, the FTC routinely re-examines mergers and acquisitions, and can potentially unravel them if new information emerges during the review process.

Instagram Acquisition Under Scrutiny

Facebook points to its 2012 acquisition of Instagram, which received unanimous FTC approval. However, internal communications revealed Facebook was concerned Instagram could become a significant competitor, leading to the acquisition as a preemptive measure.

The FTC addressed these points in a FAQ published alongside the original filing.

Questioning Traditional Antitrust Principles

Some of Facebook’s arguments raise fundamental questions about antitrust law. Is it valid to disregard value exchanged through user engagement when assessing a market? Can a company’s actions in a free product context be judged by its practices in a related market, like advertising?

The Need for Updated Antitrust Doctrine

Antitrust law has largely remained unchanged for decades, focusing on consumer goods and price manipulation. This framework, while effective in some cases, proves inadequate for complex, multi-business entities like Microsoft, Google, and Facebook.

Amazon’s rise exemplifies the shortcomings of current antitrust doctrine, prompting research like “Amazon’s Antitrust Paradox.” This paper highlighted how network effects create anti-competitive practices that are more subtle than traditional price fixing.

A Potential Shift in FTC Leadership

Lina Khan, author of “Amazon’s Antitrust Paradox,” is reportedly a nominee for a vacant commissioner position at the FTC. Her nomination signals a potential shift in antitrust philosophy.

Even if her confirmation faces opposition, her views are gaining prominence. With Khan and her allies potentially leading the FTC, the assumptions Facebook relies on may be challenged.

Looking Ahead

While this lawsuit may not immediately reflect these changes, the next legal battle will likely be fought under revised rules. The debate over antitrust enforcement in the digital age is far from over.

Federal Trade Commission v Facebook Inc Dcdce-20-03590 0056.1 by TechCrunch on Scribd

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