phhhoto's Antitrust Claim Against Meta Returns to Court

Meta Faces Renewed Antitrust Challenge from Phhhoto

A recent ruling by a U.S. appeals court has reinstated an antitrust lawsuit against Meta, originally filed in late 2021 by the now-defunct social application, Phhhoto. The startup contends that Meta engaged in anti-competitive practices by replicating its key features and stifling market competition.

Initial Dismissal and Subsequent Appeal

In 2023, U.S. District Judge Kiyo Matsumoto initially dismissed Phhhoto’s complaint, citing the expiration of statutory time limits. However, the appeals court reversed this decision, asserting that the case merited a hearing as these limitations should not have been enforced.

This reversal grants Phhhoto the opportunity to present arguments that Meta’s actions directly contributed to its business’s failure, through feature duplication and impeded growth.

Allegations of Algorithmic Suppression

Central to the lawsuit is the claim that Meta leveraged changes to Instagram’s algorithm to suppress Phhhoto’s content. This alleged manipulation resulted in decreased user registrations and engagement for Phhhoto, while simultaneously boosting Meta’s own platform.

Phhhoto alleges it discovered evidence of this algorithmic influence through comparative testing. A video posted from an alternate Instagram account garnered significantly more engagement than identical content shared from Phhhoto’s official account, despite the latter having a substantially larger follower base.

Statute of Limitations Dispute

The initial dismissal hinged on the interpretation of the Sherman Act’s four-year statute of limitations. The district court determined that the time frame for filing the claim had elapsed.

Additional Anti-Competitive Tactics

Beyond algorithmic manipulation, Phhhoto asserts that Meta employed other strategies to disadvantage its business.

• Prior to Instagram’s algorithmic feed launch in March 2016, Meta reportedly revoked Phhhoto’s access to the “Find Friends” API.
• Plans for integrating Phhhoto’s content into the Facebook News Feed were also terminated.
• Meta subsequently introduced Instagram Boomerang, a looping video app that closely mirrored Phhhoto’s core technology.

“Equitable Tolling” and Project Amplify

Phhhoto’s appeal centered on the concept of “equitable tolling,” arguing that the statute of limitations should have been paused due to Meta’s alleged fraudulent concealment of crucial information.

The company contends it only became aware of Meta’s manipulative practices in December 2018, following the public release of documents from a separate federal lawsuit in California. These documents detailed “Project Amplify,” a Meta initiative designed to manipulate and reorder content within user feeds for Meta’s benefit.

Appeals Court Findings

The appeals court did not issue a final ruling on the merits of the case. However, it concluded that the lower court made errors in its assessment of the fraudulent concealment claims. This indicates the initial dismissal of Phhhoto’s antitrust allegations was premature, and the case warrants further consideration.

Next Steps

The case will now be remanded to the district court for a full trial.

Meta responded to a request for comment, stating, “As we have said since the beginning, this suit is baseless and we will continue to vigorously defend ourselves.”

Updated after publication with Meta comment.