Aug 19, 2021 - Economy

FTC accuses Facebook of "buy or bury" scheme in new antitrust complaint

Illustration of a gavel bearing down on Facebook's "f" logo

Illustration: Sarah Grillo/Axios

The Federal Trade Commission on Thursday took a second shot at alleging Facebook is an illegal monopoly in a new complaint that accuses the social media company of buying up potential competitors or thwarting their access to the platform.

Why it matters: The FTC, now led by Big Tech critic Lina Khan, is trying to save its case against Facebook after a judge dismissed its first attempt.

Driving the news: The FTC filed an amended complaint in a D.C. federal court arguing Facebook illegally acquired competitors WhatsApp and Instagram, and that Facebook "lured" app developers to its platform and "buried" them when they became competitive threats.

  • In June, Judge James Boasberg dismissed the agency's first complaint, noting that it lacked specifics on the metrics or methods used in defining and calculating Facebook's market share, but allowed the agency to try again.
  • The FTC said in a press release that its new complaint bolsters its arguments with new detailed statistics on Facebook's market share and new evidence showing Facebook has the power to control prices or exclude competition.

Details: In its complaint, the FTC argues companies like TikTok, Twitter and YouTube are not real substitutes for Facebook in the "personal social networking" market because those services are not used to interact with friends and family.

  • The FTC notes that Snapchat is the next-largest provider of personal social networking services in the U.S. after Facebook, but its user base and engagement level are only a "fraction of the size" of those of Facebook and Instagram.
  • The agency argues that Facebook has maintained a dominant share of the market since 2011, and uses metrics including time spent, daily active users and monthly active users as evidence.
  • For example, the FTC says Facebook's share of the time spent by users of apps providing social networking services has exceeded 80% since 2012.

What they're saying: “Facebook lacked the business acumen and technical talent to survive the transition to mobile," said Holly Vedova, FTC Bureau of Competition acting director.

  • "After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat. This conduct is no less anticompetitive than if Facebook had bribed emerging app competitors not to compete."

The other side: Facebook called the lawsuit "meritless" in a statement.

  • "There was no valid claim that Facebook was a monopolist — and that has not changed," a Facebook spokesperson said. "Our acquisitions of Instagram and WhatsApp were reviewed and cleared many years ago, and our platform policies were lawful.
  • "The FTC's claims are an effort to rewrite antitrust laws and upend settled expectations of merger review, declaring to the business community that no sale is ever final."

The intrigue: Facebook called on Khan to recuse herself from the case, given her previous work on antitrust issues for the House Judiciary Committee and her public criticism of the company.

  • The FTC says the Office of General Counsel reviewed the Facebook petition and Office of the Secretary dismissed it, noting that the case will be prosecuted before a federal judge

Flashback: The FTC filed the case in the waning days of the Trump administration, with then-Chairman Joe Simons, a Republican, joining with the agency's two Democrats to bring the complaint over the objections of the two Republican commissioners.

  • The Democratic and Republican leaders of the House and Senate antitrust subcommittees urged Khan to continue enforcement efforts against Facebook for potential antitrust violations in a letter following the judge's dismissal of the complaint.

Go deeper: Read the complaint

Editor's note: This story has been updated with more details from the FTC's complaint and a comment from Facebook.

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