Maksim Kabakou - stock.adobe.com
Editor's note: This story was updated Aug. 23, 2021
The Federal Trade Commission filed an amended complaint against Facebook with additional details regarding the company's alleged monopolistic behavior.
The amended complaint, filed Aug. 19, alleges Facebook bought out competition, hindered third-party developers and maintained a dominant share of the market.
Specifically, the FTC argues that Facebook struggled to operate on mobile devices in the 2010s, when it suffered "significant failures" and resorted to an "illegal buy-or-bury scheme" that included acquiring Instagram in 2012 and WhatsApp in 2014. The FTC's amended complaint cites comments from Facebook's CEO Mark Zuckerberg, who said at the time that the company is "vulnerable in mobile."
"Facebook lacked the business acumen and technical talent to survive the transition to mobile," Holly Vedova, FTC's acting director of the Bureau of Competition, said in a news release. "After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat."
The FTC's amended complaint also includes additional evidence regarding Facebook's use of conditional contract polices with third-party developers that it perceived as threats. Additionally, the FTC included statistics such as time spent, daily active users and monthly active users to demonstrate Facebook's dominant share of the U.S. personal social networking market since 2011.
Original antitrust lawsuit dismissed in June
A federal court dismissed antitrust lawsuits against Facebook on Monday, which could have led to breaking up the social media giant.
The U.S District Court for the District of Columbia filing stated the Federal Trade Commission (FTC) failed to present solid evidence of Facebook's dominant market power, including a "speculative and conclusory" assertion that Facebook's dominant share of the social networking market is in excess of 60%. In its lawsuit filed against Facebook in December, the FTC alleged Facebook violated Section 2 of the Sherman Act, which prohibits a person from monopolizing trade among several U.S. states.
The court also dismissed a lawsuit from 46 state attorneys general against Facebook, which was aimed at the company's 2012 acquisition of Instagram and 2014 acquisition of WhatsApp, alleging Facebook violated Section 7 of the Clayton Act, which prohibits acquisitions reducing competition. The court filing said the lawsuit came too late after the acquisitions occurred.
"Such long-past violations cannot furnish a basis for the injunctive relief the plaintiffs seek here," the filing stated.
The court dismissed the FTC's complaint, meaning the FTC could file an amended case, while the case by the state attorneys general has been completely dismissed.
The dismissal comes as authorities around the globe are looking to regulate companies that have grown in power through the multiple lines of businesses they operate in, as well as through the vast amounts of consumer data they collect.
Recently, the European Commission opened an investigation into Google for its ad practices, as well as Apple for anticompetitive behavior in how it deals with third parties through its app store. In the U.S., the House of Representatives is preparing to consider sweeping antitrust legislation that could result in the breakup of large companies like Apple and Amazon.
Message likely received
Alan Pelz-Sharpe, founder of consulting firm Deep Analysis, said although the FTC's complaint will likely be amended and refiled, he's doubtful of a successful outcome.
He called Facebook a powerful company, deeply embedded in consumers' lives, and said it will have "factored in a plan B to deal with any outcome," even if the case rises to the level of the Supreme Court.
Alan Pelz-SharpeFounder, Deep Analysis
"Firms at the scale of Facebook can afford to fight these moves with near unlimited resources," he said. "Moreover, they can afford to drag them out over long periods of time with no impact on their bottom line."
Still, he said, the dismissed lawsuits send a strong message to technology companies like Facebook that the days of gobbling up companies without scrutiny and growing at an unprecedented pace are over.
"The [antitrust lawsuits] are a threat and will be treated as such," he said. "Not a threat to their existence or profitability, but a threat to [companies like Facebook] continuing to do what they want, when they want -- and potentially a threat to their image."
Ray Wang, principal analyst and founder of Constellation Research, also doubted the success of an appeal. He said there is no substantial evidence to support the claims the FTC and state attorneys general were making.
"They can come back on appeal, but the claims don't have merit," he said. "To now come back retroactively to say, 'That was an evil move; they locked up the competition' -- nobody thought that at the time."
He is, however, keeping an eye on legislation the House will be taking up, particularly the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act. That bill would require that companies make it easy for consumers to move their data between competitor platforms.
Wang also stressed that the federal government do a cost-benefit analysis, weighing the cost of regulating companies like Facebook with the benefits those companies provide.
"I think people need to do that before getting to this point of saying a tech vendor is being evil or a tech vendor is being noncompetitive or monopolist," he said.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.