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Washington — Facebook has won a court ruling dismissing two monopoly lawsuits filed by the US government and a coalition of states that sought to break up the company, dealing a blow to the effort of antitrust officials to take on the biggest tech platforms.
The decision by US district judge James Boasberg in Washington on Monday sent Facebook shares soaring, pushing the company’s market value to more than $1-trillion.
Boasberg granted the company’s request to dismiss the complaints filed last year by the US Federal Trade Commission and state attorneys-general led by New York, saying in his opinion that the FTC failed to meet the burden for establishing that Facebook has a monopoly in social networking.
The judge said the FTC failed to define the market and said its assertion about Facebook’s share of the market was “too speculative and conclusory to go forward”. He said the agency could refile the complaint within 30 days.
“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,” Boasberg wrote.
Facebook shares gained as much as 4.9%, the most since April 29. The shares have advanced 30% this year.
“We are pleased that today’s decisions recognise the defects in the government complaints filed against Facebook,” said a company spokesperson.
With the ruling, Facebook has escaped, at least for now, the most significant regulatory threat to its business to emerge out of the wider crackdown on US technology giants. The FTC did not immediately comment on the decision. The New York attorney-general’s office said it is reviewing the decision and considering its legal options.
The ruling delivers a blow to the FTC and the states, which claimed Facebook violated antitrust laws by buying photo-sharing app Instagram and messaging service WhatsApp to cut off emerging competitive threats and protect its monopoly.
It also puts new emphasis on antitrust legislation advanced by the House judiciary committee last week that would make it easier for enforcers to challenge anticompetitive conduct by the biggest tech platforms.
Antitrust hurdles
Boasberg’s decision to toss the Facebook complaints shows the hurdles US antitrust enforcers face in trying to take on the internet giants. Officials on their own cannot break up companies or impose other remedies, but instead must persuade judges to take action. The process can take years.
In a separate opinion about the states’ lawsuit, the judge criticised the attorneys-general for waiting years after the Instagram and WhatsApp deals to challenges the acquisitions.
“The states’ long delays were unreasonable and unjustified as a matter of law,” Boasberg said. “Both acquisitions were, per plaintiffs’ allegations, publicly announced, and the states were thus aware or certainly should have been aware of them from those points onward.”
The Facebook lawsuits were filed in December as part of a widening crackdown on America’s tech giants. The cases followed a Justice Department complaint against Alphabet for allegedly monopolising internet search, and the findings of a House investigation that accused tech companies of abusing their dominance. Legislators have since proposed a pile of bills that would cast a broad regulatory net over the companies.
Antitrust investigators at the US justice department have stepped up scrutiny of Google’s digital ad market practices in recent months, according to people familiar with the matter, showing that the Biden administration is pursuing a probe that started under former President Donald Trump.
The Facebook lawsuits centred on the 2012 acquisition of Instagram and the 2014 takeover of WhatsApp. Officials say Facebook made the deals because it saw both companies as threats to its business. Rather than compete with its own products, Facebook followed CEO Mark Zuckerberg’s mantra “it is better to buy than compete”, according to the FTC complaint.
Facebook offered $1bn for Instagram when it had only 25-million users and no revenue, but had already started to capture the market for mobile photo-sharing. Zuckerberg said the threat from Instagram was “really scary”, according to the FTC complaint. The company paid $19bn for WhatsApp because it saw messaging apps as another danger to its business. A Facebook executive said the apps “might be the biggest threat we’ve ever faced as a company”, the FTC complaint said.
Facebook attacked the complaints on several grounds. One of its arguments was that the FTC investigated both acquisitions when they were announced and allowed both deals to proceed. While antitrust enforcers can challenge completed mergers, Facebook argued the FTC’s case was unprecedented and the agency never explained why its prior decisions approving the purchases were mistaken. The government simply wants a “do-over”, Facebook said.
The company also had argued that a US supreme court ruling in April that curtailed the FTC’s authority to recover money for defrauded consumers required that the complaint be dismissed.
Bloomberg News. More stories like this are available on bloomberg.com
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Facebook wins dismissal of monopoly lawsuits
Washington — Facebook has won a court ruling dismissing two monopoly lawsuits filed by the US government and a coalition of states that sought to break up the company, dealing a blow to the effort of antitrust officials to take on the biggest tech platforms.
The decision by US district judge James Boasberg in Washington on Monday sent Facebook shares soaring, pushing the company’s market value to more than $1-trillion.
Boasberg granted the company’s request to dismiss the complaints filed last year by the US Federal Trade Commission and state attorneys-general led by New York, saying in his opinion that the FTC failed to meet the burden for establishing that Facebook has a monopoly in social networking.
The judge said the FTC failed to define the market and said its assertion about Facebook’s share of the market was “too speculative and conclusory to go forward”. He said the agency could refile the complaint within 30 days.
“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,” Boasberg wrote.
Facebook shares gained as much as 4.9%, the most since April 29. The shares have advanced 30% this year.
“We are pleased that today’s decisions recognise the defects in the government complaints filed against Facebook,” said a company spokesperson.
With the ruling, Facebook has escaped, at least for now, the most significant regulatory threat to its business to emerge out of the wider crackdown on US technology giants. The FTC did not immediately comment on the decision. The New York attorney-general’s office said it is reviewing the decision and considering its legal options.
The ruling delivers a blow to the FTC and the states, which claimed Facebook violated antitrust laws by buying photo-sharing app Instagram and messaging service WhatsApp to cut off emerging competitive threats and protect its monopoly.
It also puts new emphasis on antitrust legislation advanced by the House judiciary committee last week that would make it easier for enforcers to challenge anticompetitive conduct by the biggest tech platforms.
Antitrust hurdles
Boasberg’s decision to toss the Facebook complaints shows the hurdles US antitrust enforcers face in trying to take on the internet giants. Officials on their own cannot break up companies or impose other remedies, but instead must persuade judges to take action. The process can take years.
In a separate opinion about the states’ lawsuit, the judge criticised the attorneys-general for waiting years after the Instagram and WhatsApp deals to challenges the acquisitions.
“The states’ long delays were unreasonable and unjustified as a matter of law,” Boasberg said. “Both acquisitions were, per plaintiffs’ allegations, publicly announced, and the states were thus aware or certainly should have been aware of them from those points onward.”
The Facebook lawsuits were filed in December as part of a widening crackdown on America’s tech giants. The cases followed a Justice Department complaint against Alphabet for allegedly monopolising internet search, and the findings of a House investigation that accused tech companies of abusing their dominance. Legislators have since proposed a pile of bills that would cast a broad regulatory net over the companies.
Antitrust investigators at the US justice department have stepped up scrutiny of Google’s digital ad market practices in recent months, according to people familiar with the matter, showing that the Biden administration is pursuing a probe that started under former President Donald Trump.
The Facebook lawsuits centred on the 2012 acquisition of Instagram and the 2014 takeover of WhatsApp. Officials say Facebook made the deals because it saw both companies as threats to its business. Rather than compete with its own products, Facebook followed CEO Mark Zuckerberg’s mantra “it is better to buy than compete”, according to the FTC complaint.
Facebook offered $1bn for Instagram when it had only 25-million users and no revenue, but had already started to capture the market for mobile photo-sharing. Zuckerberg said the threat from Instagram was “really scary”, according to the FTC complaint. The company paid $19bn for WhatsApp because it saw messaging apps as another danger to its business. A Facebook executive said the apps “might be the biggest threat we’ve ever faced as a company”, the FTC complaint said.
Facebook attacked the complaints on several grounds. One of its arguments was that the FTC investigated both acquisitions when they were announced and allowed both deals to proceed. While antitrust enforcers can challenge completed mergers, Facebook argued the FTC’s case was unprecedented and the agency never explained why its prior decisions approving the purchases were mistaken. The government simply wants a “do-over”, Facebook said.
The company also had argued that a US supreme court ruling in April that curtailed the FTC’s authority to recover money for defrauded consumers required that the complaint be dismissed.
Bloomberg News. More stories like this are available on bloomberg.com
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.