WSJ US BusinessGovernment Antitrust Lawsuits Against Facebook Dismissed by Federal Judge

June 28, 20210
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WASHINGTON—A federal judge dismissed antitrust lawsuits against Facebook Inc. filed by the U.S. government and most states, a major win for the company before the cases even got off the ground.

U.S. District Judge James Boasberg in Washington on Monday granted the social-media giant’s requests to dismiss lawsuits filed by the Federal Trade Commission and state attorneys general in December. The dismissals, which came in a pair of rulings, came before any pretrial proceedings had progressed.

Judge Boasberg said the FTC’s lawsuit was “legally insufficient” because it didn’t plead enough allegations to support monopolization claims against Facebook. The judge, however, said the commission can try again and gave it 30 days to attempt to file an amended lawsuit.

The judge dismissed the case brought by 46 states in its entirety, largely on the grounds that the attorneys general waited too long to bring their claims.

The rulings dealt a direct, early blow to bipartisan government efforts to pursue Big Tech giants on allegations they have unlawfully monopolized the marketplace. They also served as a reminder that antitrust cases—particularly against dynamic tech-sector firms that offer free, nontraditional products—can be difficult to win before federal courts that have narrowed the reach of antitrust laws over several decades.

“This really stings for the agencies,” said George Washington University law professor William Kovacic, a former FTC chairman. “The FTC and the states I’m sure used the best talent they had to bring these cases, and they have been knocked out at the earliest stage.”

Even if the FTC is able to successfully amend its lawsuit, he added, “this adds complexity and delay to a case that was already going to be difficult.”

Facebook said it was pleased “that today’s decisions recognize the defects in the government complaints filed against Facebook. We compete fairly every day to earn people’s time and attention and will continue to deliver great products for the people and businesses that use our services.”

An FTC spokeswoman said the commission “is closely reviewing the opinion and assessing the best option forward.”

New York Attorney General Letitia James, a Democrat, led the states’ lawsuit. Her office also said it was considering its options.

News of the judge’s decisions fueled a rise in Facebook’s shares, which ended 4 p.m. trading Monday up 4.2%, valuing the company above $1 trillion for the first time in its history.

The FTC alleged Facebook engaged in unlawful monopolization by buying up potential future rivals such as Instagram and WhatsApp instead of competing with them, and was seeking to force the social-media giant to unwind those transactions. The commission also argued Facebook imposed anticompetitive conditions that limited how third-party app developers could access the social-media platform.

Judge Boasberg, an Obama appointee, said the FTC’s principal problem was that it didn’t make enough allegations to support its claims that Facebook has a monopoly in what the FTC described as a market for personal social-networking services. The commission, he said, only made a bare minimum allegation that Facebook had a dominant market share exceeding 60%, and that no other social network of comparable scale exists in the U.S.

“These allegations—which do not even provide an estimated actual figure or range for Facebook’s market share at any point over the past ten years—ultimately fall short of plausibly establishing that Facebook holds market power,” the judge wrote.

Judge Boasberg also said the FTC didn’t have a valid challenge to Facebook’s policy of refusing to grant interoperability permissions to competing apps. “There is nothing unlawful about having such a policy in general,” the judge said. There could have been legal concerns with how Facebook implemented its policy, but the issues the FTC raised didn’t involve current Facebook conduct and thus were out of reach, he said.

Not everything in the ruling was bad for the FTC. The judge rejected Facebook’s contention that the commission couldn’t challenge its Instagram and WhatsApp acquisitions now that several years have passed since those deals were completed.

Sizable acquisitions must be reviewed by the government before they are consummated. The FTC allowed Facebook to acquire Instagram and WhatsApp in 2012 and 2014, respectively, but argued in its lawsuit that time has shown the deals to be anticompetitive.

University of Pennsylvania law professor Herbert Hovenkamp said while the FTC likely has ways it could amend its allegations to at least get its case out of the starting gate, Monday’s ruling would almost certainly increase calls in Congress to pass new antitrust legislation.

“This sends a signal that the antitrust laws are not good enough,” Mr. Hovenkamp said of the rulings. “It’s going to pour pretty cold water on the idea that the existing antitrust laws can do the job.”

Lawmakers from both parties have argued that current law is insufficient to restrain powerful technology companies, but it isn’t clear whether Democrats and Republicans will find enough consensus to get something passed.

The House Judiciary Committee last week approved a series of antitrust measures aimed at strengthening competition law and taking on Big Tech, but pitched political battles are likely ahead.

The 46 states made arguments similar to those of the FTC, while also alleging that Facebook degraded personal privacy and exploited consumer data because it had no rivals to keep it in check.

Judge Boasberg, in turn, offered similar rejections of the states’ claims as he did to the FTC’s, with one notable exception: He said the states, unlike the federal government, can’t challenge Facebook’s past acquisitions years after the fact.

The proceedings in the Facebook litigation stand in contrast to the Justice Department’s antitrust case against Alphabet Inc.’s Google, which the government filed last October. There, Google chose not to file a motion seeking to have the lawsuit dismissed at the outset. A trial in that case has been tentatively scheduled for 2023.

Facebook in March filed motions asking for the cases to be dismissed before trial, arguing that its business faced stiff competition in the tech industry, with nearly all of its revenue coming from advertising, which it said was a relentlessly competitive market.

Facebook also argued that government enforcers didn’t plausibly allege it had monopoly power, because the government couldn’t show that the company has raised prices or restricted output, given that its products are offered free and in unlimited quantities.

Judge Boasberg didn’t hold oral arguments before issuing his ruling, which was based on written submissions from the parties.

Big Tech’s Battles

More coverage of antitrust and regulation efforts, selected by the editors

Write to Brent Kendall at brent.kendall@wsj.com

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