A judge said that the US Federal Trade Commission failed to assume responsibility for determining Facebook’s monopoly on social networks.
When the judge dismissed the lawsuit, Facebook Inc. won a ruling that dismissed two antitrust cases brought by the federal government and the alliance of states. Shares of the social media platform rose.
U.S. District Court Judge James Boasberg in Washington approved Facebook’s request on Monday to dismiss a complaint made last year by the U.S. Federal Trade Commission and the state attorney general led by James Leticia, New York.
The judge stated in his opinion that the FTC failed to bear the responsibility for determining Facebook’s monopoly on social networks. He said that the agency can file a new complaint within 30 days.
“Although the court disagrees with all of Facebook’s arguments here, it ultimately agrees that the agency’s complaint is legally inadequate and must be rejected,” Bosberg wrote.
After the ruling, Facebook shares rose 4.4% in New York.
With this ruling, Facebook got rid of the broader blow to the US tech giants, the most significant regulatory threat to its business—at least for now.
The decision hit the FTC and the states, which claimed that Facebook bought the photo-sharing app Instagram and messaging service WhatsApp to cut off emerging competitive threats and protect its monopoly, thus violating antitrust laws.
It re-emphasized the antitrust legislation proposed by the Judiciary Committee last week, which will make it easier for law enforcers to challenge the anti-competitive behavior of the largest technology platforms.
Boasberg’s decision to abandon the Facebook complaint shows the obstacles faced by US antitrust enforcement agencies when trying to compete with Internet giants. Officials cannot dissolve the company or take other remedial measures on their own, but must persuade the judge to take action. This process may take several years.
Facebook’s lawsuit was filed in December of last year as part of a broader crackdown on American technology giants. These cases occurred after the Department of Justice’s complaint against Alphabet Inc.’s alleged monopoly of Internet search and the results of the House of Representatives investigation accusing technology companies of abusing its dominant position. Since then, legislators have proposed a series of bills that will cast an extensive regulatory network for these companies.
Facebook’s lawsuit focused on its acquisition of Instagram in 2012 and WhatsApp in 2014. Officials said that Facebook made these transactions because it believed that both companies posed a threat to its business. According to the Federal Trade Commission’s complaint, Facebook did not compete with its own products, but followed the mantra of CEO Mark Zuckerberg: “Buy is better than competition.”
When Facebook had only 25 million users and no revenue, it provided Instagram with $1 billion, but it has begun to occupy the mobile photo-sharing market. According to the FTC’s complaint, Zuckerberg said that the threat from Instagram was “really terrifying.” The company paid $19 billion for WhatsApp because it saw the messaging app as another threat to its business. The FTC’s complaint stated that a Facebook executive stated that these apps “may be the biggest threat we face as a company.”
Facebook attacked these complaints for several reasons. One of its main arguments is that the Federal Trade Commission investigated the two acquisitions when they announced it and allowed the two transactions to proceed. Although antitrust enforcers can question the completed merger, Facebook believes that the FTC case is unprecedented, and the agency has never explained why its previous decision to approve the purchase was wrong. Facebook stated that the government just wants to “rework.”
The company also argued that an April ruling by the U.S. Supreme Court weakened the FTC’s power to recover payments for defrauded consumers and demanded that the complaint be dismissed.
The case is Federal Trade Commission v. Facebook Inc. 20-cv-3590, U.S. District Court for the District of Columbia (Washington).