On Tuesday, federal Judge James E. Boasberg ruled that Federal Trade Commission’s attempt to break up Facebook can move forward. The the case itself long to decide. But by upholding the FTC’s theory that monopolies can harm consumers even if their products are free, the judge signaled that Facebook — and other tech platforms — are not invincible.
That’s a big change from last summer. In June, Boasberg, a judge in the U.S. District Court for the District of Columbia, approved Facebook’s motion to dismiss the case. (The company has rebranded itself as Meta Platforms, but Facebook remains the defendant.) The problem, he said, is that the FTC — which is seeking to reverse Facebook’s acquisitions of Instagram and WhatsApp — has failed to provide any evidence that the company is a monopoly. But in the same judgment, Boasberg made a clear blueprint to know how to revive the case. All the government has to do is provide proof that Facebook has a dominant share of the social networking market.
Two months later, the agency filed a new complaint with data points from Comscore, an analytics firm that Facebook itself uses, showing that the company dominates the market according to a variety of metrics: people daily active user, monthly active user and user time. . The new evidence seems to have impressed Boasberg. “In short,” he wrote in latest verdict, “The FTC finished its homework this time around.”
Market share data doesn’t completely solve the problems on its own. The FTC, Boasberg noted, must also point out that Facebook’s alleged monopoly has been harmful to consumers. This is where the verdict gets interesting. From the very beginning, the antitrust movement against companies like Facebook and Google has encountered one major obstacle: How do you prove that consumers are harmed by companies whose services core is free? (Or, in the case of Amazon, famously cheap?) Technically, antitrust law has nothing to do with price, but since the late 1970s, judges have tended to interpret it as if exactly. The standard way to argue against a corporate merger is to show that it will lead to higher prices. (For example, see beef industry.)
In recent years, legal thinkers, including FTC chair Lina Khan, have developed a different way of thinking about the harms of technological monopolies: When there is no competition, companies will freedom to do things that users don’t like and will feel less pressure to improve their products. For example, scholar Dina Srinivasan has argued that Facebook has downgraded its users privacy standards once it beat first-time rivals like MySpace. The FTC included that theory in its summary, along with several others. Facebook’s dominance also allows the company to bundle users’ feeds with more ads. And, the FTC noted, Facebook killed its in-house photo-sharing app after buying Instagram, suggesting that consumers would have more choices if the two companies remained rivals.
So far, it remains an open question whether these non-price theories will succeed in court. That’s why it looks like Boasberg has accepted them as a big deal. “In short,” he wrote, “the FTC alleges that while Facebook’s acquisitions of Instagram and WhatsApp did not lead to higher prices, they did lead to poorer service and fewer choices for consumers. ”
