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Facebook moves to kill amended FTC complaint, says no basis for branding company 'an unlawful monopolist'

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Facebook Chairman and CEO Mark Zuckerberg testifies at a House Financial Services Committee hearing in Washington, U.S., October 23, 2019. REUTERS/Erin Scott     TPX IMAGES OF THE DAY
Facebook Chairman and CEO Mark Zuckerberg testifies at a House Financial Services Committee hearing in Washington, U.S., October 23, 2019. REUTERS/Erin Scott TPX IMAGES OF THE DAY

Facebook (FB) is once again defending itself against the Federal Trade Commission's (FTC) claims that the company is flouting antitrust laws. On Monday, the social media giant fired back at the agency's amended lawsuit by asking that a federal district judge toss allegations that it's an illegal monopoly.

"The Federal Trade Commission alleged no plausible factual basis for branding Facebook an unlawful monopolist," Facebook said in its motion to dismiss the FTC's amended complaint, filed on Monday.

At the heart of Facebook's arguments for dismissing the case is its assertion that the company lacks dominant market share in the markets alleged by the FTC: "personal social networking" or "personal social networking services."

In June, a federal judge dismissed the FTC's antitrust lawsuit against Facebook and a separate antitrust lawsuit brought by dozens of attorneys general. Both suits alleged the social media giant is violating antitrust law by buying up competitors and depriving consumers of alternatives that would better protect their privacy.

However, the judge dismissed the FTC case without prejudice, meaning the agency could file an amended complaint.

'Better to buy than compete'

In its revived complaint, the FTC argues that Facebook holds a monopoly in the market due to its control of the world’s two largest social networks, Facebook and Instagram. The FTC contends that the company has leveraged the power of those companies in an illegal "buy-or-bury" scheme, which includes purchasing companies that pose competitive threats and retooling its programming policies to stifle third-party developers that could aid rivals.

“Facebook has maintained its monopoly position in significant part by pursuing CEO Mark Zuckerberg’s strategy, expressed in 2008: 'it is better to buy than compete,'" the agency wrote in its refiled suit. "True to that maxim, Facebook has systematically tracked potential rivals and acquired companies that it viewed as serious competitive threats."

The allegations go on to criticize Facebook’s executives for lacking enough talent to compete fairly in a changing social media environment, and turning to non-compete agreements to cut off competitive companies from valuable Facebook platform interconnection programming.

“Unable to maintain its monopoly by fairly competing, the company’s executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed,” the FTC states. 

As an example, the FTC cites Facebook’s acquisitions of WhatsApp and Instagram, which the FTC’s own regulators approved. The company purchased Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion.

The FTC is tasked with reviving its claims against Facebook under new leadership from Biden Administration FTC chair, Lina Khan, a fierce critic of the tech industry. In July, Facebook requested that Khan be blocked from handling the agency's antitrust investigations into the company based on her public criticism of its market power. Amazon (AMZN) made a similar request with respect to probes into its market dominance.

FTC Commissioner nominee Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee hearing on the nomination of Former Senator Bill Nelson to be NASA administrator, on Capitol Hill in Washington, U.S., April 21, 2021. Graeme Jennings/Pool via REUTERS
FTC Commissioner nominee Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee hearing on the nomination of Former Senator Bill Nelson to be NASA administrator, on Capitol Hill in Washington, U.S., April 21, 2021. Graeme Jennings/Pool via REUTERS

Judge James Boasberg of the U.S. District Court for the District of Washington D.C. will decide for a second time whether the FTC’s renewed claims survive Facebook’s motion to dismiss the claims. In June, when dismissing the suit, the judge ruled that Facebook didn't properly identify how Facebook held an illegal monopoly in the “personal social networking” space, despite the agency's claims that its acquisitions of Instagram and What's App were leveraged to quash competition.

In its revised lawsuit, the FTC alleges that Facebook’s monopoly in the U.S. market has existed since at least 2011. In an effort to address Judge Boasberg’s dismissal of its previous complaint, the FTC references Facebook’s share of users it says exist among apps providing social networking services, including daily average users and monthly active users.

Facebook’s share of daily active users in the U.S., the FTC says, has exceeded 70% since 2016, and reached at least that high in 2011. The company’s monthly active users share, it adds, exceeded 65% since 2012, and reached at least that high in 2011.

Facebook, however, says the allegations in the suit are unfair because the FTC used user data from a third party that doesn't claim responsibility for their accuracy. The company further states that the FTC "cherry picked" user numbers from Instagram, Facebook, and Snap, while leaving out those of other platforms.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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