FTC files new lawsuit against Facebook over antitrust

U.S. antitrust officials on Thursday refiled their monopoly lawsuit against Facebook Inc., seeking to salvage the landmark case that a judge threw out in June.

The Federal Trade Commission filed the new complaint in federal court in Washington, alleging that Facebook violated antitrust laws by buying Instagram and WhatsApp in order to eliminate them as competitors.

Facebook shares reversed an earlier gain, slipping less than 1% to $355.28 at 11:34 a.m. in New York. The stock has climbed about 30% this year.

The agency is trying to revive the case after U.S. District Judge James Boasberg in June dismissed it, saying the agency failed to provide enough detail to support its claim that Facebook has a monopoly in the social-media market. Boasberg had given the FTC 30 days to fix the error and refile, and the commission won an extension until Aug. 19.

The Facebook case, first filed in December, presents an early test for FTC Chair Lina Khan, who was named head of the agency in June by President Joe Biden. Khan is a leading advocate for taking a more forceful antitrust stance against companies and is already taking steps to bolster the agency’s authority.

Facebook is seeking to bar Khan from participating in the case, arguing that her academic writing about the company and her work on the House antitrust panel, which investigated Facebook and other tech platforms, showed she is biased.

The lawsuit is part of a broad effort by lawmakers and competition enforcers to rein in the power of the biggest U.S. tech companies. Besides the Facebook case, the Justice Department and state attorneys general across the country have multiple lawsuits pending against Google, while Democrats and Republicans on Capitol Hill are pushing forward with a raft of bills that would impose new restrictions on how the companies do business.

Supporters of the Facebook lawsuit said Boasberg’s decision illustrated the legal barriers the government faces in bringing monopoly cases. Advocates for reform say court decisions over decades have effectively allowed dominant companies to engage in anticompetitive tactics and that Congress must give enforcers new authority.

Boasberg not only threw out the FTC’s case. He also dismissed a parallel case by state attorneys general led by New York, without giving them an opportunity to try again. The judge said the states waited too long to challenge Facebook’s acquisitions. Facebook bought Instagram in 2012 and WhatsApp in 2014. The legal doctrine that applied to the states doesn’t apply to the FTC.

Boasberg also narrowed the FTC’s case. In addition to trying to undwind the two deals, the FTC said Facebook tried to thwart competition by only allowing third-party apps to connect to its platform on condition that they don’t compete against Facebook and don’t connect with other social networks.

The FTC argued that the policy deterred apps from offering features that might compete with Facebook and prevented promising apps from evolving into competitors that could threaten Facebook’s monopoly.

Boasberg dismissed that part of the FTC case. The judge wrote that under existing antitrust law established by the courts, companies don’t have an obligation to do business with other firms and can “refuse to deal” even to prevent a rival from competing.

“A monopolist has no duty to deal with its competitors, and a refusal to do so is generally lawful,” Boasberg wrote. “The FTC, therefore, cannot get anywhere by reframing Facebook’s adoption of a policy of refusing to deal with all competitors as the execution of an unlawful scheme of monopoly maintenance.”