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More of Meta’s dirty laundry may soon get aired

January 12, 2022, 7:37 PM UTC

Federal Trade Commission v. Facebook is officially on. And even if the social media giant prevails, it’s going to be messy.

A federal judge ruled Tuesday that the FTC can proceed with its antitrust case against Facebook parent company Meta, reversing an earlier dismissal of the lawsuit. If the FTC prevails, it could force Meta to sell off Instagram and/or WhatsApp, two incredibly lucrative brands that the company acquired in 2012 and 2014, respectively.

In his ruling, U.S. District Court Judge James Boasberg wrote the FTC’s case initially “stumbled out of the starting blocks,” but the federal agency’s amended complaint contains enough new information to warrant moving forward to trial. FTC officials, led by new agency chairperson and noted Big Tech critic Lina Khan, allege that Facebook reached monopoly status and improperly suppressed competition through its acquisitions of Instagram in 2012 and WhatsApp in 2014.

“Although the agency may well face a tall task down the road in proving its allegations, the Court believes that it has now cleared the pleading bar and may proceed to discovery,” Boasberg wrote. 

It’s those last three words—proceed to discovery—that should make Mark Zuckerberg shudder.

While the scope of discovery remains to be seen, FTC lawyers are primed to get access to internal emails, research, and other documents that Meta leaders would certainly prefer to remain confidential. Look no further than the recent legal battle between Apple and Epic Games, which produced tons of juicy information about Apple’s business practices.

We know, too, that Facebook hasn’t exactly functioned like the CIA when it comes to keeping sensitive information off the books. In the past few years, we’ve seen Facebook’s dirty laundry routinely aired in the public sphere:

  • Last year’s Facebook Files leak, which documented extensive internal research showing the negative effects of Instagram and Facebook on some users.
  • The release of internal emails acquired and partially published in 2020 by a House Judiciary antitrust subcommittee, some of which FTC lawyers used against Facebook in their amended complaint. The records included emails showing Facebook executives’ knowledge of the competitive threat posed by Instagram and WhatsApp.
  • The U.K. Parliament’s publishing of internal records in 2018 that were obtained during the discovery phase of a lawsuit filed by app developer Six4Three. The documents featured Facebook leaders coordinating how to limit competition and potentially capitalize on data collection.

In each case, the publication of internal records steeled the resolve of American and European lawmakers to enact legislation that would harm Meta’s business. The documents also further tarnished Meta’s already sullied public image (though its daily active users and revenue remain at all-time highs). 

The FTC still faces a high hurdle in proving that Facebook maintains a monopolistic stranglehold on social media, particularly amid the rise of competitors like TikTok and Snapchat. The litigation could drag on for years, by which time Meta could cede market share as it pivots to the metaverse and other newer technologies. Political winds also could shift during that time, potentially weakening the FTC’s appetite for a drawn-out fight with Facebook’s legion of lawyers.

Even so, Meta better hope its house is in order. It’s called “discovery” for a reason.

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Jacob Carpenter

NEWSWORTHY

The VC spigot opens wide. Startups took in a record $621 billion in venture capital in 2021 as investing boomed in Asia and several American cities outside of Silicon Valley, Bloomberg reported Wednesday, citing data from research firm CB Insights. About half of the funding went to companies in the U.S., with Silicon Valley startups collecting about $105 billion alone. Startup investment also picked up in Los Angeles, Philadelphia, Miami, and Dallas, among other domestic cities, as more companies embraced regions with lower cost of living and remote work opportunities.

Some hardcore negging. Semiconductor giants Nvidia and Arm are punching back against regulators trying to stop their $40 billion merger, arguing in new filings to British authorities that critics of the deal overstate Arm’s financial position and influence on the market, CNBC reported Tuesday. Regulators in the U.S., U.K., and the European Union have taken steps toward halting Nvidia’s acquisition of Arm, with many observers predicting that at least one government will scuttle the deal. The regulators argue that Nvidia could stifle competition if it limits sharing of Arm’s chip design technology, which the company currently licenses to hundreds of semiconductor manufacturers across the globe.

Everybody must go. Coinbase, one of the world’s largest cryptocurrency platform operators, will virtually shut down operations for four weeks spread throughout 2022, aiming to give employees more time off amid a demanding work schedule, Protocol reported Tuesday. Coinbase executives said they’re making the rare move because “many employees weren’t taking enough time off to recharge” during their breaks, often out of fear that work would pile up during their absence. The company, which closed its San Francisco headquarters as part of a shift to all-remote work, has about 2,700 employees.

A September to remember. A federal judge tentatively set a Sept. 12 sentencing date for Theranos founder Elizabeth Holmes following her conviction last week on four fraud and conspiracy charges related to the company’s spectacular collapse, Bloomberg reported Tuesday. Holmes faces up to 20 years in prison, though she is expected to receive a much more lenient sentence. Holmes will remain out on bond as she awaits sentencing. Former Theranos president Ramesh “Sunny” Balwani is set to stand trial on the same charges in March.

FOOD FOR THOUGHT

Betting on the Big Apple. New York City Mayor Eric Adams pledged on the campaign trail to welcome the cryptocurrency industry with open arms—and early indications show the feeling is mutual, Reuters reported Wednesday. A few crypto startups have chosen NYC as their home base in recent months, as Adams, who took office Jan. 1, continues to trumpet the industry’s potential in the Empire State. That said, Adams still needs to find ways around New York’s extensive crypto red tape and skepticism among top officials in Albany.

From the article:

Adams has yet to propose specific policies that would give crypto companies an incentive to set-up in New York, unlike other cities like Miami and Austin whose marketing has highlighted their low energy costs and competitive tax rates.

The mayor's office did not respond to a request for comment, but Adams has said he hopes his crypto-friendly stance will attract more tech talent to the city, and many executives believe it will.

IN CASE YOU MISSED IT

Tesla rivals face dilemma: even as they grew EVs sales faster last year, the gap to Elon Musk only widened, by Christiaan Hetzner

Crypto kiosks are being used for human trafficking and drug dealing, federal watchdog warns, by Marco Quiroz-Gutierrez

Was CES 2022 a super spreader event? Data is starting to come in, by Chris Morris

The age of the frontline worker, by Jared Spataro

BioNTech and London A.I. firm create ‘early warning system’ to spot dangerous new COVID-19 variants before they spread, by Jeremy Kahn

Teen hacker says he remotely took control of 25 Tesla EVs around the world, by Katrina Nicholas and Bloomberg

Google’s staff get pricey fast COVID tests while contractors wait, by Nico Grant, Mark Bergen, and Bloomberg

BEFORE YOU GO

A bad influencer? Let this be a lesson to all you everyday investors out there: don’t take financial advice from Kim Kardashian. A new class-action lawsuit alleges that the world’s most overexposed celebrity, along with boxer Floyd Mayweather and National Basketball Association Hall-of-Famer Paul Pierce, misled investors when they promoted a cryptocurrency called EthereumMax in mid-2021. The digital token quickly skyrocketed in value, increasing up to 13-fold at one point, before plummeting to near-worthlessness.

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