Facebook and antitrust: legacy standards take network to $1tn

In 1964, US Supreme Court Justice Potter Stewart said he could not define pornography but that he knew it when he saw it. In 2021, narrower criteria determine what counts as a monopoly. A federal judge has dismissed lawsuits alleging that Facebook attained and abused monopoly power.

The decisions show that competition law, which tends to focus narrowly on direct consumer detriment, is poorly adapted to deal with big tech. Businesses such as Facebook use network effects and data aggregation to indirectly extract large rents from consumers. Reform efforts have barely begun, allowing the tech giants to consolidate gains and bolster their share prices.

The US Federal Trade Commission and separately, state attorneys-general, had brought the cases. The FTC, the main trust buster for the US, argued that Facebook’s market share exceeded 60 per cent in “personal social networking services”. The judge ruled that figure was “too speculative and conclusory to go forward” and that this was “no ordinary or intuitive market”.

Politicians and regulators of all ideologies have begun condemning the reach of big tech. Yet it remains nascent enough that age-old legal doctrines can prove useless in containing it. The ruling suggests regulators must get creative or lucky to convince judges of their theories. The likes of Facebook now have every reason to fight to the death whenever US regulators take them on.

The lawsuits brought two primary claims. First, that Facebook had discriminated against third-party smartphone apps seeking simultaneous operability with other social networks. The argument went that Facebook tried to tip the scales to favour their own interface with those apps.

The second claim was that Facebook acquired both WhatsApp and Instagram in order to quash potential rivals. The FTC produced a series of embarrassing emails to support the latter allegation.

Judge James Boasberg fully dismissed the first claim given that the alleged violation was from 2013. On the second, the federal government will have the chance to make a more precise argument about monopoly.

Facebook claims that the social networking market remains cut-throat and that its customers ultimately benefit from its network effect.

On Monday, after the decision was released, Facebook’s shares jumped 4 per cent. Its market capitalisation surged accordingly, sending the business founded by Mark Zuckerberg into the trillion dollar club alongside Apple, Microsoft, Google and Amazon.

One wonders what a judge does see, if not monopoly, when a company reaches such dizzying heights.

The Lex team is interested in hearing more from readers. Please tell us what you think of the Facebook ruling in the comments section below.

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