The Meta Antitrust Case: Trying Times Ahead for the FTC

The Federal Trade Commission's (FTC) long-running antitrust suit against Meta, which is challenging its acquisitions of WhatsApp and Instagram as unlawful monopolization under Sherman §2, is going to trial. In a nearly 100-page opinion in the United States District Court for the District of Columbia, Judge James E. Boasberg denied basically all of the FTC's and Meta's motions for summary judgment, writing that so far the case "leaves no clear victor." The opinion was without question not a win for the FTC, with Judge Boasberg making it clear that "the Commission faces hard questions about whether its claims can hold up in the crucible of trial," with "its positions at times strain[ing] this country's creaking antitrust precedents to their limits." Indeed, Judge Boasberg's opinion gives many indications as to why the FTC's case is likely doomed.

To prove that Meta is a monopolist, the FTC may present either direct evidence in the form of "supracompetitive prices that remain protected from erosion through competitor" (which, it should be noted, is not the same as having the ability to price discriminate) or indirect evidence of a high market share protected by barriers to entry in a relevant market. In focusing on the latter, not only did Judge Boasberg's opinion not address the direct evidence concerning whether Meta has monopoly power, but he gave short shrift to the quantitative evidence surrounding substitution with services outside the FTC's purported "personal social network" (PSN) services market-both of which are favorable to Meta. Instead, he held that the less rigorous qualitative indirect analysis in Brown Shoe"is sufficient to preclude summary judgment on the existence of a relevant market." As such, when the full spectrum of evidence is considered in detail at trial, the FTC's claim that Meta is a monopolist is unlikely to hold up.

Moreover, even with respect to the FTC's putative PSN services market, the decision highlights how "[s]ignificant unresolved questions remain over the ultimate viability of the agency's apparent position that all time spent on PSN applications relates to PSN services (even passive consumption of a video or buying a table from a stranger), while none of the time spent on applications like YouTube, TikTok, Or X does so (even sharing a TikTok with a friend in-app)." In the words of Judge Boasberg, this reflects a "counterintuitive assumption" that, as ITIF has previously critiqued, the same social media activity (e.g., sharing a video with a stranger) is somehow not in the FTC's relevant market when done on TikTok, but is in the FTC's relevant market when done on Facebook. While this peculiar supposition may survive scrutiny on summary judgment, it is highly unlikely to do so at trial.

In addition, the market share data put forward by the FTC does not even reflect the idiosyncrasies of its own contrived market definition. As Judge Boasberg's opinion suggests, assuming in a way consistent with the narrowest market principle that the relevant market is limited to the "core use case of friends-and-family sharing," the FTC's market share measurements would be flawed. This is because they "seem to capture all time spent on Meta's products---i.e., not just time spent on its asserted core use case of friends-and-family sharing, but also any time spent watching highlight reels of the Red Sox game on Instagram or buying an antique table from a stranger on Facebook Marketplace." And, although Judge Boasberg acknowledges the FTC's attempt to calculate a prorated market share focused on friends and family content, the 69.3 percent market share that results is technically below the 70 percent threshold courts generally require for a comfortable circumstantial case of monopoly power.

While Judge Boasberg highlights the key issues that at trial should dispose of the FTC's claim that Meta is a monopolist, his sanctioning on summary judgment of the FTC's theory that its acquisitions of Instagram and WhatsApp were anticompetitive is much more a result of a lack of legal clarity rather than a genuine dispute of material fact. As a general matter, a monopolization claim under Sherman §2 does not necessarily require direct evidence that exclusionary conduct resulted in anticompetitive harm in the form of higher prices, reduced output, or diminished innovation. However, in cases involving the exclusion of nascent perceived threats, it does require a demonstration that the conduct raises rivals' costs in a way that results in increased monopoly power-the mere loss of a potential competitor isn't enough. Specifically, in the landmark Microsoft case that is relied upon heavily by Judge Boasberg, the court outlined how a litany of practices not just harmed a nascent perceived rival but gave Microsoft increased power over price and maintained its monopoly power.

When it approved both transactions, the FTC did not find this sort of evidence extant. Moreover, although Judge Boasberg's opinion does detail the various allegations of how Meta viewed WhatsApp as a nascent threat, the evidence surrounding its actual ability to "pivot" in a way that would challenge Meta's purported monopoly and overcome its network effects is threadbare at best. Of course, Judge Boasberg's characterization of Instagram as an "actual competitor" at the time of Meta's acquisition-to be sure, there was no attempt by the FTC to rely on any structural presumption of harm-suggests that a lower quantum of evidence could in theory suffice to prove that this deal was exclusionary. Still, while the opinion points to a handful of examples of post-acquisition behavior purportedly demonstrating some consumer harm, proving that Meta's acquisition caused these effects must still be shown: Without the transaction and Meta's investments, consumers may have been much worse off vis-à-vis Instagram.

Judge Boasberg's analysis is also strained in his brief but critical discussion of the legal standards that should apply toward examining Meta's procompetitive justifications for its acquisitions. Specifically, Judge Boasberg rightly identifies that under Sherman §1 and Clayton §7, there must be some reason for thinking that "the procompetitive benefits could not have been achieved" without the conduct at issue if they are to be credited. But this requirement is expressly not set forward in the Microsoft standard for Sherman §2 that Judge Boasberg otherwise attempts to apply dutifully, and which does not condition the legitimacy of a procompetitive justification on whether it satisfies any "least restrictive alternative" or "conduct specific" test. What's more, Judge Boasberg upheld nine out of the ten categories of procompetitive justifications put forward by Meta, which bodes well for its overall chances to provide sufficiently compelling defenses for its acquisitions at trial.

At bottom, FTC v. Meta will undoubtedly prove to be a hugely consequential trial with substantial implications for U.S. antitrust law and the digital economy writ large. While the FTC has lived to fight another day, the likelihood that it will overcome the hurdles implicated by Judge Boasberg's summary judgment opinion is slim. Not only is Meta not a monopoly, but it will almost certainly be able to provide strong procompetitive justifications for its acquisitions of Instagram and WhatsApp-two products that have developed successfully in large part due to the considerable investments Meta has made in them and the network synergies throughout Meta's digital ecosystem. Indeed, while direct evidence of either Meta's monopoly power or that its acquisitions have resulted in consumer harm may not be a strict requirement for the FTC's monopolization claim, the fact that both Instagram and WhatsApp are free, have improved in quality, and have witnessed huge output growth since the acquisition by Meta strongly weigh toward a final decision in the company's favor.