When the federal judge James Boasberg dismissed the Federal Trade Commission antitrust lawsuit against Facebook in June, giving the agency pretty specific instructions on how to get it back. The problem, he wrote in his opinion, was that the FTC had not offered any evidence that Facebook is a monopoly, beyond the vague claim that it “maintains a dominant share of the US market for devices. personal social networks (over 60 percent). ”As Boasberg noted, this inexplicably left some basic questions unanswered, such as: 60% of what? Who makes up the remaining 40%? It was kind of like accuse a driver of speeding without even mentioning the speed limit.
To get back to court and take the next step in litigation, the FTC would have to come back with something much more specific. This presented an interesting first mission for Lina Khan, who was confirmed as the agency’s commissioner just two weeks before Boasberg made his decision. (Facebook has sought to have Khan disqualified from the case based on his public criticism of big tech companies ahead of his current job, although experts see little chance of success.)
On Thursday, the FTC filed its revised complaint answering these unanswered questions. While it’s impossible to predict how any given judge will rule, the new material looks likely to satisfy Boasberg and keep the case alive. “In my eyes, they scratched Boasberg’s itch,” said Paul Swanson, an antitrust attorney in Denver. Facebook, he said, may not be able to avoid “a long chore of production and filing of documents.”
To prove that Facebook is a monopoly for legal purposes, the FTC doesn’t have to prove that it is literally the only social network. They must show that they have “market power”. In a nutshell, having market power means that you face so little competition that you can do things your customers don’t like without losing any markets. This is one of the main reasons antitrust law exists: When there is not enough competition, companies will stop trying to please their customers and start trying to crush them. Think how frustrating it is when your ISP raises the prices and you realize that no one else is serving your neighborhood. It’s market power.
There are two ways of showing market power: circumstantial evidence and direct evidence. Circumstantial evidence generally refers to the dominant market share. (This may sound counterintuitive, but the reason why this is indirect that’s because being great on its own doesn’t prove that a company is doing something wrong – it just raises a strong possibility.) In its initial complaint, the FTC offered only circumstantial evidence, and very little. : this low statistic of 60 percent, which Boasberg deemed inadequate. The revised complaint details the market share very precisely. Relying on data from analytics firm Comscore – which, according to the complaint, Facebook itself relies on – the FTC argues that in some way Facebook controls a dominant share of the market for “personal social networking services”. According to data from Comscore, Facebook has accounted for over 80% of the time spent since 2011, at least 70% of daily active users and at least 65% of monthly active users.
The new complaint also strengthens the FTC’s definition of the market itself, which is another crucial part of any case of monopolization. You cannot prove that a company has market power without explaining in which market it has power in. According to the agency, the personal social networking services market has three key attributes. First, a network must be “built on a social graph that maps connections between users and their friends, family and other personal connections”. Second, it must have functionality that allows users to interact with each other in a “shared social space”, such as a news feed or a group. Third, it must allow users to consult each other. (Think about how you can search for someone by name on Facebook, but not in iMessage.)