The judge said the government failed to establish exactly what Facebook’s market was:
“The market-definition inquiry in this case is somewhat unusual because, unlike familiar consumer goods like tobacco or office supplies, there is no obvious or universally agreed-upon definition of just what a personal social networking service is.”
This is key, the judge said, because the F.T.C.’s case accuses Facebook of shutting out competitors from its market:
“The FTC must do two things here. First, it must provide a definition of PSN [personal social networking] services. Second, it must further explain whether and why other, non-PSN services available to the public either are or are not reasonably interchangeable substitutes with PSN services.”
Most importantly, the judge said the government needed to show not just that Facebook is large, but that its size grants it extra-special power over the market:
“The FTC alleges only that Facebook has ‘maintained a dominant share of the U.S. personal social networking market (in excess of 60%)’ since 2011, and ‘no other social network of comparable scale exists in the United States.’ That is it. These allegations — which do not even provide an estimated actual figure or range for Facebook’s market share at any point over the past ten years — ultimately fall short of plausibly establishing that Facebook holds market power.”
The ruling is a blow to the antitrust movement that is gaining momentum in Washington. The biggest takeaway from the case is this: The monopoly case against one of Big Tech’s key players is out of step with the law as currently written. What needs to be established is whether what Facebook is doing, as defined by the law and rulings in other cases, is illegal. The answer seems to be no.
The judge’s ruling also added evidence for those who say the law is not up to the task of keeping Big Tech in check. Legislative efforts took a step forward last week when the House Judiciary Committee advanced six bills that would overhaul antitrust laws, with the goal of reining in tech giants. But this also puts Lina Khan, the Big Tech critic who now chairs the F.T.C., in a tricky spot. If the F.T.C. amends and refiles its case against Facebook, Khan would need to balance arguments that Facebook is violating law as it currently stands with support for efforts, as she has backed in the past, for Congress to introduce new legal tools.
In related news, the jump in Facebook’s stock after the ruling sent its market value above $1 trillion for the first time; the White House is reportedly drafting an executive order on antitrust enforcement; and all this antitrust scrutiny is generating a boom in demand for lawyers steeped in competition law.
HERE’S WHAT’S HAPPENING
Banks prepare to shower their shareholders with cash. Wall Street giants yesterday announced plans to raise their dividends and share buybacks, after they cleared the latest Fed stress tests. (Morgan Stanley and Wells Fargo, for instance, will double their dividends.) Critics of the stress tests worry that they allowed banks to reduce their cash buffers too aggressively, leaving them unprepared for the next crisis.