A DC court ruling has given the FTC the power to potentially take the company apart
This was a very bad week for Meta/Facebook and its CEO, Mark Zuckerberg, though you probably wouldn’t know it from the way the company has been covered in the news. (And yes, it’s been another week of distracting news on all kinds of other fronts.) The headlines on DC federal district judge James Boasberg’s decision to allow the Federal Trade Commission’s antitrust case against Facebook to go forward were all accurate, to be sure. In the judge’s view, the commission has met the evidentiary bar in its claim that the company has a monopoly level of dominance in the personal social networking space, and that dominance may plausibly be harming consumers. Most of the media emphasized the first point about Meta’s monopolistic moves, since the company has tried to argue that it has several strong competitors. (Given all we now know about how platforms like Facebook and Instagram hurt teens, to take just one example, the consumer harm argument should be less disputed.)
What they didn’t emphasize enough was this one sentence in Boasberg’s ruling: “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.”
Getting to discovery matters because of how much evidence the FTC already has of Facebook’s malign behavior as well as the compelling theory of the case that the agency has already articulated. To recap, back in December of 2020, the FTC sued Facebook on antitrust grounds but last summer Boasberg rejected its original complaint for lacking sufficient evidence. The FTC then amended its complaint, and the arguments it marshaled there are fearsome. In its original suit, the agency had already disclosed a 2008 internal email from Zuckerberg stating that “it is better to buy than to compete.” But what the FTC laid out in its amended complaint is a very plausible and damning narrative for why he then chose to buy a series of rising competitors, burying some and, in the cases of Instagram and WhatsApp, turning them into core products while killing off his own internal efforts to compete with them.
The key thing to remember about Facebook’s move to monopoly is how the web was changing between 2009 and 2012 and how much that threatened the company. Mobile was starting to displace desktop as the main way people went online, and Facebook’s core service (internally known as Facebook Blue) didn’t function well on smartphones. Zuckerberg’s first attempt at rewriting its code for mobile was a failure, the FTC’s suit recounts. He was worried that new apps that were mobile native, especially those that were well-suited to the way smartphones double as text- and photo-sharing tools, could challenge his dominance. Instagram, which exploded in usage in 2010, was a major threat.
At first, Zuck tried to compete. But by September 2011 he wrote, in an internal email cited in the FTC’s amended complaint, “In the time it has taken us to get ou[r] act together on this[,] Instagram has become a large and viable competitor to us on mobile photos, which will increasingly be the future of photos.” He added, “If Instagram continues to kick ass on mobile or if Google buys them, then over the next few years they could easily add pieces of their service that copy what we’re doing now, and if they have a growing number of people’s photos then that’s a real issue for us. They’re growing extremely quickly right now. It seems like they double every couple of months or so, and their base is already -5–10m users. …But at the current rate, literally every couple of months that we waste translates to a double in their growth and a harder position for us to work our way out of.”
Soon, monopoly became the obvious way out. In a February 2012 internal email advocating the acquisition of Instagram, he wrote, “One thing that may make [neutralizing a potential competitor] more reasonable here is that there are network effects around social products and a finite number of different social mechanics to invent. Once someone wins at a specific mechanic, it’s difficult for others to supplant them without doing something different. It’s possible someone beats Instagram by building something that is better to the point that they get network migration, but this is harder as long as Instagram keeps running as a product.” He added, “[O]ne way of looking at this is that what we’re really buying is time. Even if some new competitors spring[] up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won’t get much traction since we’ll already have their mechanics deployed at scale.”
You have to give Zuckerberg credit for thinking clearly about how the web was developing. At a time when many of us were in thrall to the potential of the open web to enable human collaboration, he already understood that his company’s only hope for survival as a walled garden was in either defeating or absorbing threatening newcomers offering better social tools. In February 2012, he wrote of Instagram, “I think it’s quite possible that our initial thesis was wrong and that theirs is right — that what people want is more to take the best photos than to put them on FB. If so, [Facebook] Snap might be a good first step but we’d be very behind in both functionality and brand on how one of the core use cases of Facebook will evolve in the mobile world, which is really scary and why we might want to consider paying a lot of money for this.” Two months later, he bought Instagram for $1 billion and then cut his team’s own efforts to make a photo-sharing app.
The FTC amended complaint offers similar inside details about Zuckerberg’s decision to buy WhatsApp. Facebook Messenger was created to compete with the messaging app, but Zuck knew that it was not as good, writing in April 2012, “Right now, aside from Facebook integration, WhatsApp is legitimately a better product for mobile messaging than even our standalone Messenger app. It’s more reliable and faster for sending messages. You get better signal and feedback via read receipts and last seen times. You can even reach most people easily via the contacts integration.” He added, “[I]’m the most worried about messaging. WhatsApp is already ahead of us in messaging in the same way Instagram was ‘ahead’ of us in photos.” He added: “I’d pay $1b for them if we could get them.” Two years later he paid a whopping $19 billion.
Facebook’s flacks have tried to play down the importance of the DC court’s latest ruling. “Today’s decision narrows the scope of the FTC’s case by rejecting claims about our platform policies. It also acknowledges that the agency faces a ‘tall task’ proving its case regarding two acquisitions it cleared years ago,” a spokesperson said. While both of these claims are true in the narrow sense — Judge Boasberg did set aside the FTC’s claim that Facebook Platform was being deployed in a monopolistic manner because it stopped that practice a few years ago, and he did use the words ‘tall task’ — they amount to whistling past the graveyard. If Facebook thinks it can win in court with these arguments it needs new lawyers.
In the meantime, getting to discovery means the FTC’s lawyers will now be able to probe even further inside Facebook. And there’s a small army of ex-Facebook employees who undoubtedly know where more damning documents and emails may be buried. It may still take years, but the idea that the government will break up Facebook on antitrust grounds is no longer unrealistic.