WASHINGTON (Legal Newsline) - The Federal Trade Commission’s antitrust lawsuits against Amazon and Facebook owner Meta share one essential – and both companies say, legally shaky – claim: That they monopolized their “relevant markets.”
What does that mean? In Amazon’s case, a narrowly defined “online superstore” market that includes just a few of the millions of merchants who sell products on the Internet. And in Meta’s case, a market for “personal social networking services” that the FTC defines as including specific features on Facebook, Instagram, Snapchat and MeWe, but excluding identical services on other platforms like YouTube and TikTok.
Both cases are examples of what critics of FTC Chair Lina Khan’s legal strategy call “gerrymandered markets,” narrowly constrained market definitions that exclude competitors that would undermine the agency’s claims of monopolization.
Meta, for example, argues in a motion to dismiss the FTC’s case that the agency created “a contrived `market’” for information shared among family and friends on Facebook and Instagram but which doesn’t include identical information shared over X, Pinterest, Reddit or Apple’s iMessage. Even Facebook Messenger lies outside the FTC’s definition of “personal social networking services," although Meta says the FTC’s own experts disagree on what PSNS actually means.
“Where the FTC’s own expert witnesses cannot even agree on the relevant arena of competition (the market) or who the competitors are and for what, it is a blaring alarm that the alleged market has no support in commercial realities,” Meta says in its April 5 filing with the U.S. District Court in Washington, D.C.
The slicing and dicing of relevant markets is an “unfortunate trend,” antitrust scholar Geoffrey Manne has said, although it also could signal the weakness of the FTC’s case.
“An artificially narrow and gerrymandered market definition is a double-edged sword,” Manne wrote. “If the court accepts it, it’s much easier to show market power. But the odder the construction, the more likely it is to strain the court’s credulity.”
The FTC argues Facebook’s acquisitions of Instagram and WhatsApp in 2012 and 2014 allowed it to exert monopoly control over the market for free social networking services. Both purchases were closely examined by the FTC at the time but allowed to go through.
Then in the waning days of the Trump Administration in December 2020, the FTC sued, joined by a number of states, asserting Meta was violating antitrust laws. While Meta’s platforms are free to consumers, the agency argues, it used its monopoly power to provide lower-quality services with less privacy protection than if Instagram and WhatsApp had remained independent.
Judge James Boasberg dismissed the states’ cases in June 2021 but allowed the FTC to amend its complaint. The agency “stumbled out of the starting blocks,” he wrote in a subsequent ruling, but it added enough information in its amended complaint to allow the case to proceed to discovery. “Ultimately, whether the FTC will be able to prove its case and prevail at summary judgment and trial is anyone’s guess,” he wrote in a January 2022 order.
The judge accepted the FTC’s definition of a market that excluded “specialized social networking services” such as LinkedIn, YouTube and even Facebook’s dating service. Meta attacked that reasoning in its motion to dismiss, however, highlighting what it said were absurdities in the FTC’s position.
The FTC says 100% of the time spent watching Facebook Reels is PSNS, for example, while watching identical short videos on TikTok is not. Messages sent on Facebook and Instagram are PSNS, while the identical message sent on Facebook Messenger is not, the agency maintains. Only viewing products for sale on Facebook Marketplace is PSNS, while shopping for identical items from the same merchants on other online marketplaces is not.
“The FTC’s expert witnesses conceded that virtually everything consumers do on Facebook or Instagram can be done (and is done) on other services outside the supposed PSNS market,” Meta argues in its motion to dismiss.
The FTC has until May 24 to file a response.