The FTC’s Facebook Face Plant

What an embarrassment. Federal Judge James Boasberg Tuesday threw out the Federal Trade Commission’s lawsuit seeking to break up Facebook after finding the agency failed Antitrust 101: Demonstrating a monopoly.

The FTC sued Facebook in December under Section 2 of the Sherman Act, which makes it unlawful for a company to “monopolize, or attempt to monopolize” a market. The lawsuit says Facebook acquired Instagram (2012) and WhatsApp (2014) to neutralize future competitors. As evidence, the FTC cited statements by CEO Mark Zuckerberg such as “It is better to buy than compete.”

We said the FTC lawsuit was weak, not least because the FTC had approved Facebook’s $1 billion Instagram purchase in 2012. Most WhatsApp users are overseas, and Facebook’s own instant-messaging app still has four times more users in the U.S.

The more basic problem, as Judge Boasberg notes, is that the agency failed to show that Facebook has a monopoly in social media, which is step one in bringing an antitrust suit under Section 2. While the government claimed Facebook had a more than 60% market share in the “Personal Social Networking Services” market, it didn’t detail the metrics or methods it used to calculate this figure.

“Such an unsupported assertion might (barely) suffice in a Section 2 case involving a more traditional goods market, in which the Court could reasonably infer that market share was measured by revenue, units sold, or some other typical metric,” the judge writes. “But this case involves no ordinary or intuitive market.”

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