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Utah joins massive antitrust lawsuit against Facebook

New bill from Sen. Mike Lee also targets Big Tech over political bias

In this Saturday, Nov. 21, 2020, file photo, a demonstrator joins others outside of the home of Facebook CEO Mark Zuckerberg to protest what they say is Facebook spreading disinformation in San Francisco. Federal regulators asked Wednesday, Dec. 9, 2020, for Facebook to be ordered to divest its Instagram and WhatsApp messaging services as the U.S. government and 48 states and districts accused the company of abusing its market power in social networking to crush smaller competitors. The antitrust lawsuits were announced by the Federal Trade Commission and New York Attorney General Letitia James.
Jeff Chiu, Associated Press

Utah is one of dozens of states joining the Federal Trade Commission in an antitrust lawsuit announced Wednesday targeting the business practices of social media giant Facebook.

Critics have accused Facebook of using its enormous financial wherewithal to simply purchase competitive companies — like WhatsApp and Instagram — before they grow large enough to become serious competition.

Utah Attorney General Sean Reyes is one of 48 state attorneys general who will join forces in pursuing legal remedies against the company, which some industry pundits believe could include breaking up the company.

“Facebook systematically plotted to change the competitive market of social media, and its actions are a blatant profit and power grab,” said Utah deputy attorney general and antitrust section director David Sonnenreich in a statement. “When Facebook entered the social media market, it was highly competitive and consumer privacy was paramount. Today Facebook dominates the social media market because it bought or crushed the competition, and consumer privacy is no longer prioritized by Facebook.

“This lawsuit seeks to restore competition to the market for social media. Consumers win when companies compete; that is true even when services appear to be free but consumers are ‘paying’ with their data.”

An earlier version attributed the previous statement to Reyes, per an initial press release from his office.

The filing alleges that Facebook’s “illegal course of conduct has been driven, in part, by fear that the company has fallen behind in important new segments and that emerging firms were ‘building networks that were competitive with’ Facebook’s and could be ‘very disruptive to’ the company’s dominance.

“As Facebook’s founder and CEO Mark Zuckerberg observed, ‘One thing about startups ... is you can often acquire them,’ indicating at other times that such acquisitions would enable Facebook to ‘build a competitive moat’ or ‘neutralize a competitor.’”

In a tweet, Facebook said it was “reviewing the complaints (and) will have more to say soon.” The posting also fired back at the Federal Trade Commission, claiming the agency was pursuing a “do-over” through the legal action.

“Years after the (Federal Trade Commission) cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day,” the Tweet says.

Later in the day, Facebook vice president and general counsel Jennifer Newstead blogged that the complaint was simply an effort to reargue long-settled issues and noted federal agencies conducted reviews, and issued approvals, of both the WhatsApp and Instagram deals without issue.

“Now, many years later, with seemingly no regard for settled law or the consequences to innovation and investment, the agency is saying it got it wrong and wants a do-over,” Newstead wrote. “In addition to being revisionist history, this is simply not how the antitrust laws are supposed to work. No American antitrust enforcer has ever brought a case like this before, and for good reason.

“The (Federal Trade Commission) and states stood by for years while Facebook invested billions of dollars and millions of hours to make Instagram and WhatsApp into the apps that users enjoy today. And, notably, two (FTC) commissioners voted against the action that the (FTC) has taken today.”

Newstead also rebutted claims the company wields monopoly power, noting Facebook is engaged in “fierce competition” with other, and powerful, tech companies like Apple, Google, Twitter, Snap, Amazon, TikTok and Microsoft. She wrote that the lawsuit is likely to have a chilling effect on the business community’s trust in federal regulators while hindering tech innovation and growth.

“This lawsuit risks sowing doubt and uncertainty about the U.S. government’s own merger review process and whether acquiring businesses can actually rely on the outcomes of the legal process,” Newstead wrote. “It would also punish companies for protecting their investment and technology from free-riding by those who did not pay for the innovation, making those companies less likely over the long term to make their platforms available to spur the growth of new products and services.”

Successful antitrust actions typically require plaintiffs to show how a company’s actions have harmed clients or consumers, a challenge legal experts have characterized as particularly difficult with a business, like Facebook, that gives away its product.

Sonnenreich said that consumer harm has, over the last decade, come “as a direct result of Facebook’s acquisition of smaller firms that pose competitive threats.”

“Facebook employs unique data-gathering tools to monitor new apps all in an effort to see what is gaining traction with users,” Sonnenreich said. “That data helps Facebook select acquisition targets that pose the greatest threats to Facebook’s dominance. Once selected, Facebook offer the heads of these companies vast amounts of money — that greatly inflate the values of the apps — all in hopes of avoiding any competition for Facebook in the future.”

The lawsuit also touches on issues related to the massive amounts of users’ personal data collected by the platform and claims Facebook’s “unlawfully maintained monopoly power gives it wide latitude to set the terms for how its users’ private information is collected, used, and protected.”

“In addition, because Facebook decides how and whether the content shared by users is displayed to other users, Facebook’s monopoly gives it significant control over how users engage with their closest connections and what content users see when they do,” the filing reads.

“Because Facebook users have nowhere else to go for this important service, the company is able to make decisions about how and whether to display content on the platform and can use the personal information it collects from users solely to further its business interests, free from competitive constraints, even where those choices conflict with the interests and preferences of Facebook users.”

The plaintiffs’ coalition, led by New York Attorney General Letitia James, is asking the court to “halt Facebook’s illegal, anticompetitive conduct and block the company from continuing this behavior in the future” and restrain the company from making further acquisitions valued at or in excess of $10 million without advance notice to the state of New York and other plaintiff states.

Additionally, the filing seeks court action on providing any additional relief it determines is appropriate, including “the potential divestiture or restructuring of illegally acquired companies, or current Facebook assets or business lines.”

Sen. Mike Lee, R-Utah, weighed in on the Facebook lawsuit in a statement released Wednesday.

“I am glad to see that our antitrust enforcers are finally taking the threats posed by Big Tech seriously,” Lee said. “If Facebook faced greater competition, it might be more reticent to engage in the draconian censorship it has become fond of. At the same time, the FTC previously cleared both the Instagram and WhatsApp acquisitions, and I hesitate to congratulate it now for trying to clean up its own mess. This is one more reason that antitrust enforcement should be consolidated at the Department of Justice, as I’ve proposed in the One Agency Act. I’ll be following this case closely, and look forward to continuing to exercise oversight in this area.”

On Tuesday, Lee mounted his own effort targeting Big Tech, introducing the Promoting Responsibility Over Moderation In the Social Media Environment Act. The bill, which Lee is co-sponsoring with Sen. Jerry Moran, R-Kansas, is “designed to hold Big Tech companies accountable for their promises to not operate their social media platforms with political bias.”

Lee has been a vocal critic of perceived political bias in how some of the biggest U.S. social media platforms are managed, including at an October Senate hearing at which Twitter CEO Jack Dorsey of Twitter, Alphabet/Google CEO Sundar Pichai and Facebook CEO Mark Zuckerberg all testified.

“Given the disparate impact of who gets censored on your platforms, it seems that you’re either one, not enforcing your terms of service equally, or alternatively, two, that you’re writing your standards to target conservative viewpoints,” Lee told the executives.

Lee and Moran believe the proposal, if successful, will compel social media platform operators to be more “open and honest” about how they moderate content.

“The billionaires who own our nation’s Big Tech companies have every right to be partisan political actors,” Lee said. “What they don’t have a right to do is make promises to consumers that they will provide unbiased platforms and then discriminate against conservatives on those same platforms.”