Federal court dismisses FTC’s bid to unwind Instagram from Facebook

On Monday, a US District Court dealt a huge blow to the federal government’s antitrust case against Facebook by dismissing a complaint filed against the company by the Federal Trade Commission. The lawsuit, filed late last year, sought to unwind Facebook’s acquisitions of Instagram and WhatsApp. The judge also dismissed an associated case filed by a group of state attorneys general.

In its initial complaint, the FTC alleged that Facebook violated federal antitrust laws by purchasing a would-be competitor in the social media market. But in his decision to dismiss the complaint Monday, Judge James E. Boasberg wrote that the FTC offered insufficient evidence for its central claim — that Facebook wields monopoly power.

“The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims —namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services,” Boasberg wrote. “The complaint contains nothing on that score save the naked allegation that the company has had and still has a ‘dominant share of th[at] market (in excess of 60%).’”

Boasberg also dismissed the claims against Facebook’s interoperability restrictions, finding that the policies were implemented too long ago to be subject to FTC action.

Facebook did not immediately respond to a request for comment from The Verge. However, the company’s stock surged in response to the dismissal, clearing $1 trillion in market capitalization for the first time in Facebook history.

The ruling also struck down a parallel anti-monopoly case against Facebook filed by a coalition of state attorneys general. Nearly every state attorney general signed onto a lawsuit against Facebook in December, making similar allegations as the FTC case. But Boasberg dismissed that case in an accompanying decision on Monday, holding that a specific civil law doctrine prevented the coalition from challenging acquisitions settled so many years in the past.

Notably, Judge Boasberg left room for the FTC to revise its case and unwind past Facebook mergers. The commission has until July 29th to file a new complaint outlining its argument regarding Facebook’s market dominance, and the judge made it clear that the FTC’s case was not affected by the civil doctrine that doomed the state attorneys general.

“An injunction under Section 13(b) is a theoretically available remedy in a Section 2 challenge to long-ago mergers,” Boasberg wrote in the FTC opinion, “so long as the defendant still holds the purchased assets or stock, as is the case here.”

Boasberg also noted the inherent difficulty of establishing monopoly power for a free online service, as the FTC is now required to do. “This case involves no ordinary or intuitive market,” Boasberg’s opinion reads. “Rather, PSN [Personal Social Networking] services are free to use, and the exact metes and bounds of what even constitutes a PSN service — i.e., which features of a company’s mobile app or website are included in that definition and which are excluded — are hardly crystal clear.”

The court’s dismissal could provoke more aggressive action from the legislature, as Congress is currently pushing forward on sweeping tech antitrust reforms. Last week, the House Judiciary Committee approved a slate of bills targeting Big Tech’s market power, including bans on large mergers and new interoperability requirements. All six measures are headed to the House floor and parallel bills are expected to be introduced in the Senate over the coming weeks.

“Today’s development in the FTC’s case against Facebook shows that antitrust reform is urgently needed,” Rep. Ken Buck (R-CO), ranking member on the House Judiciary Committee’s antitrust subcommittee, said in a tweet Monday. “Congress needs to provide additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anticompetitive conduct.”