How has 2022 begun for our favorite Big Tech companies? With a good chunk of lawsuits. As technology companies grow bigger, they face bigger legal challenges. Here’s a brief rundown of a few such challenges Facebook and Google face in the courts in this new year:
FTC Antitrust Lawsuit Against Facebook Moves Forward
Let’s begin at the federal level. Last June, Judge James E. Boasberg of the U.S. District Court of the District of Columbia tossed out a lawsuit from the Federal Trade Commission (FTC) challenging Facebook’s acquisition of Instagram and WhatsApp. According to Boasberg, the FTC failed to adequately show that Facebook holds a monopoly.
Not to be dissuaded, the FTC re-filed with an amended complaint in August. Last week, Judge Boasberg approved the amended complaint, calling its facts “far more robust and detailed than before, particularly in regard to the contours of defendant’s alleged monopoly.”
The FTC’s primary charge against Facebook is that they eliminated competition and violated antitrust laws by buying up their competitors, most notably Instagram and WhatsApp. Facebook acquired Instagram for $1 billion in 2012, and WhatsApp for $22 billion in 2014. They have been Facebook’s largest acquisitions, among many other smaller ones.
“Unable to maintain its monopoly or its advertising profits by fairly competing,” reads the FTC complaint, “Facebook’s executives addressed this existential threat by buying up the new mobile innovators, including its rival Instagram in 2012 and mobile messaging app WhatsApp in 2014, who had succeeded where Facebook had failed.”
The Wall Street Journal wrote last summer, “If the commission’s new lawsuit survives a likely motion by Facebook to dismiss the case, a yearlong legal battle could ensue with broad ramifications for the tech giant’s future, and for the FTC’s powers to restrain dominant companies.”
But Boasberg commented that whether the FTC will be successful in proving its claims “is anyone’s guess.”
Four Dozen States Sue Facebook For Antitrust Violations
Last June, when Judge Boasberg tossed out the FTC complaint, he also tossed out a similar lawsuit from over four dozen states (plus Washington, D.C. and Guam). Led by Attorney General Letitia James of New York, this complaint alleged the same as the FTC: That Facebook, by acquiring Instagram and WhatsApp, had violated antitrust laws.
Boasberg explained that the states had waited too long to file the lawsuit. Facebook acquired WhatsApp eight years ago, and Instagram ten years ago.
Like the FTC, Attorney General James is undeterred. The plaintiffs have requested an appeal of Judge Boasberg’s summer decision. “Facebook is a monopolist that has exploited its immense market power to crush competition,” their lawyers wrote. “Through an ongoing course of conduct to ‘buy or bury’ nascent competitors, Facebook has maintained a monopoly that harms its users and the public at large.”
Meta, parent company of Facebook, insists that these allegations are false. “There are no grounds for overturning that decision in the court of appeals,” a Meta spokesperson said.
“Time and again,” wrote James, “the social media giant has used its market dominance to force small companies out of business and reduce competition for millions of users. We’re filing this appeal with the support of almost every state in the nation because we will always fight efforts to stifle competition, reduce innovation and cut privacy protections, even when we face a goliath like Facebook.”
The original filing tossed out last summer demanded that Facebook be required to break apart its monopoly by selling Instagram and WhatsApp.
Fifteen States (and Puerto Rico) Sue Google For Secret Deal With Facebook
Facebook isn’t the only Big Tech company being targeted. Fifteen states (and Puerto Rico), led by Texas Attorney General Ken Paxton, have sued Google in federal court for antitrust violations, alleging that Google and Facebook made a secret agreement in 2018, giving them an unfair advantage in digital advertising.
Writes The Verge:
First filed in November, the initial complaint…alleged broad collusion between the two companies, particularly in a collaborative project codenamed “Jedi Blue” that saw the companies joining together to limit header bidding practices.
Drawing on internal emails, Friday’s complaint shows that the Jedi Blue deal was reviewed at the highest levels of both companies, with personal involvement from Sundar Pichai, Sheryl Sandberg, and Mark Zuckerberg. In one email to Zuckerberg, Sandberg told the CEO “[t]his is a big deal strategically.” Notably, the filing refers to Zuckerberg and Sandberg by their job titles but redacts their name.
Reached for comment, Google referred to a previous statement on the lawsuit, and specifically denied the claim that Pichai had been personally involved in the deal.Russell Brandom, “Mark Zuckerberg and Sundar Pichai were involved in ad collusion plot, claims court filing” at The Verge
Google is seeking for a dismissal. “Despite Attorney General Paxton’s three attempts to re-write his complaint, it is still full of inaccuracies and lacks legal merit,” said Google spokesperson Peter Schottenfels. “Our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world. There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers.”
Online advertising is a huge boon for Google. In 2020, advertisements brought in $183 billion in revenue for Google parent company Alphabet. “Of that, $147 billion – over 80% – came from Google’s ads business, according to the company’s 2020 annual report.” Additionally, Google “command(ed) nearly a 29% share of digital ad spending globally in 2021.”
Facebook Sued in U.K. Court For $3 Billion
More lawsuits exist, but the last one to be covered here today has been initiated by British academic Dr. Liza Lovdahl Gormsen, a Senior Research Fellow at the British Institute of International and Comparative Law and an expert in competition law.
Gormsen filed a class-action lawsuit on January 12th with the U.K. Competition Appeal Tribunal in London, accusing Facebook of exploiting the personal data of the 44 million Facebook users residing in the U.K. She is seeking $3 billion in damages (which works out to about $70 per person).
Her reasoning? Facebook is not providing a service (free communication with family, friends, and acquaintances) equal to what it asks of its users (personal information and data). In other words, Facebook has exacted an “unfair price.” Not only that, but it has abused the trust of its users by profiting from people’s data and failing to keep personal information safe. Gormsen specifically points to the Cambridge Analytica scandal, which ended in Facebook paying British authorities $644,000 in fines in 2019.
“In a free and fair market, competition should lead to lower prices and increased quality,” said Gormsen. “But the bigger a company is in the market, the less choice we have, no matter what else they’re doing. Facebook has exploited its dominance at its users’ cost.”
Federal Trade Commission Takes Facebook to Court… Again. The FTC hopes to prove in an 80-page complaint that Facebook holds damaging monopoly power over competitors. The lawsuit comes under the leadership of newly-confirmed chair Lina Khan, an academic critic of Big Tech with bipartisan approval. (Caitlin Bassett)
Fast Facts re the Google, Facebook Anti-Trust Probes. The 48-state pile-on comes just before an election year. The accusations by American states of a Big Social Media stranglehold on advertising come on the heels of the European Union fining Google billions. (Denyse O’Leary)