The Federal Trade Commission has filed an amended complaint against Facebook, in the agency’s ongoing federal antitrust case. The complaint renews allegations Facebook resorted to unlawful methods to maintain its dominance. “Facebook lacked the business acumen and technical talent to survive the transition to mobile. After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat,” the FTC said.
“This conduct is no less anticompetitive than if Facebook had bribed emerging app competitors not to compete. The antitrust laws were enacted to prevent precisely this type of illegal activity by monopolists. Facebook’s actions have suppressed innovation and product quality improvements. And they have degraded the social network experience, subjecting users to lower levels of privacy and data protections and more intrusive ads. The FTC’s action today seeks to put an end to this illegal activity and restore competition for the benefit of Americans and honest businesses alike,” it added.
The amended complaint follows the dismissal by a federal judge of FTC and state antitrust lawsuits against Facebook, saying the prosecutors had not provided enough evidence to support their claim that Facebook holds a monopoly over social networking. The FTC was given 30 days to refile its suit. It has now done so, in the US District Court for the District of Columbia. The amendment complaint includes additional data and evidence to support the FTC’s claims that Facebook is a monopolist that has abused its excessive market power to eliminate threats to its dominance.
Specifically, the complaint alleges that Facebook was not able to develop innovative mobile features for its network, and so resorted to an illegal buy-or-bury scheme to keep its monopoly. It also unlawfully acquired innovative competitors with popular mobile features that succeeded where Facebook’s own offerings fell flat or fell apart. The FTC added that the company also “lured” app developers to the platform, surveilled them for signs of success, and then buried them when they became competitive threats. “Lacking serious competition, Facebook has been able to hone a surveillance-based advertising model and impose ever-increasing burdens on its users,” the complaint said.
The FTC noted that Facebook’s dominant position is also protected by significant barriers to entry, including high switching costs. Over time, users of a personal social network build more connections and develop a history of posts and shared experiences, which they cannot easily transfer to another personal social networking provider. Other significant barriers to entry include user-to-user effects, known as network effects, which make a personal social network more valuable as more users join the service. As the amended complaint notes, it is very difficult for a new entrant to displace an established personal social network in which users’ friends and family already participate.
According to the amended complaint, Facebook continues to monitor the industry for competitive threats to its personal social networking monopoly.
