You might not have heard about it in the mainstream news, but Facebook faced a very real existential threat within American courtrooms last week.
A long-awaited antitrust case brought against the company by the US government finally went in front of a judge after years of preparation. The company braced itself for a bitter fight but needn’t have worried. To the surprise of everybody- including many senior executives within Facebook – US district judge James Boasberg dismissed the lawsuits out of hand. He found them to be insubstantial and lacking in merit. The Federal Trade Commission is likely to file again, but the ruling is a hammer blow to regulators in the USA.
The charge against Facebook, in this case, was mostly similar to the charges filed against Facebook elsewhere in the world and repeated (ironically) on social media every day. The company is too big. It’s a monopoly. It exercises anti-competitive business practices and bullies smaller companies. The FTC wanted Facebook broken up and specifically wanted to see the company forced to package up and sell off WhatsApp and Instagram. The FTC has never been happy with how those formerly independent companies were acquired in the first place and would like them to go back to being independent. If they ever get their wish, it won’t be through Judge Boasberg’s courtroom.
While WhatsApp and Instagram are the first “connected” companies that come to mind when you think of Facebook, the reality is that there’s barely a field of industry that Facebook doesn’t touch. In 2018 it even tried to capitalise on the growing popularity of online slots websites by launching a native Facebook casino in association with a company called High 5. The idea was that users would be able to play online slots without leaving the social media site. The casino is still online, but thus far, it hasn’t been able to eat into the market share of more specialised online slots companies like Rose Slots Canada. While Facebook hasn’t had a lot of luck with online slots, it’s found a presence in people’s homes through Facebook Portal and has also developed the Oculus VR headset. Social media is now just a single strand of a multi-stranded company – which is precisely why so many regulators object to it.
Judge Boasberg was surprisingly scathing in his dismissal of the lawsuits. He called the cases “legally insufficient,” “lacking in evidence,” and “falling short of plausibility.” He criticised the suit for failing to include an estimate of Facebook’s market share at any point within the past decade, thus making it impossible to classify them as a monopoly. Forty-eight states had signed off on the lawsuit, which forces us to question how state attorneys failed to notice errors on the scale that Judge Boasberg alleges. In his closing remarks, Judge Boasberg said that he was left feeling like he was expected to go along with “anti-Facebook sentiment” purely because hating Facebook and believing the company to be a monopoly was “received wisdom.” It’s rare for a judge to unleash such an attack on a government-backed lawsuit, and it’s a stinging rebuke to the lawyers who put it together. Even in doing so, though, he left a loophole open. The complaint has been dismissed, but the case has not. The FTC is free to refile.
Predictably, the state sponsors of the lawsuit aren’t happy with the judge’s findings. Ken Buck of Colorado, who was the biggest Republican sponsor of the suit, says the judge’s ruling is proof that America’s antitrust laws need an urgent overhaul. That overhaul might soon be coming. The US House Judiciary Committee approved new antitrust laws at the end of June and sent them for further approval to the full house. The stated aim of the new legislation is to make it easier to use the legal system to break up gargantuan companies like Facebook, Amazon, Google, and Apple. In every instance, each one of those companies would fight any such lawsuit vociferously. They probably won’t have to worry about that for a while, though. Even if the House approves of the new legislation, it’s an uphill battle for it to reach the Senate and become law.
If regulators have their way (which they usually do eventually), there will be more pain to come for Facebook in the future. In the here and now, though, investors are over the moon with the news. In the hours that followed the judge’s dismissal of the legal complaint, Facebook’s value soared to new highs. It became the fifth US-based company – and by far the youngest – to achieve a market value of one trillion dollars. That’s fantastic news if you happen to hold shares in Facebook. It’s probably horrifying news if you’re already worried about Facebook’s spending power and ability to dominate the market. The enormously rich blue social media brand is now richer than ever before. It’s impossible to escape the conclusion that the FTC’s legal complaint backfired in the most spectacular manner imaginable.
The other four companies to reach a trillion-dollar market value are also the other four companies that regulators would like to break up or otherwise curb. Amazon, Apple, Microsoft, and Google’s parent company Alphabet are the only other firms that’ve ever reached such heights. It took a four per cent jump in Facebook’s stock after the ruling was handed down to hit the record-breaking amount, and it might be the case that the company’s value goes below it again after the market settles. In the short term, though, Facebook is having the last laugh at the FTC’s considerable expense.
Two years ago, many of us wondered about Facebook’s long-term future when it suffered a near-20% drop in value during the worst of its data protection scandals. Today, that’s a distant memory. Facebook can’t be tanked by the stock market and can’t be stopped in the courtroom. Mark Zuckerberg’s company appears to be an unstoppable juggernaut, destined to get bigger and bigger in the years ahead. That’s not what the firm’s many critics want to hear, but unless the FTC does better with its next filing, it’s the reality that everyone has to deal with.
