The antitrust case against Facebook crumbles

The judge said the government hadn’t determined exactly what Facebook’s market was:

The market definition research is somewhat unusual in this case because, unlike well-known consumer goods such as tobacco or office supplies, there is no clear or generally accepted definition of what exactly a personal social networking service is.

This is critical, the judge said, as the FTC case accuses Facebook of excluding competitors from its market:

The FTC needs to do two things here. First, it must have a definition of PSN. to give [personal social networking] Services. Second, it should further explain whether and why other non-PSN services available to the public are or are not reasonably interchangeable substitutes for PSN services.

Most importantly, the judge said the government should not only show that Facebook is big, but that its size gives it extra special power over the market:

The FTC only claims that Facebook has had a dominant share of the US personal social network market (over 60%) since 2011, and that there is no other social network of comparable size in the United States. That is it. These allegations, which at no point in the past decade even provide an estimated actual figure or reach for Facebook’s market share, ultimately fail to demonstrate that Facebook has market power.

The ruling is a blow to the antitrust movement that is gaining momentum in Washington. The main advantage of the case is this: the monopoly case against one of the major players of Big Techs is not in accordance with the law as currently written. What needs to be determined is whether what Facebook is doing, as defined by law and rulings in other cases, is illegal. The answer seems to be no.

The judges’ ruling also added evidence for those who say the law is incapable of keeping Big Tech in check. Legislative efforts took a step forward last week when the House Judiciary Committee put forward six bills that would overhaul antitrust laws, aiming to rein in tech giants. But this also puts Lina Khan, the Big Tech critic who now chairs the FTC, in an awkward spot. If the FTC changes and resubmits its case against Facebook, Khan will have to weigh arguments that Facebook is violating current law against efforts it has supported in the past to get Congress to introduce new legal instruments.

In related news, the jump in Facebook’s shares after the ruling sent its market value above $1 trillion for the first time; the White House is reportedly drawing up an executive order on antitrust enforcement; and all this antitrust investigation generates a huge demand for lawyers infused with competition law.

HERE’S WHAT HAPPENS

Banks are preparing to shower their shareholders with cash. The Wall Street giants yesterday announced plans to increase their dividends and buy back stocks after passing the Fed’s latest stress tests. (Morgan Stanley and Wells Fargo, for example, will double their dividends.) Critics of the stress tests fear they allowed banks to reduce their cash buffers too aggressively, leaving them unprepared for the next crisis.