Reveal Chat Files Opposition to Facebook’s Motion to Dismiss

In the latest move in its antitrust suit against Facebook, Reveal Chat Holdco, LLC, Technology and Management Services, Inc. d/b/a Lenddo USA and Beehive Biometric, Inc. (collectively Reveal Chat) filed an opposition on Friday in the Northern District of California to Facebook’s motion to dismiss the amended class-action complaint, asserting that the motion to dismiss “badly mischaracterizes the facts and law.”

For background, Facebook allowed other app developers to access its Application Programming Interfaces (APIs) and certain user data, meanwhile, Facebook also collected user data from its competition; anyone using the APIs could access the data of other companies also using the API. However, Facebook allegedly enacted a policy change that prevented existing third parties from accessing its APIs. Moreover, Facebook also tactfully acquired Instagram and WhatsApp, which increased its shares in the relevant markets and removed their competitive threat.

The plaintiffs claimed that Facebook’s purported anticompetitive conduct and unlawful monopoly have violated Section 2 of the Sherman Act because of its willful acquisition and maintenance of its monopoly in the relevant markets. Specifically, the plaintiffs asserted that the complaint alleged “several exclusionary acts” of Facebook, which were “alleged to be part of the same anticompetitive scheme to monopolize the Social Data and Social Advertising Markets.”

For instance, “Facebook entered into tying or coercive bundling agreements with developers on its Platform, providing access to the Core APIs beyond the withdrawal date in exchange for large purchases of social data in the form of advertising,” these agreements allegedly harmed competition “by strengthening the Social Data Barrier to Entry and anticompetitively bootstrapping Facebook’s otherwise fledgling mobile advertising business.” Additionally, Facebook’s agreements with developers “required those developers to provide their own users’ social data in exchange for continued access to the Core APIs,” thus, Facebook had access to “a superset of all of the data available to other potential competitors, whereby Facebook was a “data pass-through.” This also increased the entry barrier and, according to the plaintiffs, ensured that all apps were relying on Facebook for data. Furthermore, Facebook allegedly used spyware to surreptitiously spy on “users’ phones to determine what apps they used and the extent to which they engaged with those apps,” which Facebook purportedly used to assess its competition. Lastly, the plaintiffs proffered that Facebook purposefully redesigned its APIs to exclude potential competitors.

Moreover, Reveal Chat averred that Facebook’s “refusal to deal on the same terms as whitelisted developers is unlawful under Aspen Skiing.” The plaintiffs claimed that Facebook satisfies that three aspects of Aspen Skiing based on its aforementioned allegations because: “(1) it unilaterally terminates…a voluntary and profitable course of dealing ”; (2) “the only conceivable rationale or purpose is to ‘sacrifice short-term benefits in order to obtain higher profits in the long run from the exclusion  of  competition’”; and (3) “the refusal to deal involves products that the defendant already sells in the existing market to other similarly situated customer.” The plaintiffs also stated that Facebook has market power in the relevant markets, namely the social data and social advertising markets.

Reveal Chat proffered that it has suffered antitrust injury because the plaintiffs participate in the social data market and their injuries “are inextricably intertwined with harm to competition in both social data and social advertising markets.” The plaintiffs asserted that Facebook’s claims that they are not market participants are false, but noted that they are not competitors in the social advertising market. They also argued that Facebook incorrectly “erects a straw man requirement that an app must be a formidable rival to Facebook in the Social Data market to suffer antitrust injury in that market.” The injury was their exclusion from Facebook’s API or “the eventual destruction of their businesses.”

Furthermore, the plaintiffs stated that their claims are timely because their “claims could not have accrued under a discovery rule,” Facebook’s purported conduct “restarted the statute of limitations” under the continuing violation doctrine. Additionally, Facebook allegedly “fraudulently concealed the claims here,” which also “tolls the statute of limitations.”

Reveal Chat has sought for Facebook’s motion to dismiss to be denied. Reveal Chat Co is represented by Bathaee Dunne LLP. Facebook is represented by Wilmer Cutler Pickering Hale and Dorr LLP.