Facebook Asks Court to Toss FTC’s Divestiture Bid

On Wednesday, Facebook Inc. filed a motion to dismiss the Federal Trade Commission’s (FTC) one-count monopolization suit against it on grounds that the agency both failed to state a claim upon which relief could be granted and lacked the authority to bring the suit altogether. Facebook’s memorandum in support of its motion explained why the allegations the FTC leveled against the company in early December, asking the District of Columbia court to break Facebook up, are baseless.

By way of background, the FTC, after a collaborative investigation with 48 state attorneys general, filed the lawsuit. The agency’s complaint argued that Facebook engaged in a systematic strategy, including its 2012 acquisition of successful up-and-comer Instagram, its 2014 acquisition of the messaging app WhatsApp, and the imposition of restrictive conditions on software developers, to minimize threats to its monopoly. Facebook also moved to dismiss similar claims brought by the state attorneys general in their separate suit on Wednesday.

In the FTC case, Facebook’s filing opens by suggesting that “no government lawsuit similar to this one has been brought in the 130-year history of the Sherman Act, and for good reason: The (FTC) has not alleged facts amounting to a plausible antitrust case.” The memorandum then contended that the government satisfies none of a federal monopolization claim’s three required elements.

First, the defendant argued that the FTC has not properly alleged a relevant market because the agency “does not allege any facts that would permit the Court to discern which products (or even which features of Facebook) are in the alleged market and which are not.” In addition, the memorandum takes issue with the FTC’s failure to use a cross-elasticity of demand analysis or any other “that could reliably define such a market for the first time in an antitrust case.”

Second, Facebook contended that the FTC has not adequately pled monopoly power, citing its “bare, conclusory” allegations that Facebook holds a market share greater than 60%. This calculation, the filing claims, is supported by neither an explanation nor metrics, and therefore must be disregarded.

Third, the memorandum asserted that the FTC has not satisfactorily alleged unlawful exclusionary conduct. The filing pointed out that both Facebook’s acquisition of Instagram and WhatsApp were reviewed by the FTC and allowed to proceed, and in the case of Instagram, by a unanimous 5-0 commissioner vote.

The moving papers added that after 2011, Facebook instituted policies to limit competitors’ ability to “free-ride” on its platform. Facebook asserted that it was well within its right to block others from accessing its technology, and was not, as the FTC suggests, required to accommodate its competitors. Finally, Facebook contended that the FTC lacks the statutory authority to maintain the suit because its attempt to challenge past conduct, like the completed acquisitions, is “incompatible” with the section of the FTC Act from which the agency derives its power.

Facebook is represented by Kellogg, Hansen, Todd, Figel & Frederick PLLC.