Point Break: Has Meta met its match?

January 24, 2022

4 min read

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What's going on here?

A US judge has denied Meta’s second attempt to dismiss the antitrust lawsuit being brought against it by the US Federal Trade Commission (FTC) – the country’s competition watchdog.

What does this mean?

The lawsuit accuses the Facebook group of pursuing a “course of anti-competitive conduct” and is seeking to force it into unwinding its acquisitions of photo-sharing app Instagram and its messaging service WhatsApp, which were acquired for a combined $20bn. If the FTC can convince the courts that Meta’s conduct damaged the market, the default solution would be nothing short of dismantling the company. On the other hand, Meta says it is confident it will win in court, arguing that the acquisitions “have been good for competition”.

The decision reverses a significant blow that Judge James Boasberg dealt the FTC when it originally sued Meta in June last year, when he said that the complaint contained “nothing” proving Meta’s monopoly power. The new complaint amended that claim with data compiled by Comscore (a US company providing marketing and analytics data) which was used to highlight Meta’s market share of active users of social networks, as well as the relative time spent on these networks. While these numbers will likely be questioned as the case proceeds, they were convincing enough to let the FTC clear the first hurdle and proceed with discovery, where more details could come to light.

What's the big picture effect?

The FTC’s case against Meta raises a number of issues but will especially impact the future of competition law within the technology sector. This is because the lawsuit is the latest of several efforts by authorities around the world to curtail the monopoly power of major tech companies:

  • In the US, the Department of Justice is pursuing an antitrust case against Google, whilst a package of tech-focused antitrust bills has already moved with bipartisan support out of the House of Representatives’ Judiciary Committee. Such moves suggest that the Biden administration is feeling extra pressure to pursue a more aggressive competition policy as a way of rebuilding its reputation after Big Tech had grown so powerful during the Obama era.
  • Across the Atlantic, the EU’s proposed Digital Markets Act (DMA) will prevent Big Tech companies from engaging in anti-competitive practices, such as ‘self-preferencing’ whereby a platform can display their products more prominently in their search results. A single breach could lead to a fine of up to 10% of global turnover.
  • The UK has also committed to establishing a new pro-competitive digital regulator, the Digital Markets Unit (DMU). It will sit within an increasingly assertive Competition and Markets Authority (CMA) that has already ordered Meta to sell Giphy (the largest supplier of gifs to social networks) and is looking to exercise its jurisdiction post-Brexit.

For the Big Tech firms, antitrust issues will therefore be at the heart of their global success, not only because of the astronomical fines. As the FTC is now challenging Meta’s acquisitions of Instagram and WhatsApp after initially giving them the green light, tech companies will now question whether they can rely on merger clearances by authorities. As a result, any future and deal-making decisions by firms will have to take even more careful consideration of stringent competition regimes. With demand for antitrust partners thus set to intensify, commercial law firms may look to respond by beefing up their antitrust and litigation practices in the aforementioned jurisdictions.

Big Tech firms are also facing significant regulatory pressure in regards to data privacy. Legal experts accuse them of exploiting private human experience to wilfully maintain their market dominance, principally through surveillance capitalism – the practice of harvesting personal data from consumers to make more accurate predictions about how they will behave, which are then sold into ‘behavioural futures’ markets for profit. Many hope that the FTC’s lawsuit will shed light on Meta’s long-standing user data issues – it alleges that the company hurt its users, even whilst providing free services, by forcing them to surrender more of their privacy than they might have done if there had been more competition. Subsequently, regulators may look to incorporate privacy and consumer welfare into competition law as a ‘theory of harm’. Subsequently, commercial law firms may seek to leverage their privacy and data security expertise to help tech clients cleanse their internal data gathering practices in the pursuit of business objectives.

Competition law within the tech industry therefore appears to be at an inflection point. Authorities around the world are now beginning to demonstrate an increased willingness to challenge acquisitions based on novel and more aggressive claims. Many legal experts claim that this is part of a more holistic approach from authorities to technology regulation by ​​considering competition, data protection and consumer regulation together. What is clear, however, is that such willingness raises significant – and as yet-unanswered – questions about the proper scope of antitrust laws

Past is often prologue, and whilst there may not be any one master initiative to ‘break up’ Big Tech in 2022, its members should expect to face more challenges and scrutiny for the digital road ahead.

Report written by Charlie Parkman

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