Federal Trade Commission v. Facebook Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
FEDERAL TRADE COMMISSION,
Plaintiff,
v. Civil Action No. 20-3590 (JEB)
FACEBOOK, INC.,
Defendant.
MEMORANDUM OPINION
Second time lucky? The Federal Trade Commission’s first antitrust suit against
Facebook, Inc. stumbled out of the starting blocks, as this Court dismissed the Complaint last
June. In doing so, the Court concluded that the Commission had failed to plausibly allege “that
Facebook has monopoly power in the market for Personal Social Networking (PSN) services.”
FTC v. Facebook, Inc., 2021 WL 2643627, at *1–2 (D.D.C. June 28, 2021). Because that
“defect could conceivably be overcome by re-pleading,” however, the Court left the door ajar for
the agency to amend the Complaint and reinstate its suit. Id. at *1.
Eagerly accepting such invitation, the FTC has filed an Amended Complaint containing
significant additions and revisions aimed at addressing the shortcomings identified in the Court’s
prior Opinion. The core theory of the lawsuit remains essentially unchanged. The Commission
continues to allege that Facebook has long had a monopoly in the market for PSN services and
that it has unlawfully maintained that monopoly via two types of actions: first, by acquiring
competitors and potential competitors — most notably, Instagram and WhatsApp — that it
believed were well situated to eat into its monopoly; and second, by implementing and enforcing
1
policies that prevented interoperability between Facebook and other apps that it viewed as
nascent threats. The facts alleged this time around to fortify those theories, however, are far
more robust and detailed than before, particularly in regard to the contours of Defendant’s
alleged monopoly.
Facebook nonetheless moves to dismiss once again, contending that the FTC’s latest
effort is akin to rearranging the deck chairs on the Titanic. Although the agency may well face a
tall task down the road in proving its allegations, the Court believes that it has now cleared the
pleading bar and may proceed to discovery. That holding flows from several conclusions. First,
the FTC has now alleged enough facts to plausibly establish that Facebook exercises monopoly
power in the market for PSN services. Second, it has adequately alleged that the company’s
dominant market share is protected by barriers to entry into that market. Third, the agency has
also explained that Facebook not only possesses monopoly power, but that it has willfully
maintained that power through anticompetitive conduct — specifically, the acquisitions of
Instagram and WhatsApp. The Court will not, however, allow the allegations surrounding
Facebook’s interoperability policies (also known as the Platform policies) to move forward; they
founder for the same fundamental reasons as explained before: Facebook abandoned the policies
in 2018, and its last alleged enforcement was even further in the past.
Last, the company lets fly a new arrow this time around, urging dismissal on the
independent basis that the FTC’s vote authorizing the Amended Complaint was invalid because
Chair Lina Khan’s alleged prejudgment of Facebook’s antitrust liability required her recusal.
The Court believes that such contention misses its target, as Khan was acting in a prosecutorial
capacity, as opposed to in a judicial role, in connection with the vote.
2
Ultimately, whether the FTC will be able to prove its case and prevail at summary
judgment and trial is anyone’s guess. The Court declines to engage in such speculation and
simply concludes that at this motion-to-dismiss stage, where the FTC’s allegations are treated as
true, the agency has stated a plausible claim for relief under Section 2 of the Sherman Act. The
Court, consequently, will deny Facebook’s Motion.
3
Table of Contents
I. Background.............................................................................................................................. 5
II. Legal Standard ......................................................................................................................... 7
III. Analysis ................................................................................................................................... 8
A. Monopoly Power................................................................................................................. 8
1. Market Definition ....................................................................................................... 10
2. Market Share............................................................................................................... 13
3. Barriers to Entry ......................................................................................................... 20
B. Anticompetitive Conduct .................................................................................................. 24
1. Count I ........................................................................................................................ 25
a. Legal Framework .................................................................................................... 25
b. Application.............................................................................................................. 26
c. Facebook’s Counterarguments................................................................................ 30
2. Count II ....................................................................................................................... 34
C. Recusal of Chair Khan ...................................................................................................... 41
1. Chair Khan’s Role ...................................................................................................... 43
2. Other Ethical Issues .................................................................................................... 47
IV. Conclusion ............................................................................................................................. 48
4
I. Background
In its prior Opinions in this case and in a parallel antitrust suit filed by a number of
States, the Court described in detail the background of social networking, Facebook Blue — i.e.,
the product that “its millions of users think of when they think of ‘Facebook,’” — the company’s
acquisitions of Instagram and WhatsApp, and the history of Facebook Platform and the
company’s interoperability policies. See Facebook, 2021 WL 2643627, at *2–6; New York v.
Facebook, Inc. (New York), No. 20-3589, 2021 WL 2643724, at *2–6 (D.D.C. June 28, 2021).
The Court will spare the reader another factual recitation here and will instead confine this brief
background section to the case’s procedural history. As the critical question in this Motion is
whether the FTC’s new allegations have filled the holes in its previous Complaint, that will be
the focus of the Court’s analysis below.
The FTC filed this action on December 9, 2020, asserting one count of monopoly
maintenance under Section 2 of the Sherman Act. See ECF No. 3 (Redacted Complaint),
¶¶ 169–74. The suit was filed after three of the FTC’s five Commissioners voted to authorize it.
See FTC, FTC Sues Facebook for Illegal Monopolization (Dec. 9, 2020), https://bit.ly/30Q3I8Y.
Chair Khan was not yet a Commissioner at the time. Id. As noted in the Court’s previous
Opinions, although this FTC suit was initially assigned to Judge Christopher R. Cooper of this
district, he reassigned it to this Court, which was handling the earlier-filed and related State case.
See Facebook, 2021 WL 2643627, at *7; see also No. 20-3590, Minute Order of Jan. 12, 2021.
Facebook subsequently moved to dismiss both cases. While the Court granted the dismissal of
the States’ entire case, New York, 2021 WL 2643724, at *29, here it dismissed only the
Complaint, “leaving the agency the chance to replead if it believes it can successfully remedy the
infirmities described” in the Court’s Opinion. Facebook, 2021 WL 2643627, at *7.
5
Despite a change in leadership since the lawsuit was initially filed, the FTC took the
Court up on its offer, filing an Amended Complaint in August 2021. See ECF No. 76 (Amended
Complaint filed under seal); ECF No. 82 (Redacted Am. Compl.). (In this Opinion, the Court
cites a copy of the Amended Complaint that has minor redactions to protect confidential business
information.) As with the initial Complaint, three of the five Commissioners voted to authorize
the updated filing. See FTC, FTC Alleges Facebook Resorted to Illegal Buy-or-Bury Scheme to
Crush Competition After String of Failed Attempts to Innovate (Aug. 19, 2021),
https://bit.ly/3q8Ku76. This time around, however, Chair Khan — who was appointed earlier in
2021 — was one of those three. Id.; see also ECF No. 83-1 (Motion to Dismiss) at 5.
The Amended Complaint again alleges unlawful monopoly maintenance under Section 2
of the Sherman Act, although it now lists two counts. See Redacted Am. Compl., ¶¶ 230–42.
The allegations in the second count incorporate those in the first, while also alleging additional
conduct. Specifically, Count I alleges that “Facebook has willfully maintained its monopoly
power through its course of anticompetitive conduct consisting of its anticompetitive
acquisitions.” Id., ¶ 232. Count II, meanwhile, alleges that “Facebook has willfully maintained
its monopoly power through its course of conduct that includes both anticompetitive acquisitions
and . . . maintaining and enforcing anticompetitive agreements relating to Facebook Platform to
deter competitive threats to its personal social networking monopoly.” Id., ¶ 238 (emphasis
added). Plaintiff again invokes Section 13(b) of the FTC Act, id., ¶ 243, which authorizes the
agency to seek an injunction against an entity that “is violating” or “is about to violate” the
antitrust laws. See 15 U.S.C. § 53(b). The Government hopes to procure an injunction aimed at
preventing the allegedly unlawful conduct in the future, as well as an order mandating
“divestiture of assets, divestiture or reconstruction of businesses (including, but not limited to,
6
Instagram and/or WhatsApp), and such other relief sufficient to restore the competition that
would exist absent the conduct alleged in the Complaint.” Redacted Am. Compl. at 79.
Believing the FTC’s recent effort as flawed as its predecessor, Facebook has now moved
to dismiss the Amended Complaint.
II. Legal Standard
Facebook relies on Federal Rule of Civil Procedure 12(b)(6), which permits dismissal of
a complaint where it fails to state a claim upon which relief can be granted. See MTD at 6. In
evaluating such a motion to dismiss, courts must “treat the complaint’s factual allegations as
true . . . and must grant plaintiff ‘the benefit of all inferences that can be derived from the facts
alleged.’” Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting
Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979)). Although “detailed factual
allegations” are not necessary to withstand a Rule 12(b)(6) motion, Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007), “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face,’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570) — that is, the facts alleged in the
complaint “must be enough to raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555. The court need not accept as true, then, “a legal conclusion couched as a factual
allegation,” Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478
U.S. 265, 286 (1986)), nor “inferences . . . unsupported by the facts set out in the complaint.” Id.(quoting Kowal v. MCI Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994)). And it may
consider not only “the facts alleged in the complaint,” but also “any documents either attached to
or incorporated in the complaint[,] and matters of which [courts] may take judicial notice.”
7
Equal Emp’t Opportunity Comm’n v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C.
Cir. 1997).
III. Analysis
As set forth in the Court’s prior Opinion, the offense of monopoly maintenance under
Section 2 of the Sherman Act “has two elements: ‘(1) the possession of monopoly power in the
relevant market and (2) the willful . . . maintenance of that power as distinguished from growth
or development as a consequence of a superior product, business acumen, or historic accident.’”
United States v. Microsoft Corp., 253 F.3d 34, 50 (D.C. Cir. 2001) (en banc) (quoting United
States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)); see Facebook, 2021 WL 2643627, at *7.
Facebook seeks dismissal on the ground that the FTC has not adequately pleaded either of those
prerequisites. Specifically, Defendant contends that, as before, the Commission has not alleged
facts plausibly establishing monopoly power, see MTD at 6–20, and that the agency has also not
adequately alleged legally cognizable exclusionary conduct. Id. at 20–38. Separately, Facebook
also urges the Court to conclude that the FTC’s vote purporting to authorize the Amended
Complaint was invalid because of Chair Khan’s biased participation. Id. at 38–45. The Court
examines each of those arguments in turn.
A. Monopoly Power
Consider first the threshold inquiry of a monopoly-maintenance claim: has the FTC
plausibly alleged that Facebook has monopoly power in a relevant market? “The Supreme Court
defines monopoly power as ‘the power to control prices or exclude competition.’” Microsoft,
253 F.3d at 51 (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391
(1956)). In other words, “a firm is a monopolist if it can profitably raise prices substantially
above the competitive level.” Id. (citations omitted). If a plaintiff can supply direct proof that a
8
“firm has in fact profitably done so, the existence of monopoly power is clear.” Id. (citations
omitted). Because such “direct proof” is “rarely available,” however, plaintiffs and courts “more
typically examine market structure in search of circumstantial evidence of monopoly power.” Id.In such a case, courts may infer monopoly power from “a firm’s possession of a dominant share
of a relevant market.” Id.; see Toys “R” Us, Inc. v. FTC, 221 F.3d 928, 937 (7th Cir. 2000)
(market power can be proven “through direct evidence of anticompetitive effects” or, “more
conventional[ly],” “by proving relevant product and geographic markets and by showing that the
defendant’s share exceeds [some] threshold”); S. Pac. Commc’ns Co. v. Am. Tel. & Tel. Co.,
740 F.2d 980, 1000 (D.C. Cir. 1984) (“[C]ourts frequently approach the problem of measuring
market power by defining the relevant product and geographic market and computing the
defendant’s market share. Monopoly power is then ordinarily inferred from a predominant share
of the market.”).
Because “[m]arket power is meaningful only if it is durable,” a plaintiff proceeding by
the indirect method must also show that the firm’s dominant share of the relevant market is
protected by “barriers to entry” into the market. See Lenox MacLaren Surgical Corp. v.
Medtronic, Inc., 762 F.3d 1114, 1123–25 (10th Cir. 2014); Microsoft, 253 F.3d at 51. “‘Entry
barriers’ are factors . . . that prevent new rivals from timely responding to an increase in price
above the competitive level.” Microsoft, 253 F.3d at 51; see S. Pac. Commc’ns Co., 740 F.2d at1001–02.
In its Opposition, the FTC contends that it has alleged both indirect and direct evidence
of Facebook’s monopoly power, although it devotes far more attention to the indirect-proof
argument. See ECF No. 85 (Redacted FTC Opposition) at 4–15. Because the Court concludes
that the FTC has adequately alleged indirect evidence of such monopoly power, it need not
9
separately address whether this is the rare case in which the agency has also pleaded direct
evidence. The indirect framework first requires the plaintiff to “establish[] the relevant market”
in which the defendant firm allegedly has monopoly power. See Sky Angel U.S., LLC v. Nat’l
Cable Satellite Corp., 947 F. Supp. 2d 88, 102 (D.D.C. 2013) (quoting Neumann v. Reinforced
Earth Co., 786 F.2d 424, 429 (D.C. Cir. 1986)). If the plaintiff succeeds at that stage, it must
then adequately allege that the defendant has a dominant share of that market, and that its
dominance is protected by barriers to entry. Id.; see, e.g., FTC v. AbbVie Inc., 976 F.3d 327,
373–74 (3d Cir. 2020) (above 60% market share sufficient); Image Tech. Servs. v. Eastman
Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1997) (“Courts generally require a 65% market share
to establish a prima facie case of market power.”).
Market Definition
As the Court explained in its previous Opinion, even though the definition of a relevant
antitrust market is typically a “factual” rather than a “legal” inquiry, certain “legal principles”
nevertheless govern. Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1045 (9th Cir. 2008);
see Facebook, 2021 WL 2643627, at *9. It is well established, for instance, that an antitrust
market includes “two components: the product market and the geographic market.” Sky Angel,
947 F. Supp. 2d at 102. “A ‘relevant product market’ is a term of art in antitrust analysis,”
United States v. H & R Block, Inc., 833 F. Supp. 2d 36, 50 (D.D.C. 2011), and the Circuit has
defined it as including “all products reasonably interchangeable by consumers for the same
purposes.” Microsoft, 253 F.3d at 52 (internal quotation marks and citation omitted). “Because
the ability of consumers to turn to other suppliers restrains a firm from raising prices above the
competitive level,” id. at 51 (internal citation omitted), the analysis of market power uses as its
denominator all products “roughly equivalent to another for the use to which [they are] put.”
10
Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 437 (3d Cir. 1997) (citation
omitted). “In other words, courts look at whether two products can be used for the same
purpose, and, if so, whether and to what extent purchasers are willing to substitute one for the
other.” H & R Block, 833 F. Supp. 2d at 51 (internal quotation marks and citation omitted).
The Court found in its prior Opinion that the FTC had plausibly established a relevant
antitrust market. Facebook, 2021 WL 2643627, at *9–11. The FTC alleges the same market in
its Amended Complaint, and Defendant does not object to that market definition here. See
Redacted Am. Compl., ¶¶ 165–80; Redacted FTC Opp. at 3 (“The Court has already determined,
correctly, that the FTC has adequately pleaded a relevant antitrust market for PSN services in the
United States.”); MTD at 6–13 (noting Court’s prior market definition without objection, while
arguing that FTC still has not alleged dominant share of that market). The Court will briefly
recount the relevant findings of its previous Opinion on market definition, as that will help frame
the question of whether the FTC has sufficiently alleged that Facebook has a dominant share of
such market.
Unlike a relatively obvious market for, say, tires or doughnuts, the relevant market here is
considerably more nuanced. The Court previously endorsed the agency’s definition of the
market for PSN services in the United States as consisting of “online services that enable and are
used by people to maintain personal relationships and share experiences with friends, family, and
other personal connections in a shared social space.” Facebook, 2021 WL 2643627, at *10
(quoting Redacted Compl., ¶ 52). Such PSN services are “defined, and distinguished from other
services, by their having ‘[t]hree key elements.’” Id. (quoting Redacted Compl., ¶ 52). “First,
[they] are built on a social graph that maps the connections between users and their friends,
family, and other personal connections.” Redacted Compl., ¶ 53. “Second, [they] include
11
features that many users regularly employ to interact with personal connections and share their
personal experiences in a shared [virtual] social space, including in a one-to-many ‘broadcast’
format.” Id., ¶ 54. And “‘[t]hird, [they] include features that allow users to find and connect
with other users, to make it easier for each user to build and expand their set of personal
connections. The social graph also supports this feature by informing [the user] which [new]
connections’ might be available based on her existing network.” Facebook, 2021 WL 2643627,
at *10 (quoting Redacted Compl., ¶ 55). Here, the Amended Complaint provides an essentially
identical definition of PSN services. See Redacted Am. Compl., ¶¶ 166–69.
Having approved the FTC’s definition of PSN services, the Court’s previous Opinion
then turned to the agency’s allegation that certain other well-known “types of internet services”
are not “adequate substitutes.” Facebook, 2021 WL 2643627, at *10 (quoting Redacted Compl.,
¶ 57). The Commission put forth a number of reasons why other technology services — such as
LinkedIn, YouTube, Spotify, and Netflix — do not qualify. For instance, it alleged that
“‘specialized social networking services’ that ‘focus on professional . . . connections’ (e.g.,
LinkedIn) are not substitutes because they are designed for and used primarily by professionals
for sharing professional content,” as opposed to PSN’s design and primary use of “maintain[ing]
personal relationships and shar[ing] experiences with friends, family, and other personal
connections.” Id. (quoting Redacted Compl., ¶¶ 52, 58). The Amended Complaint provides
substantially similar allegations here, while acknowledging other players in the PSN market,
“including Snapchat, Google+, Myspace, Path, MeWe, Orkut, and Friendster.” Redacted Am.
Compl., ¶¶ 171–77, 200.
In its first Opinion, the Court concluded that “[w]hile there are certainly bones that one
could pick with the FTC’s market-definition allegations, the Court does not find them fatally
12
devoid of meat.” Facebook, 2021 WL 2643627, at *10. It rejected, for example, Facebook’s
contentions that the market definition “contains an internal contradiction,” and that the FTC
“neglected to allege any facts regarding the cross-elasticity of demand between [PSN services]
and [potential] substitutes for it.” Id. at *10–11 (internal quotation marks and citations omitted).
Notably, the Court parried Defendant’s argument “that the Complaint impermissibly
distinguishes PSN services from other possible substitutes based on their primar[y] uses.” Id. at
*11 (internal quotation marks and citations omitted). As the Court explained, the question of
appropriate substitutes “looks to both ‘whether two products can be used for the same purpose,
and, if so, whether and to what extent purchasers are willing to substitute one for the other.’” Id.
(quoting H & R Block, 833 F. Supp. 2d at 51) (emphasis added); see also United States v. Aetna
Inc., 240 F. Supp. 3d 1, 19 (D.D.C. 2017). In sum, although “the agency certainly could have
provided more on that front, the fact that other services are not primarily used for the sort of
personal sharing that is the hallmark of a PSN service seems a plausible reason why little
switching would occur.” Id.Given that the Amended Complaint provides an essentially identical definition of the
relevant market, see Redacted Am. Compl., ¶¶ 166–69, and that Facebook lodges no objection to
the Court’s prior finding, the Court sees no reason to revisit its earlier analysis and conclusion.
See MTD at 6–13; Redacted FTC Opp. at 3. The Amended Complaint’s allegations thus do
enough to make out a plausible market for PSN services. See Redacted Am. Compl., ¶¶ 165–80.
Market Share
With the market defined, the Court now addresses what has thus far been the FTC’s
Achilles’ heel: sufficiently alleging Facebook’s market dominance. In the last go-round, the
Commission alleged “only that Facebook has ‘maintained a dominant share of the U.S. personal
13
social networking market (in excess of 60%)’ since 2011, and that ‘no other social network of
comparable scale exists in the United States.’” Facebook, 2021 WL 2643627, at *12 (quoting
Redacted Compl., ¶¶ 3, 64). The Court concluded that such bare allegations — “which do not
even provide an estimated actual figure or range for Facebook’s market share at any point over
the past ten years — ultimately fall short of plausibly establishing that Facebook holds market
power.” Id. Because it was conceivable “that the agency may be able to ‘cure [these]
deficiencies’ by repleading,” however, the Court dismissed the Complaint without prejudice,
leaving Plaintiff “free to amend [its] pleading and continue the litigation.” Id. at *14 (quoting
Foman v. Davis, 371 U.S. 178, 182 (1962); Ciralsky v. CIA, 355 F.3d 661, 666 (D.C. Cir.
2004)).
The FTC has now done precisely that, adding substantial new allegations about the
contours of Facebook’s market share. Most notably, the Amended Complaint alleges far more
detailed facts to support its claim that “Facebook has today, and has maintained since 2011, a
dominant share of the relevant market for U.S. personal social networking services.” Redacted
Am. Compl., ¶ 190. Specifically, the Amended Complaint includes allegations regarding
Facebook’s market share of daily average users (DAUs) and monthly average users (MAUs) of
PSN services in the United States, as well as its share of users’ average time spent on PSN
services. Id. For instance, the FTC alleges that, “[b]ased on an analysis of data maintained by
Comscore, a commercially-available data source,” “Facebook’s share of DAUs of apps
providing personal social networking services in the United States has exceeded 70% since 2016
and was at least as high in 2011.” Redacted Am. Compl., ¶¶ 182, 200. Indeed, the Amended
Complaint alleges that, from “September 2016 through December 2020, Facebook’s share of
DAUs among apps providing personal social networking services in the United States averaged
14
80% per month for smartphones, 86% per month in tablets, and 98% per month for desktop
computers, and that Facebook’s share of DAUs has not dropped below 70% in any month on any
device-type.” Id., ¶ 200(a). “The combined shares of other [PSN] providers,” meanwhile —
which the FTC identifies as “including Snapchat, Google+, Myspace, Path, MeWe, Orkut, and
Friendster” — “did not exceed 30% on any device type during any month in this period.” Id.
The agency’s allegations concerning MAUs tell the same story. Again relying on
Comscore data, the FTC alleges that “Facebook’s share of MAUs of apps providing personal
social networking services in the United States has exceeded 65% since 2012 and was at least as
high in 2011.” Id., ¶ 201. Similarly, the “combined shares of other providers . . . did not exceed
32% on either device type, mobile or desktop, in any month during” the period of September
2012 to December 2020. Id., ¶ 201(a). Plaintiff’s allegations concerning “Facebook’s share of
the time spent by users of apps providing personal social networking services in the United
States” are also in accord with the DAU and MAU data. In fact, the FTC alleges that Facebook’s
share of users’ time spent on such services “has exceeded 80% since 2012 and was at least as
high in 2011.” Id., ¶ 199.
The Amended Complaint also adequately alleges that the three metrics offered to
measure market share — DAUs, MAUs, and time spent — are appropriate indicators. The FTC
explains, consistent with common sense, that “a personal social networking service’s
attractiveness to users, and therefore its competitive significance, is related to its number of users
and to how intensively its users engage with the service.” Id., ¶ 192. Significantly, the Amended
Complaint alleges that Facebook itself uses these metrics to assess its performance, as well as
that of rival PSN services. Indeed, “in the ordinary course of business, Facebook’s executives
and investors, rival personal social networking providers, and industry observers have assessed
15
the performance of Facebook Blue, Instagram, and other personal social networking providers
using measures of active user base and how much people use the services—with DAUs, MAUs,
and the amount time spent by users on the service being common units of measure.” Id., ¶ 193.
For instance, “Facebook’s internal presentations assessing the performance of Facebook Blue
and Instagram focus on time spent per month, MAUs, and DAUs,” and the company “relies on
these same metrics to assess its rivals’ competitive significance.” Id., ¶ 194.
The FTC similarly alleges that other firms offering PSN services cite these metrics.
Snapchat, for example, regularly compares its performance with that of “Instagram by observing
the firms’ MAUs, DAUs, and time spent” metrics. Id., ¶ 195. Relatedly, the FTC also alleges
that “[c]ommercial data sources track the usage of online services within the United States”
using metrics such as “MAUs, DAUs, and time spent.” Id., ¶ 196.
Considering these new allegations and granting Plaintiff “the benefit of all inferences that
can be derived from the facts alleged,” Sparrow, 216 F.3d at 1113 (internal citation omitted),
means that the Amended Complaint “contain[s] sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 570). In stark contrast with its predecessor, this Complaint provides reinforcing,
specific allegations that all point toward the same conclusion: Facebook has maintained a
dominant market share during the relevant time period. Accepting the market definition (which
Defendant does) and the truth of Plaintiff’s market-share allegations (which the Court must at
this stage), Facebook’s market share comfortably exceeds the levels that courts ordinarily find
sufficient to establish monopoly power. See, e.g., AbbVie Inc., 976 F.3d at 373 (above 60%
market share sufficient); Eastman Kodak Co., 125 F.3d at 1206 (“Courts generally require a 65%
16
market share to establish a prima facie case of market power.”); 2301 M Cinema LLC v. Silver
Cinemas Acquisition Co., 342 F. Supp. 3d 126, 140 (D.D.C. 2018).
Not prepared to throw in the towel, Defendant offers several rejoinders, none of which is
persuasive at this stage. First, it contends that the Comscore data on which the FTC relies “itself
warns against reliance on this data, disclaiming responsibility for its ‘accuracy or
completeness.’” MTD at 7–8 (quoting Redacted Am. Compl., ¶ 182 n.1). Such an attack on the
reliability of the underlying data, however, is inapposite at the motion-to-dismiss stage.
Facebook will be given ample opportunity to advance such arguments down the line, perhaps in
a potential “battle of the experts.” At this juncture, however, the Court “must treat the
complaint’s factual allegations as true.” Sparrow, 216 F.3d at 1113 (internal quotation marks
and citation omitted). It thus has no basis now to scrutinize the reliability of the data relied on by
the FTC.
Second, Defendant also assails the significance of data concerning time spent on PSN
services. Specifically, it contends that such data “does not track PSNS usage; it instead tracks
users of online services and total time spent on those services (PSNS and non-PSNS alike).”
MTD at 7. Here, Facebook gains more traction, though its argument does not ultimately carry
the day. It is correct, as the Court previously acknowledged, that data measuring the amount of
time users spend on Facebook (and on other PSN service providers) likely captures time not
spent engaging with a PSN service — e.g., watching a movie trailer embedded on the official
page of the movie — given how the FTC defined the market. Facebook, 2021 WL 2643627, at
*13 (“[A]t least some of the features offered by a Facebook or Instagram or Path are not,
seemingly, part of those firms’ PSN-services offerings as defined by the FTC; time spent on
those apps or websites, accordingly, is not necessarily time spent on a PSN service.”). But that
17
does not mean that the metric tells the Court nothing about Facebook’s market share, as the
company suggests. See MTD at 7–10. The Amended Complaint alleges, for instance, that
Facebook Blue and Instagram “are predominantly used as personal social networking services.”
Redacted Am. Compl., ¶ 202. Indeed, the FTC states that Facebook itself recognizes that
Facebook Blue provides “personal social networking services, and that personal social
networking services are the predominant value and use of Facebook Blue to users.” Id., ¶ 178
(emphasis added). Numerous statements from Facebook CEO Mark Zuckerberg fortify the
premise that the company understands Facebook Blue and Instagram to be focused on delivering
PSN services. See, e.g., id., ¶¶ 177–79, 202.
While Defendant is correct that data capturing time spent on platforms providing PSN
services includes more than time spent just using such services, that imperfection is not fatal at
this stage. As courts in this district have recognized, “[P]laintiffs ‘need not present market
shares . . . estimates with the precision of a NASA scientist. The closest available approximation
often will do.’” United States v. Anthem, Inc., 236 F. Supp. 3d 171, 207 (D.D.C. 2017) (quoting
FTC v. Sysco Corp., 113 F. Supp. 3d 1, 54 (D.D.C. 2015)) (internal quotation marks and citation
omitted); see H & R Block, Inc., 833 F. Supp. 2d at 72 (citation omitted) (“A reliable,
reasonable, close approximation of relevant market share data is sufficient.”). Here, moreover,
Plaintiff is not relying solely on the time-spent data — which indicates a market share well over
the necessary threshold — but instead supports that allegation with MAU and DAU metrics that
reinforce the same conclusion. See Twombly, 550 U.S. at 563 (“[O]nce a claim has been stated
adequately, it may be supported by showing any set of facts consistent with the allegations in the
complaint.”). In light of those allegations, it would be improper to dismiss the FTC’s Amended
Complaint just because it does not have perfect data (which may not exist) about precisely what
18
percentage of users’ time spent on Facebook Blue and Instagram includes interacting with
friends, family, and other personal contacts, as opposed to engaging in activity — such as
passively viewing a music video — that falls outside of the market definition. See, e.g., United
States v. Bazaarvoice, Inc., No. 13-133, 2014 WL 203966, at *32 (N.D. Cal. Jan. 8, 2014) (“The
data that exist regarding this market are imperfect, in part because the market is relatively new.
But that does not mean that one should ignore the existing data or the market realities. For
example, there is no real dispute that the overwhelming majority of [Defendant’s] business came
from [Ratings and Reviews platforms (R & R)], so to complain that [the Government’s expert]
did not distinguish between revenue from R & R and other [of] the parties’ other offerings that
complement R & R is unconvincing.”).
Facebook’s third central counterargument focuses on the FTC’s use of MAU and DAU
figures. See MTD at 12. Defendant posits that those metrics “cannot plausibly be used to
calculate relative market share, both because the same individuals may (and often do) use more
than one service and, more fundamentally, because the mere fact that an individual uses a service
says nothing about how much time (if any) that person spends consuming PSNS on that service.”
Id. Not so. With regard to the first point, the FTC indicates that a single user’s consumption of
services from multiple providers is reflected in the MAU and DAU metrics. See Redacted FTC
Opp. at 8. In other words, if one person used both Instagram and Snapchat on the same day, both
uses would be included in the denominator to determine the total shares in the market for PSN
services. Id. As for Facebook’s contention that MAU and DAU figures do not account for
intensity of use of PSN services, that argument merely underscores the utility of looking to time-
spent data as well and considering the three metrics holistically. Indeed, while each metric
captures consumption of PSN services on somewhat different terms, that reality may in fact
19
strengthen the FTC’s case because each measurement paints the same picture: Facebook has
maintained a dominant market share during the relevant time period. In any event, to the extent
that DAUs and MAUs do not fully capture consumers’ intensity of use, the Amended Complaint
alleges that Facebook’s share of the relevant market actually increases when one looks to time-
spent data, which accounts for intensity of use within a day or month. See Redacted Am.
Compl., ¶¶ 199–201.
In short, the FTC has done its homework this time around and has put forth detailed
factual allegations that “raise a right to relief above the speculative level, on the assumption that
all the allegations in the complaint are true.” Twombly, 550 U.S. at 555 (citations omitted). To
allege market dominance, the agency used multiple metrics designed to capture output or
consumption — “the usual measure of a market and of the shares within it.” Phillip E. Areeda &
Herbert Hovenkamp, Antitrust Law, vol. IIB, ¶ 535, at 308 (5th ed. 2021). Each of those metrics
buttresses one another and demonstrates a market share that courts typically find significant
enough to infer monopoly power. And the Amended Complaint extensively alleges that the
metrics are regularly used by Facebook, its competitors, and relevant data collectors to assess
market power. While Defendant may ultimately be able to disprove these allegations as
litigation continues, that issue is not before the Court today. Rather, it suffices to conclude that
the FTC has plausibly alleged that Facebook maintained a dominant share of the U.S. personal-
social-networking market since 2011.
Barriers to Entry
As the prior Opinion in this case concluded that the Commission had fallen short on its
market-share allegations, the Court did not “address the issue of whether the FTC has
20
sufficiently alleged entry barriers.” Facebook, 2021 WL 2643627, at *12. Because the agency
has now plausibly alleged such a market share, the Court must take on the issue.
As explained above, a plaintiff proceeding under the indirect method of proof who has
alleged a dominant market share must also allege that the defendant’s “possession of a dominant
share of a relevant market [] is protected by entry barriers.” Microsoft, 253 F.3d at 51. “Because
market share is just a way of estimating market power, which is the ultimate consideration, easy
entry and the absence of barriers matter even though the defendant has a large market share.”
Areeda & Hovenkamp, ¶ 420, at 78 (internal quotation marks and citations omitted). “For
antitrust purposes, a barrier to entry is best defined as any factor that permits firms already in the
market to earn returns above the competitive level while deterring outsiders from entering.” Id.,
¶ 420, at 77; see Microsoft, 253 F.3d at 51 (“‘Entry barriers’ are factors . . . that prevent new
rivals from timely responding to an increase in price above the competitive level.”).
The FTC alleges that “Facebook’s dominant position in the U.S. personal social
networking market is durable due to significant entry barriers, including direct network effects
and high switching costs.” Redacted Am. Compl., ¶ 212. The Court concludes that such
allegations, set forth in more detail below, are sufficient at this stage.
Start with network effects. A leading antitrust treatise explains, “For purposes of
analyzing barriers to entry, a network effect is a feature that makes a network more valuable as
the number of users increases.” Areeda & Hovenkamp, ¶ 421h, at 95. A telephone system, for
example, is traditionally “more valuable as it has more subscribers, thus enabling more people to
communicate with one another.” Id. Here, the FTC advances a modern variation on that well-
established barrier to entry. It alleges that “because a core purpose of personal social networking
is to connect and engage with personal connections, it is very difficult for a new entrant to
21
displace an established personal social network in which users’ friends and family already
participate.” Redacted Am. Compl., ¶ 212. In other words, why would new users go to a social
space that does not include their important contacts?
The Amended Complaint also alleges that “[i]n addition to facing these network effects, a
potential entrant in personal social networking services would also have to overcome the high
switching costs faced by users.” Id., ¶ 213. It explains: “Over time, users of Facebook’s and
other personal social networks build more connections and develop a history of posts and shared
experiences, which they cannot easily transfer to another personal social networking provider.”
Id. Indeed, these “switching costs can increase over time” as a “user’s collection of content and
connections, and investment of effort in building each, continually builds with use of the
service.” Id.
It is at least plausible that these twin doctrines pose barriers to entry in the market for
PSN services. Off the bat, there can be little doubt that network effects and switching costs are
commonly recognized types of barriers to entry — a proposition that Facebook does not
meaningfully contest. See ECF No. 87 (Reply) at 9–12; see also, e.g., Eastman Kodak Co. v.
Image Tech. Servs., Inc., 504 U.S. 451, 476–77 (1992) (discussing switching costs); Microsoft,
253 F.3d at 55–56 (discussing network effects); Areeda & Hovenkamp, ¶ 421h. Against that
backdrop, the FTC has supported its claims with ample allegations in the Amended Complaint.
For example, that Defendant itself “recognized the significant advantage Facebook enjoyed due
to these structural barriers.” Redacted Am. Compl., ¶ 212. Indeed, a Facebook executive
expressed the sentiment as follows: “Why are we hard to compete with[?] Your friends are here.
You have made a big investment in your Facebook network and identity.” Id. Zuckerberg,
furthermore, stated about the company’s network effects, “Perhaps the most valuable thing about
22
Facebook is that it is by far the world’s most comprehensive directory of people and their
connections[, which is] a huge structural advantage.” Id.The Amended Complaint also alleges the same with regard to switching costs. It states
that Facebook executives recognized that “one of the most important ways we can make
switching costs very high for users - if we are where all users’ photos reside[, it] will be very
tough for a user to switch if they can’t take those photos and associated data/comments with
them.” Id., ¶ 216. The FTC also notes that “these switching costs can increase over time — a
‘ratchet effect’ — as each user’s collection of content and connections, and investment of effort
in building each, continually builds with use of the service.” Id., ¶ 213. Finally, it alleges that
Facebook was also well aware of this dynamic, with “a Facebook ordinary course document
not[ing] that there are ‘many lines of evidence for a substantial ratchet effect’ and that ratchet
effects ‘can confer [a] permanent advantage.’” Id.
Taken together, those allegations are sufficient at this early stage in the ligation. While
this case involves a novel market, it is at least plausible that Facebook’s network effects and the
high cost of switching away prevent new rivals from entering that market. In short, the
Amended Complaint’s allegations concerning barriers to entry are “enough to raise a right to
relief above the speculative level.” Twombly, 550 U.S. at 555.
Facebook resists this conclusion, insisting that the FTC has “pleaded itself out of court”
by alleging that “other service providers with substantial networks could add PSNS offerings
along with other services.” MTD at 13. In other words, Defendant contends that there cannot be
significant entry barriers because a “non-PSNS can add PSNS features after establishing a
network outside the PSNS market.” Reply at 10. But the FTC’s allegation about the growth of
non-PSN services does not necessarily contradict the existence of entry barriers into the market
23
for PSN services. Indeed, the Amended Complaint describes how “well-known, sophisticated,
and well-financed firms” such as Google “also tried but failed to successfully enter the U.S.
personal social networking market” and how Facebook’s market power has nonetheless endured
for years. See Redacted Am. Compl., ¶ 187. The Amended Complaint further alleges that
Zuckerberg himself recognized, “[T]here are network effects around social products and a finite
number of different social mechanics to invent.” Redacted Am. Compl., ¶ 66. In addition, while
Defendant’s prediction about non-PSN services’ ability to grow before eventually adding PSN
services may ultimately be vindicated, at this stage the Court is required to “grant [P]laintiff ‘the
benefit of all inferences that can be derived from the facts alleged.’” Sparrow, 216 F.3d at 1113(quoting Schuler, 617 F.2d at 608). To accept Facebook’s theory about barriers to entry would
require the Court to do the inverse and all but ignore the FTC’s well-pleaded allegations about
network effects and switching costs. The Court declines Defendant’s invitation, while noting
that Facebook is of course free to pursue the theory as the litigation progresses.
B. Anticompetitive Conduct
Possessing monopoly power in the relevant market is not enough, however. The Court
now turns to the second element of a Section 2 claim: has the FTC sufficiently alleged the
“willful . . . maintenance of that power as distinguished from growth or development as a
consequence of a superior product, business acumen, or historic accident”? Microsoft, 253 F.3d
at 50 (quoting Grinnell, 384 U.S. at 570–71). Count I alleges that Facebook engaged in
anticompetitive conduct by acquiring firms such as Instagram and WhatsApp. Count II,
meanwhile, alleges that those acquisitions, together with Defendant’s agreements and practices
related to Facebook Platform — i.e., the company’s “set of tools that allowed software
developers to create interoperability between their products and Facebook Blue,” Facebook,
24
2021 WL 2643627, at *5 — constitute a course of anticompetitive conduct. The Court thus
considers whether the FTC has satisfied the second element of its monopoly-maintenance claim
with respect to each of the two counts.
Count I
a. Legal Framework
“[H]aving a monopoly does not by itself violate § 2.” Microsoft, 253 F.3d at 58. The
Supreme Court has explained that the “mere possession of monopoly power, and the concomitant
charging of monopoly prices, is not only not unlawful; it is an important element of the free-
market system . . . . To safeguard the incentive to innovate, the possession of monopoly power
will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.”
Verizon Commc’ns Inc. v. L. Offs. of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
“Whether any particular act of a monopolist is exclusionary, rather than merely a form of
vigorous competition,” however, “can be difficult to discern: the means of illicit exclusion, like
the means of legitimate competition, are myriad.” Microsoft, 253 F.3d at 58. “The challenge for
an antitrust court,” therefore, “lies in stating a general rule for distinguishing between
exclusionary acts, which reduce social welfare, and competitive acts, which increase it.” Id.Addressing that challenge, the D.C. Circuit has articulated several principles that
“emerge” from “a century of case law on monopolization under § 2.” Id. “First, to be
condemned as exclusionary, a monopolist’s act must have an ‘anticompetitive effect.’ That is, it
must harm the competitive process and thereby harm consumers.” Id. “Second, the plaintiff, on
whom the burden of proof of course rests, must demonstrate that the monopolist’s conduct
indeed has the requisite anticompetitive effect.” Id. at 58–59 (internal citations omitted). “Third,
if a plaintiff successfully establishes a prima facie case under § 2 by demonstrating
25
anticompetitive effect, then the monopolist may proffer a ‘procompetitive justification’ for its
conduct.” Id. at 59. “Fourth, if the monopolist’s procompetitive justification stands unrebutted,
then the plaintiff must demonstrate that the anticompetitive harm of the conduct outweighs the
procompetitive benefit.” Id. Finally, “in considering whether the monopolist’s conduct on
balance harms competition and is therefore condemned as exclusionary for purposes of § 2, [a
court’s] focus is upon the effect of that conduct, not upon the intent behind it. Evidence of the
intent behind the conduct of a monopolist is relevant only to the extent it helps us understand the
likely effect of the monopolist’s conduct.” Id.
b. Application
With those principles in mind, the Court examines whether Count I in the Amended
Complaint — which focuses on Facebook’s acquisitions of Instagram and WhatsApp —
plausibly alleges legally cognizable anticompetitive conduct.
As its last Opinion recognized, “It is well established that mergers may constitute one
such ‘means’” that tend to “‘destroy competition itself’ via ‘means other than competition on the
merits.’” Facebook, 2021 WL 2643627, at *22 (quoting Microsoft, 253 F.3d at 58, 62). Indeed,
there is no shortage of authorities observing that “[h]istorically and today, merging viable
competitors to create a monopoly is a clear § 2 offense.” Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law, vol. III, ¶ 701a, at 200 (4th ed. 2015). Further, a monopolist’s
acquisition of “an actual or likely potential competitor is properly classified as anticompetitive,
for it tends to augment or reinforce the monopoly by means other than competition on the
merits.” Id.; see also, e.g., Grinnell, 384 U.S. at 576 (finding Section 2 violation based in part on
acquisitions of competitors); BRFHH Shreveport, LLC v. Willis Knighton Med. Ctr., 176 F.
Supp. 3d 606, 622 (W.D. La. 2016) (“[A]cquisitions of viable competitors alone may establish
26
the anticompetitive conduct element of a section 2 claim.”); Behrend v. Comcast Corp., No. 03-
6604, 2012 WL 1231794, at *20 (E.D. Pa. Apr. 12, 2012) (same).
Against that backdrop, the key question is whether the FTC has plausibly alleged that
Facebook engaged in such anticompetitive conduct by acquiring actual or potential competitors,
harming the competitive process, and thereby harming consumers. Before delving into that
question, it is worth noting preliminarily that while the Amended Complaint references
Facebook’s acquisitions of companies other than Instagram and WhatsApp, the agency concedes
that it does not allege that those acquisitions “each standing alone[] violated the antitrust laws.
Instead, the allegations provide factual context for Facebook’s anticompetitive course of
conduct.” Redacted FTC Opp. at 21 (emphasis omitted). The Court therefore focuses on the
allegations with regard to the acquisitions of Instagram and WhatsApp.
Start with Instagram. The FTC alleges that it was long “a serious threat to Facebook’s
dominance,” which led Defendant to “initially tr[y] to compete on the merits with mobile photo-
sharing capabilities.” Redacted Am. Compl., ¶¶ 80, 83. “As Instagram soared,” however,
“Facebook’s leaders began to focus on the prospect of acquiring Instagram rather than competing
with it.” Id., ¶ 87. Indeed, Zuckerberg internally “repeatedly explained the case for acquisition
in terms of Instagram’s threat as a personal social networking competitor.” Id., ¶ 89; see id.,
¶¶ 87–92. According to the Amended Complaint, that sentiment was consistent with the “deeply
rooted view within Facebook that, as Mr. Zuckerberg put it in a June 2008 internal email, ‘it is
better to buy than compete.’” Id., ¶ 64. Eventually in April 2012, Facebook announced that it
had reached an agreement to acquire Instagram for $1 billion, the company’s most expensive
acquisition to date. Id., ¶ 95. The Amended Complaint also alleges that both internally and
externally, commentators viewed the purchase as designed to neutralize a competitor. See, e.g.,
27
id., ¶¶ 95–104. “Less than two weeks after the acquisition was announced,” moreover,
“Zuckerberg suggested canceling or scaling back investment in Facebook’s own mobile photo
app as a direct result of the Instagram deal,” which Facebook went on to do in the ensuing years.
Id., ¶ 98.
The story is much the same with regard to WhatsApp. The Amended Complaint alleges
that “[a]fter neutralizing the threat from Instagram, Facebook turned to what it considered ‘the
next biggest consumer risk’ for Facebook Blue”: WhatsApp, “the popular and widely used
mobile message app.” Id., ¶ 107. Although WhatsApp was not yet active in the personal-social-
networking market, Facebook feared that once the app reached sufficient scale, it “could, by
adding additional features and functionalities, enter the personal social networking market at
competitive scale and undermine or displace Facebook Blue’s personal social networking
monopoly.” Id., ¶ 108. In other words, Facebook viewed WhatsApp as a likely potential
competitor. Id., ¶ 118 (“Facebook executives and employees repeatedly identified WhatsApp
internally as a unique threat to Facebook Blue.”). Once again, Facebook briefly attempted to
compete with WhatsApp before “decid[ing] to acquire WhatsApp rather than compete with it, in
an effort to neutralize a significant competitive threat to its personal social networking
monopoly.” Id., ¶ 120. Indeed, Zuckerberg wrote in 2012, “[I]’m the most worried about
messaging. WhatsApp is already ahead of us in messaging in the same way Instagram was
‘ahead’ of us in photos . . . . I’d pay $1b for them if we could get them.” Id. Ultimately, in
February 2014, Facebook announced an agreement to buy WhatsApp for $19 billion. Id., ¶ 121.
Those facts sufficiently allege that Facebook acquired Instagram and WhatsApp in order
to neutralize actual and likely future competitors. Although Defendant briefly contends that the
FTC has not alleged the “objective likelihood that WhatsApp would be a significant PSNS rival”
28
and that there may in fact have been “little actual overlap” between Instagram and Facebook
Blue, see MTD at 24, the question at this stage is merely whether the agency has plausibly
alleged that Instagram and WhatsApp were actual or potential competitors. See Areeda &
Hovenkamp, ¶ 701a, at 200 (4th ed. 2015). The Amended Complaint has plainly done so, as
evidenced by the above allegations, as well as by numerous others put forth by the FTC and not
expressly recited above. See Redacted Am. Compl., ¶¶ 80–129. In fact, Facebook drops this
argument in its Reply, see Reply at 14–19, implying a lack of faith. See, e.g., Wal-Mart Stores,
Inc. v Sec’y of Labor, 406 F.3d 731, 736 n.* (D.C. Cir. 2005) (construing moving party’s
“silence in reply” brief as indication that party had “abandoned [its initial] argument”); Hunter v.
D.C. Child & Family Servs. Agency, 710 F. Supp. 2d 152, 157 (D.D.C. 2010).
Defendant finds slightly surer footing, however, in its contention that the FTC must
allege some anticompetitive effect — that is, that the acquisitions “harm the competitive process
and thereby harm consumers.” Microsoft, 253 F.3d at 58. Facebook is correct inasmuch as the
agency must allege harm to competition and consumers; “harm to one or more competitors will
not suffice.” Id. It is right, moreover, that the FTC has not, and could not, allege harm in the
archetypal form of increased consumer prices, given that Facebook Blue, Instagram, and
WhatsApp are all provided free of charge. See Reply at 17; see also Microsoft, 253 F.3d at 51(“[A] firm is a monopolist if it can profitably raise prices substantially above the competitive
level.”). Notwithstanding that unusual aspect of this antitrust suit, the FTC contends — and the
Court ultimately agrees — that the Amended Complaint sufficiently alleges “harm to the
competitive process and thereby harm [to] consumers.” Microsoft, 253 F.3d at 58.
Setting aside price increases, the FTC does identify a host of other harms to the
competitive process and to consumers of PSN services from the acquisitions. Namely, Plaintiff
29
alleges a decrease in service quality, lack of innovation, decreased privacy and data protection,
excessive advertisements and decreased choice and control with regard to ads, and a general lack
of consumer choice in the market for such services. See Redacted Am. Compl., ¶¶ 218–24.
Indeed, the FTC specifically alleges that the lack of “meaningful competition” has allowed
Facebook to “provide lower levels of service quality on privacy and data protection than it would
have to provide in a competitive market.” Id., ¶ 222. Elsewhere the Amended Complaint alleges
that, after acquiring Instagram and WhatsApp, Facebook halted development of its own
competing services and slowed innovation and promotion of the newly acquired products. Id.,
¶¶ 98–105; 126–27. And the agency further contends that, in a competitive market,
“[c]ompeting social networks may also have explored and developed alternative advertising
models that consumers . . . could have preferred.” Id., ¶ 226. In short, the FTC alleges that even
though Facebook’s acquisitions of Instagram and WhatsApp did not lead to higher prices, they
did lead to poorer services and less choice for consumers.
c. Facebook’s Counterarguments
Defendant resists the above conclusion, maintaining that the FTC is merely speculating
about the harm to competition and consumers. At this stage, however, the Court inquires merely
into whether Plaintiff’s allegations, taken as true, state a plausible claim for relief. Here, they do,
as the FTC has alleged that consumers had access to inferior products and less choice in the
market for PSN services than they would have had in the absence of Facebook’s acquisitions.
The Amended Complaint alleges, for example, that while WhatsApp “embraced privacy-
focused offerings and design” before its acquisition, Facebook has provided lesser privacy and
data protections since, which it could not have done in a competitive market. Id., ¶¶ 127, 221. It
is certainly plausible, moreover, as the Amended Complaint alleges, that consumers would prefer
30
services that offered fewer ads or different ad frameworks. Indeed, the advent of federal
legislation addressing various privacy and advertising concerns related to consumer technology
is consistent with the intuitive notion that consumers care about these issues and may prefer
stronger protections in their PSN services. See, e.g., 15 U.S.C. § 6101 et seq. (Telemarketing
and Consumer Fraud and Abuse Prevention Act); 15 U.S.C. § 7701 et seq. (Controlling the
Assault of Non-Solicited Pornography and Marketing Act); 47 U.S.C. § 227 (Telephone
Consumer Protection Act). As for harm to consumer choice, Plaintiff’s allegations that
Facebook scaled down and eventually shuttered its own mobile-sharing app after acquiring
Instagram is consistent with the assertion that consumers would have a better and broader market
of services to choose from had the acquisition never occurred. See Redacted Am. Compl., ¶¶ 98,
102–04.
While the FTC has not yet proven the requisite anticompetitive effect, it is not required to
do so at this stage. The Commission has alleged that the acquisitions at issue harmed
competition and that “[w]ithout meaningful competition, Facebook has been able to provide
lower levels of service quality . . . than it would have to provide in a competitive market.”
Redacted Am. Compl., ¶ 222. The agency will need to substantiate these allegations at later
stages in the litigation — likely with expert testimony or statistical analysis — but lack of proof
at this juncture does not equate to impermissible speculation, as Defendant contends. Relatedly,
Facebook insists that there is no way to know how the market for PSN services would have
developed but for its acquisitions. Yet that is also not a reason to draw the negative inference
that Plaintiff’s allegations must be false; rather, it reinforces the notion that the FTC down the
road will have to prove its allegations about how the acquisitions affected market conditions and
competition. Cf. Microsoft, 253 F.3d at 79 (“[N]either plaintiffs nor the court can confidently
31
reconstruct a product’s hypothetical technological development in a world absent the defendant’s
exclusionary conduct. To some degree, the defendant is made to suffer the uncertain
consequences of its own undesirable conduct.”) (internal quotation marks and citation omitted).
Facebook’s final critique on this issue involves the FTC’s review of the acquisitions prior
to their closing. As the Court’s previous Opinion in this case explained:
As required by the Hart-Scott-Rodino Act, 15 U.S.C. § 18a, the FTC
reviewed the acquisition [of Instagram] prior to closing to assess
whether it posed anticompetitive concerns. Whereas most mergers
are cleared quickly, in this instance the review took over four
months. During that scrutiny, the agency took the rare step of
“requir[ing] the submission [by the parties] of additional
information or documentary material relevant to the proposed
acquisition.” 15 U.S.C. § 18a(e)(1)(A). Eventually, however,
Facebook and Instagram satisfied the agency’s concerns, and in
August (over four months after the merger was announced), the
Commission voted 5-0 to allow it to proceed without any challenge
or conditions. See FTC, FTC Closes its Investigation into
Facebook’s Proposed Acquisition of Instagram Photo Sharing
Program (Aug. 22, 2012), https://bit.ly/3bDa2mp.
Facebook, 2021 WL 2643627, at *4. Facebook’s acquisition of WhatsApp was “also subject to
Hart-Scott-Rodino Act pre-merger review, but the FTC, once again, did not block it.” Id.(citation omitted). “Although the FTC [again] conveniently omits any mention of this review in
its Complaint, the Court may take judicial notice of that public agency action.” Id. (citations
omitted).
Facebook thus argues that because the FTC “unconditionally cleared both acquisitions
under Section 7 of the Clayton Act, which Congress enacted to address incipient threats to
competition that Section 2 would not condemn,” it is hypocritical for the agency to now claim
that the acquisitions run afoul of Section 2. See MTD at 21. The FTC, for its part, counters that
“HSR filings do not result in acquisitions being approved or blessed by the FTC or DOJ,” that
32
the HSR Act “merely established reporting requirements for acquisitions over a certain size,” and
that the prior HSR reviews are simply beside the point here. See Redacted FTC Opp. at 21.
The FTC has the better argument, at least insofar as its HSR reviews at the time of the
acquisitions do not bear significantly on the issue now before the Court. The HSR Act does not
require the FTC to reach a formal determination as to whether the acquisition under review
violates the antitrust laws. On the contrary, it merely obliges the parties to the merger to report
certain information to the agency and to wait to consummate the deal until the expiration of the
statutory waiting period, which the FTC may extend while it gathers additional information. See
15 U.S.C. § 18a(a), (b), (e). Indeed, while the FTC conducted an investigation of the challenged
acquisitions here and eventually voted to close the investigation, its closing letter to Facebook
expressly stated, “This action is not to be construed as a determination that a violation may not
have occurred, just as the pendency of an investigation should not be construed as a
determination that a violation has occurred. The Commission reserves the right to take such
further action as the public interest may require.” FTC, Closing Letter Regarding Proposed
Acquisition of Instagram, Inc., by Facebook, Inc. (Aug. 22, 2012), https://bit.ly/3p1UMGF. That
letter is in keeping with the Act’s explicit language making clear that the FTC can bring post-
review challenges, notwithstanding the previous closing of HSR review without an antitrust-
violation determination: “Any action taken by the Federal Trade Commission or the Assistant
Attorney General or any failure of the Federal Trade Commission or the Assistant Attorney
General to take any action under this section shall not bar any proceeding or any action with
respect to such acquisition at any time under any other section of this Act or any other provision
of law.” 15 U.S.C. § 18a(i)(1).
33
In light of that reality, the FTC’s decisions to close the investigations into Facebook’s
acquisitions do not provide a basis to grant the company’s Motion. The Commission could have
decided to close the investigations for many reasons, and it would be improper to draw a merits
conclusion about the legality of the mergers on the basis of those decisions, especially at the
motion-to-dismiss stage. Cf. Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690, 713–14
(4th Cir. 2021) (affirming district court’s exclusion of evidence relating to Department of
Justice’s investigation of merger without challenging it and holding that Department’s “decision
not to pursue the matter isn’t probative as to the merger’s legality because many factors may
motivate such a decision, including the Department’s limited resources”).
In sum, the Court concludes that Count I of the Amended Complaint adequately alleges
both elements of the offense of unlawful monopoly maintenance under Section 2 of the Sherman
Act: (1) Facebook’s monopoly power in the market for PSN services; and (2) the company’s
willful maintenance of that power via anticompetitive acquisitions. See Microsoft, 253 F.3d at
50.
Count II
That leaves Count II, which alleges that Facebook “has willfully maintained its monopoly
power through its course of conduct that includes both anticompetitive acquisitions and its
anticompetitive conditional dealing practices, and maintaining and enforcing anticompetitive
agreements relating to Facebook Platform to deter competitive threats to its personal social
networking monopoly.” Redacted Am. Compl., ¶ 238 (emphases added). Primarily relying on
the Court’s first Opinion, Defendant urges dismissal of this count.
34
Because the prior Opinion’s lengthy discussion of Plaintiff’s challenges to the Platform
policies forms the backdrop for the instant dispute, it is worth briefly reviewing the key points of
that decision. In its initial Complaint, the FTC alleged the following:
Facebook adopted and enforced a number of anticompetitive
policies governing the use of its [application programming
interfaces]. Most prominently, in 2013 it announced a policy of
refusing to allow third-party, freestanding apps . . . to access those
APIs if they replicate[d] [Facebook’s] core functionality — i.e., if
they competed with Facebook Blue. Facebook then enforced that
policy against a number of freestanding apps, revoking API
permissions after having previously offering them access.
Facebook, 2021 WL 2643627, at *14 (internal quotation marks and citations omitted). The
Court sided with the company, however, and explained that these allegations did not provide “a
viable basis for an injunction under Section 13(b) of the FTC Act.” Id. That holding was
buttressed by three conclusions: (1) “Facebook’s general policy of refusing to provide API
access to its competitors does not itself violate Section 2”; (2) “although specific instances in
which Facebook revoked a competitor’s API permissions (after previously providing it access)
might have violated Section 2, the last alleged instance occurred in 2013, so there is no way in
which Facebook ‘is violating’ or ‘is about to violate’ the antitrust laws, which is a necessary
condition for an injunction under Section 13(b)”; and (3) “Plaintiff has failed to plead facts to
support a ‘conditional dealing’ theory.” Id. (citation omitted).
In response to the FTC’s Amended Complaint, Facebook suggests that the Court should
not even engage with the new allegations surrounding the Platform policies because Plaintiff was
not invited to replead on that issue. See MTD at 33. Such a position is not without support. See
Facebook, 2021 WL 2643627, at *2 (“Regardless of whether the FTC can amend its Complaint
to plausibly allege market power and advance this litigation, then, the conduct it has alleged
regarding Facebook’s interoperability policies cannot form the basis for Section 2 liability.”).
35
The Court need not decide whether the FTC was allowed to replead these allegations, however,
because in any event it has failed to successfully do so. Similarly, while the parties further
dispute whether the Platform-related allegations are barred by the law of the case, the Court can
sidestep any analysis of the technical elements of that doctrine. Regardless of whether the law of
the case formally applies, the FTC has supplied no persuasive justification for departing from the
sensible ethos that the doctrine embodies — viz., for reaching a different result on the ultimate
question of whether there is a “viable basis for an injunction under Section 13(b).” Facebook,
2021 WL 2643627, at *14; see LaShawn A. v. Barry, 87 F.3d 1389, 1393 (D.C. Cir. 1996)
(“[T]he same issue presented a second time in the same case in the same court should lead to the
same result.”) (emphasis omitted).
In other words, the Court concludes that even if the Amended Complaint’s new
allegations satisfied the exacting requirements previously set forth for showing that a Section 2
violation occurred at some point in the past, that would not be enough under Section 13(b). This
is because, as the Court previously explained, “While it is possible that Facebook’s
implementation of th[ose] polic[ies] as to certain specific competitor apps may have violated
Section 2, such finding would not change the outcome here: all such revocations of access
occurred in 2013, seven years before this suit was filed, and the FTC lacks statutory authority to
seek an injunction ‘based on [such] long-past conduct.’” Id. at *2 (quoting FTC v. Shire
ViroPharma, Inc., 917 F.3d 147, 156 (3d Cir. 2019)). Put differently, the Court held that “to the
extent that Facebook’s Platform-related conduct is actionable, it occurred nearly eight years ago,
rendering an injunction under Section 13(b) unavailable as a matter of law.” Id. at *8.
Plaintiff has not put forth material new allegations requiring the Court to change tack on
its Section 13(b) conclusion. As discussed at length in the prior Opinion, Section 13(b) allows
36
the FTC to “bring suit in a district court of the United States to enjoin” allegedly unlawful
conduct only where it has “reason to believe . . . that any person, partnership, or corporation is
violating, or is about to violate, any provision of law enforced by the [FTC].” 15 U.S.C. § 53(b).
Section 13(b) therefore contemplates only “relief that is prospective, not retrospective.” AMG
Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1348 (2021); see FTC v. Credit Bureau Ctr., LLC,
937 F.3d 764, 774 (7th Cir. 2019) (“Section 13(b) serves a . . . forward-facing role: enjoining
ongoing and imminent future violations.”). It “does not permit the FTC to bring a claim based
on long-past conduct without some evidence that the defendant ‘is’ committing or ‘is about to’
commit another violation.” Shire ViroPharma, Inc., 917 F.3d at 156.
Here, as before, “the FTC cannot use 13(b) to challenge Facebook’s Platform-related
conduct because it has not pleaded that any actual Section 2 violation is ongoing or about to
occur.” Facebook, 2021 WL 2643627, at *18. The closest the agency comes is its allegation
that, “[h]aving suspended its anticompetitive platform policies [in December 2018] in response
to anticipated public scrutiny, Facebook is likely to reinstitute such policies if such scrutiny
passes.” Redacted Am. Compl., ¶ 151. Astute readers will recognize that allegation as identical,
word-for-word, to the one that the Court already deemed insufficient for purposes of Section
13(b). Facebook, 2021 WL 2643627, at *18 (quoting Redacted Compl., ¶ 149). To be sure, the
FTC now mentions an additional developer that was allegedly subject to the API restrictions in
2016, whereas the last such instance alleged in the initial Complaint was in 2013. Compare
Redacted Am. Compl., ¶ 158(d), with Redacted Compl., ¶¶ 152–56. But that in no way affects
the Court’s previous conclusion that the FTC has not alleged that Facebook’s enforcement of the
Platform policies “is violating, or is about to violate, any provision of law enforced by the
[FTC].” 15 U.S.C. § 53(b). Once again, the temporal gap between the complained-of conduct
37
and this lawsuit is “fatal to the agency’s claim for injunctive relief under Section 13(b) here . . .
because it means that no actionable violation is either ongoing or about to occur.” Facebook,
2021 WL 2643627, at *18.
* * *
This conclusion requires resolution of one remaining issue with respect to Count II. As
mentioned above, the count is not limited to Facebook’s Platform policies; rather, the FTC
combines its challenge to those policies with its allegations concerning the contested
acquisitions. See Redacted Am. Compl., ¶¶ 238–40. (Count I, conversely, deals with only the
acquisitions.) The agency contends that the Court thus may not dismiss Count II because “the
Instagram and WhatsApp acquisitions form the basis for Count 2 as well as Count 1.” Redacted
FTC Opp. at 36. In other words, where a claim contains valid and invalid components, dismissal
is not appropriate. It is certainly true that the acquisitions could be subject to Section 13(b);
indeed, the Court previously held that “an injunction under Section 13(b) is a theoretically
available remedy in a Section 2 challenge to long-ago mergers so long as the defendant still
holds the purchased assets or stock, as is the case here,” Facebook, 2021 WL 2643627, at *23 —
a proposition the company does not contest this time around. Compare MTD at 37–38 (arguing
that Platform policies cannot be challenged under Section 13(b)), with id. at 20–33 (no mention
of similar challenge to the acquisitions). The question therefore is what to do with Count II:
should the Court dismiss the portion that encompasses challenges to the Platform policies, or
must it allow the count to remain given its incorporation of the acquisitions?
The Court concludes that the latter is the better course, with an important caveat.
Although the D.C. Circuit does not appear to have weighed in on the issue, a chorus of other
courts has held that a “motion to dismiss under Rule 12(b)(6) doesn’t permit piecemeal
38
dismissals of parts of claims.” BBL, Inc. v. City of Angola, 809 F.3d 317, 325 (7th Cir. 2015)
(citation omitted). Rather, “the question at this stage is simply whether the complaint includes
factual allegations that state a plausible claim for relief.” Id.; see also, e.g., FTC v. Nudge, LLC,
430 F. Supp. 3d 1230, 1246 (D. Utah 2019) (“As many courts have recognized, parties may not
use rule 12(b)(6) to dismiss only parts of a claim . . . . And because Defendants’ asserted
defenses do not dispose of the Division’s claims in their entirety, those claims cannot be
dismissed at this stage.”); Redwind v. W. Union, LLC, No. 18-2094, 2019 WL 3069864, at *4
(D. Or. June 21, 2019) (same and collecting cases). That conclusion flows from the plain
language of Rule 12(b)(6), which permits a party to seek dismissal for “failure to state a claim
upon which relief can be granted.” See, e.g., Charles v. Front Royal Volunteer Fire and Rescue
Dep’t, Inc., 21 F. Supp. 3d 620, 629 (W.D. Va. 2014) (“A plain reading of Rule 12(b)(6)
indicates that the rule may be used only to dismiss a ‘claim’ in its entirety.”) (internal quotation
marks and citation omitted); Doe v. Napa Valley Unified Sch. Dist., No. 17-3753, 2018 WL
4859978, at *2 (N.D. Cal. Apr. 24, 2018) (“By its own terms, there does not appear to be any
way to grant partial dismissal of a claim under Fed. R. Civ. P. 12(b)(6).”) (internal quotation
marks and citation omitted).
In sum, at the motion-to-dismiss stage, once a court determines that a claim states a
viable basis for relief, it cannot further parse out whether other portions of the claim would
suffice on their own. Since the allegations relating to Facebook’s acquisitions state a plausible
claim for relief, even though the Platform-policy ones do not, Count II should not be dismissed.
Of course, “[s]ummary judgment is different.” BBL, Inc., 809 F.3d at 325. In stark
contrast to Rule 12(b)(6), Rule 56 “explicitly allow[s] for ‘[p]artial [s]ummary [j]udgment’ and
require[s] parties to ‘identif[y] each claim or defense—or the part of each claim or defense—on
39
which summary judgment is sought.’” Id. (quoting Fed. R. Civ. P. 56(a)). “At the summary-
judgment stage, the court can properly narrow the individual factual issues for trial by
identifying the material disputes of fact that continue to exist.” Id. (emphasis omitted); see
Nudge, 430 F. Supp. 3d at 1246 (“[I]f Defendants wish to challenge only parts of Plaintiffs’
claims, such a challenge would be appropriate at summary judgment.”). The Platform portion of
Count II can thus be sliced out at summary judgment.
In the meantime, the Court will not award the FTC a discovery windfall for using Count
II as a Trojan horse to smuggle in the Platform policies. Instead, it will not permit what would
certainly be time-consuming and costly discovery on such policies. “A trial court enjoys
considerable discretion over discovery matters.” TIG Ins. Co. v. Firemen’s Ins. Co. of
Washington, D.C., 718 F. Supp. 2d 90, 95 (D.D.C. 2010) (citing Friedman v. Bache Halsey
Stuart Shields, Inc., 738 F.2d 1336, 1341 (D.C. Cir. 1984)). Here, in light of the Court’s
conclusion that the Platform-related allegations are legally infirm, there is no reason “that
discovery should be allowed of information that has no conceivable bearing on the case.” Food
Lion, Inc. v. United Food & Com. Workers Int’l Union, AFL-CIO-CLC, 103 F.3d 1007, 1012
(D.C. Cir. 1997) (quoting 8 Wright, Miller & Marcus, Federal Practice and Procedure: Civil 2d
§ 2008 (1994)). Even if discovery fully corroborated Plaintiff’s allegations about the Platform
policies, there still would be no basis for a trial on that portion of Count II. While Facebook may
argue that this is why dismissal is appropriate now, the Court does not read Rule 12(b)(6) to
permit such a result. In any event, the discovery bar means that Facebook is not prejudiced by
the Court’s ruling. Such a determination is one that best balances judicial economy and the
parties’ time with fidelity to the Federal Rules of Civil Procedure.
40
C. Recusal of Chair Khan
Rebuffed on its frontal assault on the updated allegations, Facebook last assays a flanking
maneuver. It requests that this Court either dismiss the Amended Complaint as “not properly
authorized by the Commission” or require that the FTC address the merits of a petition that
Defendant filed with the agency seeking the recusal of Chair Khan. See MTD at 40. The
company contends that Khan’s participation in the vote to authorize the Amended Complaint
violated federal law given her extensive past work on antitrust issues involving major technology
platforms, including “purported factual findings and legal conclusions to the effect that Facebook
has violated Section 2 of the Sherman Act” in a Report of the House Judiciary Committee’s
Subcommittee on Antitrust, Commercial, and Administrative Law. See ECF No. 83-3 (Petition
for Recusal) at 20.
Khan served as counsel to the Subcommittee and “led the congressional investigation into
digital markets and the publication of [the] final report.” Id. (citing to Lina M. Khan, Bio (link
no longer active)). Among the report’s conclusions were that Facebook had “monopoly power”
in the “social networking market” and had acquired both Instagram and WhatsApp to further that
market dominance. Id. at 11–12 (citing Majority Staff of H. Subcomm. on Antitrust, Com. &
Admin. Law of the Comm. on the Judiciary, 116th Cong., Investigation of Competition in
Digital Markets: Majority Staff Report and Recommendations, at 12, 13, 151, 154–55 (Oct.
2020)). Khan’s academic and other writing prior to joining the FTC also addressed at length the
question of whether certain platforms, including Facebook, are anticompetitive. These include
tweets about the initial filing of this case. See, e.g., ECF No. 83-4 at 63–82 (Expert Declaration
of Professor Daniel B. Rodriguez (Appendix of Statements by Chair Lina M. Khan)); Petition for
Recusal, Exh. D at 76–78. The Court takes judicial notice of these publications, Defendant’s
41
Petition for Recusal, and statements of the agency relating to the Petition. See Washington Post
v. Robinson, 935 F.2d 282, 291 (D.C. Cir. 1991) (“[C]ourt may take judicial notice of the
existence of newspaper articles”); Connecticut v. Dep’t of the Interior, 344 F. Supp. 3d 279, 306
n.23 (D.D.C. 2018) (court can “take judicial notice of . . . correspondence from the
Department”).
The FTC did not address the Petition’s merits, but instead dismissed it as improperly filed
since the Commission has no process for addressing the “disqualification or recusal of a
Commissioner” other than when she is involved in either a rulemaking or an adjudication. See
ECF No. 83-9 (Email from April J. Tabor, Office of the Sec’y, FTC, to Geoffrey M. Klineberg
(Aug. 19, 2021)); see also Redacted FTC Opp. at 43. Because Khan was not recused, Facebook
believes that the FTC did not properly make the decision through a vote of the Commission to
“bring suit in a district court of the United States.” 15 U.S.C. § 53(b). The FTC rejoins that the
decision to dismiss the Petition was proper and that there was no need for Khan’s recusal. The
Court concurs.
Before addressing the specific legal arguments that the parties raise, the Court notes that
Khan’s vote to authorize the Amended Complaint hardly occurred on a blank slate. The FTC
originally filed its Complaint in this case in December 2020, well before she joined the
Commission in June 2021. See Redacted Compl.; FTC, Lina M. Khan Sworn in as Chair of the
FTC, https://bit.ly/3JDleyK (June 15, 2021). When this Court dismissed the Complaint in June
2020, its Opinion expressly recognized that the FTC might well refile. Facebook, 2021 WL
2643627, at *8 (“[t]o promote clarity and efficiency going forward in the event Plaintiff amends
its Complaint”); id. at *14 (“Whether and how the agency chooses to [replead] is up to it.”). It
was hardly surprising when the FTC did in fact replead, moving to file an Amended Complaint
42
in August 2021. See ECF No. 76-2 (Unredacted Amended Complaint). Like the original
Complaint, the FTC’s authorization of the Amended Complaint came down to a 3-2 vote among
the five Commissioners, this time with Khan among the three who voted to authorize. See FTC
Alleges Facebook Resorted to Illegal Buy-or-Bury Scheme to Crush Competition After String of
Failed Attempts to Innovate, https://bit.ly/3q8Ku76. Although the Court recognizes the
importance of her vote, it is an exaggeration to treat Kahn as the sole instigator of the current
case.
The Court also notes the unique circumstances in which the FTC operates as an agency
that may bring suit, conduct rulemaking, and act as an adjudicator. In selecting a chair for a
Commission with these diverse responsibilities — as with choosing the head of any agency — it
is natural that the President will select a candidate based on her past experiences and views,
including on topics that are likely to come before the Commission during her tenure, and how
that administrator will implement the Administration’s priorities. Ass’n of Nat. Advertisers, Inc.
v. FTC, 627 F.2d 1151, 1174 (D.C. Cir. 1979) (“An administrator’s presence within an agency
reflects the political judgment of the President and Senate.”). Courts must tread carefully when
reviewing cases in this area lest we “eviscerate the proper evolution of policymaking were we to
disqualify every administrator who has opinions on the correct course of his agency’s future
action.” Id.Chair Khan’s Role
Turning to the specific legal arguments, Facebook gets off on the wrong foot by asserting
that “[b]inding D.C. Circuit precedent requires an FTC Commissioner’s recusal where ‘a
disinterested observer’ would ‘conclude that [she] has in some measure adjudged the facts as
well as the law of a particular case in advance.’” MTD at 40 (quoting Cinderella Career Coll. &
43
Finishing Schs., Inc. v. FTC, 425 F.2d 583, 591 (D.C. Cir. 1970)). What Defendant fails to note
is that both Cinderella Career Colleges and a similar out-of-Circuit case, American Cyanamid
Co. v. FTC, 363 F.2d 757, 763 (6th Cir. 1966), deal with an agency official adjudicating the
merits of a case, not authorizing the filing of one. See Redacted FTC Opp. at 42.
In American Cyanamid Co., then-FTC Chair Paul Rand Dixon had conducted work
similar to Khan’s because he had “played an ‘active role’ in an investigation by [a Senate]
Subcommittee of many of the same facts and issues and of the same parties as are involved in
this [FTC] proceeding, and participated in the preparation of the report of the Subcommittee on
the same facts, issues and parties.” 363 F.2d at 763, 767. That case — unlike this one —
involved “[t]he question of when a judicial officer is disqualified to sit in judgment in a
particular case,” id. at 763 (emphasis added), not whether Dixon could have voted to authorize a
suit filed in district court. Similarly, in Cinderella Career Colleges, then-Chair Dixon took part
in the Commission’s review and reversal of the decision of a hearing examiner. See 425 F.2d at
589. Adjudication has its own unique ethical requirements; as a result, our Circuit has held that
“the Cinderella standard is not applicable” to non-adjudicatory proceedings, and that courts
“must not impose judicial roles upon administrators when they perform functions very different
from those of judges.” Ass’n of Nat. Advertisers, 627 F.2d at 1154, 1168. The FTC thus has the
better of the argument that these cases are not relevant because it was not acting there as an
adjudicatory body as provided under 15 U.S.C. § 45(b), but instead simply filing a case in federal
court. Id. at § 53(b); see Redacted FTC Opp. at 42.
To be sure, even when not acting as an adjudicator, an FTC Commissioner is not
absolved of all ethical constraints. For instance, when a Commissioner is engaged in the
rulemaking process, she should be disqualified when “there has been a clear and convincing
44
showing that the agency member has an unalterably closed mind on matters critical to the
disposition of the proceeding.” Ass’n of Nat. Advertisers, 627 F.2d at 1170; see also Reply at
23. When considering potential prejudgment in the context of a rulemaking, however, courts
have not generally objected to statements made “prior to the initiation of agency action” and
have recognized that “[a]dministrators, and even judges, may hold policy views on questions of
law prior to participating in a proceeding.” Ass’n of Nat. Advertisers, 627 F.2d at 1173–74.
Although Khan has expressed views on Facebook’s monopoly status and even on this specific
case before she joined the FTC, she “remained free, both in theory and in reality, to change h[er]
mind upon consideration of” the suit given her new role and other factors. Id. at 1172; see also
Consumers Union of U.S., Inc. v. FTC, 801 F.2d 417, 427 (D.C. Cir. 1986) (rejecting challenge
to FTC Chairman’s impartiality, as articulation of his “own considered position” “gives no
indication of a mind that has been closed to the evidence in the past or that would disregard any
significant new material subsequently introduced”). In any event, it is not clear that the same
rulemaking standard would necessarily apply to an administrator’s vote to authorize the filing of
a lawsuit in federal court.
So what role does provide the best analogy for analyzing Chair Khan’s actions in voting
to file this case? The Court concludes it is that of a prosecutor. “[T]he standards of neutrality
for prosecutors are not necessarily as stringent as those applicable to judicial or quasi-judicial
officers. . . . [, and they] may require a stronger showing for a prosecutor than a judge in order to
conclude that a conflict of interest exists.” Young v. U.S. ex rel. Vuitton et Fils S.A., 481 U.S.
787, 810–11 (1987). In particular, given prosecutors’ duties, they “are necessarily permitted to
be zealous in their enforcement of the law.” Marshall v. Jerrico, Inc., 446 U.S. 238, 248 (1980).
Of course, this does not waive prosecutors’ ethical obligations, as they “too must serve the public
45
interest,” and their behavior is not “immunize[d] from judicial scrutiny in cases in which the
enforcement decisions of an administrator were motivated by improper factors or were otherwise
contrary to law.” Id. at 249. Facebook maintains that this is just such a case, in that Khan has
“an ‘axe to grind’ against the defendant or [is] not otherwise impartial” given the views
articulated in her past work. See MTD at 43 (quoting Wright v. United States, 732 F.2d 1048,
1056 (2d Cir. 1984)).
Although Khan has undoubtedly expressed views about Facebook’s monopoly power,
these views do not suggest the type of “axe to grind” based on personal animosity or financial
conflict of interest that has disqualified prosecutors in the past. See, e.g., Wright, 732 F.2d at
1055 (“appearance of impropriety” found because prosecutor’s wife was both “a political
opponent of [the defendant’s]” and had, among other actions, brought multiple “complaints to
federal authorities [about the defendant] that could have resulted in criminal charges against him
. . . and who almost certainly harbored personal animosity against [the defendant]”); State v.
Snyder, 256 La. 601, 605 (1970) (requiring recusal of district attorney who expressed views in
mayoral campaign that “relator was guilty of criminal offenses”); State v. Hohman, 138 Vt. 502,
505 (1980), overruled on other grounds by Jones v. Shea, 148 Vt. 307 (1987) (defendant
prejudiced at plea-bargaining stage as state’s attorney’s advertisement during campaign stated
that he would “vigorously prosecute [defendant] and obtain a second conviction” because past
conviction improperly overturned). Here, there is no allegation that Khan has a personal
animosity against Facebook beyond her own views about antitrust law, nor does she have a
financial conflict of interest. Rather, her situation is more analogous — although not a perfect fit
— to one in which an individual has “simultaneous involvement in investigative and
prosecutorial aspects of federal enforcement proceedings.” In re Perlin, 589 F.2d 260, 265 (7th
46
Cir. 1978) (quoting United States v. Dondich, 460 F. Supp. 849, 856 (N.D. Cal. 1978)). This has
not been found “to present the kind of conflict of interest” from which prosecutors are barred.
Id.The very caselaw on which Defendant relies makes clear that, “[o]f course, a prosecutor
need not be disinterested on the issue [of] whether a prospective defendant has committed the
crime with which he is charged. . . . True disinterest on the issue of such a defendant’s guilt is the
domain of the judge and the jury — not the prosecutor.” Wright, 732 F.2d at 1056. There is no
indication that Chair Khan’s decision to seek reinstatement of the FTC’s suit against Facebook
was based on anything other than her belief in the validity of the allegations. Such behavior does
not necessitate recusal.
Other Ethical Issues
Facebook also contends that Khan’s behavior independently violated federal ethics rules
— namely, 5 C.F.R. § 2635.501(a), which instructs a federal employee “to avoid an appearance
of loss of impartiality in the performance of [her] official duties” by not participating in “a
particular matter involving specific parties which [s]he knows is likely to affect the financial
interests of a member of h[er] household, or in which [s]he knows a person with whom [s]he has
a covered relationship is or represents a party, if [s]he determines that a reasonable person with
knowledge of the relevant facts would question [her] impartiality in the matter.” Id.; see also 5
C.F.R. § 2635.101(b)(14) (“Employees shall endeavor to avoid any actions creating the
appearance that they are violating the law or the ethical standards set forth in this part.”); Reply
at 24.
Here, there is no indication that this case would affect “the financial interests of a
member of [Khan’s] household” or that an individual with whom she has a covered relationship
47
is involved in the case. To the extent that Facebook is making an appearance-of-impropriety
argument, the Court believes that its above discussion lays that to rest. Although Khan has
worked extensively on matters relating to antitrust and technology, including expressing views
about Facebook’s market dominance, nothing the company presents suggests that her views on
these matters stemmed from impermissible factors. Indeed, she was presumably chosen to lead
the FTC in no small part because of her published views. The Court thus concludes that Khan’s
participating in the FTC’s vote did not violate ethical rules; as a result, the Amended Complaint
was properly authorized.
IV. Conclusion
For the foregoing reasons, the Court will deny Facebook’s Motion to Dismiss. A
separate Order so stating will issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: January 11, 2022
48