By Brent Kendall, John D. McKinnon and Ryan Tracy
WASHINGTON -- The Federal Trade Commission is preparing a
possible antitrust lawsuit against Facebook Inc. that it could file
by the end of the year, according to people familiar with the
matter, in a case that would challenge the company's dominant
position in social media.
The case preparations come after the FTC has spent more than a
year investigating concerns that Facebook has been using its
powerful market position to stifle competition, part of a broader
effort by U.S. antitrust authorities to examine the conduct of a
handful of dominant tech companies.
No final decision has been made on whether to sue Facebook,
people familiar with the matter said, and the commission doesn't
always bring cases even when it is making preparations to do so,
such as when it decided against filing an antitrust complaint
against Google Inc. in 2013 after a lengthy investigation.
Facebook is still in the process of making its case to the
commission, even as the probe has been progressing into its late
stages, and recent efforts by FTC staff have included taking
testimony from CEO Mark Zuckerberg, something the commission didn't
do during a prior probe of the company's privacy practices. That
matter resulted in a record-breaking $5 billion settlement.
A majority on the five-member FTC would need to vote in favor of
any lawsuit. The commission comprises three Republicans, including
Chairman Joseph Simons, and two Democrats.
Details of the FTC's likely legal theories in any Facebook
lawsuit couldn't be learned. The company last year disclosed it was
under investigation by the FTC, and The Wall Street Journal has
previously reported that one focus of the agency's probe is the
company's past acquisitions of potential competitors.
FTC staffers are continuing to ask questions about past
acquisitions, as well as about issues related to how Facebook
manages its platform with regard to app developers, some of the
The company has argued that its acquisitions aren't
anticompetitive and have improved products and experiences for its
users, the people said. Facebook hasn't yet held discussions with
the FTC's commissioners, which would likely happen at the very
final stage of the process, the people said.
If Facebook were to lose an antitrust case, the FTC could seek a
range of remedies designed to promote competition against the
company, from restrictions on how Facebook operates to breaking off
pieces of its business. The commission can't unilaterally dictate
such changes; it would first have to prove in legal proceedings
that the company violated federal antitrust law, and that such
changes were necessary.
Asked about Facebook in an Aug. 5 hearing before the Senate
Commerce Committee, Mr. Simons said he couldn't discuss specific
companies. "We have the ability to look back at consummated mergers
and to undo them," he said, adding that the agency has also asked
major tech platform companies for information about past
acquisitions that weren't required to be reported to antitrust
Facebook already has moved to integrate different services it
has acquired, which it says it is doing to improve consumers'
experience, for instance by allowing them to message one another
through different Facebook-owned apps.
A case against the social-media giant would open up a second big
front in the government's pursuit of Big Tech. The Justice
Department, which shares antitrust authority with the FTC, is
planning to file an antitrust lawsuit soon against Alphabet Inc.'s
Google, The Wall Street Journal has reported.
A case against either company would likely take years to
resolve, meaning the officials who bring a lawsuit may not be
around to see its conclusion. The Nov. 3 election could impact the
future of any case, though both Republicans and Democrats have been
critical of tech-company practices, including at Facebook and
The FTC previously has blessed Facebook's expansion through
acquisitions of companies including the photo-sharing app Instagram
in 2012, though not without qualms. Some on the commission worried
about the implications of that deal, but weren't sure they could
win a case, the Journal has reported.
The FTC allowed Facebook's purchase of the messaging service
WhatsApp in 2014. The company had acquired scores of firms over the
Facebook has vigorously defended its deals, saying apps like
Instagram have grown in popularity because Facebook has used its
resources to make them better.
"The acquisition has done wildly well largely because not just
of the founder's talent, but because we invested heavily in
building up the infrastructure and promoting it and working on
security and working on a lot of things around this. And I think
that this has been an amazing success story." Mr. Zuckerberg said
at a July 29 hearing before a House antitrust subcommittee, in
which he testified along with chief executives from Google,
Amazon.com and Apple Inc.
House Judiciary Committee Chairman Jerrold Nadler (D., N.Y.)
called the Instagram deal "exactly the type of anticompetitive
acquisition that the antitrust laws were designed to prevent. This
should never have happened in the first place."
Lawmakers also raised questions about whether Facebook exploits
outsize market share when it interacts with app developers or
moderates online speech.
The antitrust subcommittee, which obtained more than a million
documents from top tech companies, is expected to release a report
in the coming weeks detailing its findings regarding potentially
anticompetitive behavior in the tech sector and whether a
legislative response is needed.
Members of Congress and other Big Tech critics also have faulted
the FTC for not doing more over the past decade to rein in tech
platforms that have grown increasingly dominant, creating
additional pressures on the agency as its plots a course on
"There has to be a deep awareness of how damaging it would be
for the agency if it comes up with nothing," said George Washington
University law professor William Kovacic, a former FTC
Mr. Simons, speaking at an antitrust event this week, said
antitrust enforcers "have made mistakes" in the past, but said they
were still well-positioned to address potential issues presented by
the tech giants.
The FTC has a pair of options if it sues Facebook: It could
bring a case in federal court or it could file a complaint in its
in-house legal system, where the case would first go before an
administrative law judge. The commission itself would then review
that judge's work and issue a decision, which Facebook then could
challenge in a federal appeals court.
If the commission wants to seek an interim injunction blocking
certain Facebook practices before the end of litigation, it would
have to go to federal court. But Mr. Kovacic said the
administrative court approach may have significant advantages for
the FTC because it would allow the commission to write the first
legal decision in the case. "They have an opportunity to write an
opinion that changes the law and shapes the future of U.S. policy
involving dominant firms," he said.
Write to Brent Kendall at email@example.com, John D.
McKinnon at firstname.lastname@example.org and Ryan Tracy at
(END) Dow Jones Newswires
September 15, 2020 19:32 ET (23:32 GMT)
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