A US appeals court handed Meta’s Facebook (META) a victory Wednesday, refusing to revive an antitrust lawsuit filed by 48 states attorneys general. The decision could hamper US regulators’ broader push to curb the dominance of Big Tech, according to legal experts.
At the heart of the now-blocked lawsuit, filed the same day as an analogous, still-pending suit by the US Federal Trade Commission (FTC), are claims that Facebook’s acquisitions of Instagram in 2012 for $1 billion, WhatsApp in 2014 for $19 billion, and smaller technology companies, were carried out in an illegal “buy-or-bury” scheme intended to quash rivals.
In blocking the states’ case, a three-judge panel for the District of Columbia U.S. Court of Appeals agreed with Facebook and U.S. District Court Judge James Boasberg, that the state attorneys general waited too long to file their claims. The court sided with Facebook’s “laches” defense – a legal doctrine that stops litigation from going forward when a plaintiffs’ unreasonable delay in bringing the action prejudices the opposing party.
And as “sovereigns,” the court added in its ruling, the states don’t meet the test to pursue an injunction under antitrust laws, since injunctions are available only to a “person, firm, corporation or association.”
Antitrust lawyer Kathleen Bradish, vice president for legal advocacy for the pro-regulation American Antitrust Institute, said Facebook’s laches defense in the state case isn’t one likely to stop the FTC’s case from going forward. However, she views the appellate court’s decision to block the case as “worrisome” for antitrust enforcement, especially in the tech sector.
“While I don’t think it dooms the FTC case by any means, it does in my view reflect a troublesome trend in the courts to find ways to place conduct in the tech space – in one way or another – outside the reach of the antitrust laws,” Bradish said.
One concern, she said, is that the D.C. Circuit appears to take a broad view of the type of conduct that’s protected from antitrust scrutiny by regarding acquisitions like Facebook’s as part of a business’ freedom to choose with whom it will deal.
A separate concern, she said, is that the decision seems to treat technology companies as novel, and their competitive effects as uncertain. That attitude — and one that characterized Facebook’s tech industry as “odd” for its rapid growth and innovation — is in line with other cases where judges have shown fundamental discomfort with the complexities of tech platforms and their interoperability with rivals and potential rivals.
Tellingly, Bradish said, there are nine references in the court’s opinion to a Supreme Court case – Verizon v. Trinko – that concluded courts should hesitate to get involved in business actions that they don’t understand well, or can’t monitor well.
Meta said in an email to Yahoo Finance that appellate court “rightly recognized” that the states’ case fundamentally mischaracterized the vibrant competitive ecosystem in which Facebook operates. The company vowed to vigorously defend against the FTC’s antitrust claims.
New York University law professor Eleanor Fox agrees that the appellate court’s decision to block the states’ suit has serious implications for future antitrust actions, given the court’s view against divestiture of Instagram and WhatsApp.
“The Court also said that even if the FTC should prevail on the merits of its case, Facebook ‘can still prevent divestiture by showing that the balance of hardships … tips in its favor,'” Fox said.
The conclusion, she said, is questionable because when the government is the plaintiff, as is the case in the FTC’s suit, the remedy for a violation should be whatever is in the public interest in restoring competition. As part of its lawsuit, the FTC is asking for the DC district court to force Facebook to divest both subsidiaries.
“Given the Circuit Court opinion, the FTC must be even more aware of the challenges before it,” Fox said.
The DC district court has said a trial date in the case will likely be set for 2024.
In February, the FTC lost a court battle over whether Facebook’s parent company could acquire VR content maker Within. The agency said it would not appeal the decision, which was issued by San Jose federal district court judge Edward Davila. In addition, the agency stepped back from pursuing an administrative challenge against the deal.
Bradish said, at some point, she thinks US courts will have to apply more meaningful scrutiny to tech platform deals since the platforms are now an embedded part of the U.S. economy.
“[T]hey will have to do the hard work of looking at specific behaviors of platforms with monopoly power in their space and determining whether their anticompetitive and exclusionary effects outweigh the procompetitive benefits of those practices,” she said.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
Find live stock market quotes and the latest business and finance news
Source: https://finance.yahoo.com/news/experts-say-curbing-big-techs-power-may-be-harder-after-meta-prevails-in-antitrust-case-115759161.html