Meta Wins Major Antitrust Case

by Rrita Osmani and Alden Hey

On Tuesday, November 18, a federal judge ruled that Meta (formerly Facebook) did not engage in prohibited anticompetitive behavior by purchasing Instagram and WhatsApp. This case was initially launched in 2020 as part of a series of efforts by the Federal Trade Commission (FTC) to break up tech giants including Meta, Google, Amazon, and Apple. This article will examine how this recent ruling affects the prospects of future antitrust cases, as well as the rules and regulations underpinning these cases.

The Sherman Act

The Sherman Act, passed in 1890, is a federal statute that “prohibits activities that restrict interstate commerce and competition in the marketplace.” Historically, it has been used to target unfair trade practices by corporations seeking to reduce competition in the marketplace whether through monopolization, cooperation, or any other anticompetitive behavior that harms consumers.

Section 2

Section 2 of the Sherman Act prohibits monopolization or attempts at monopolizing any aspect of trade or commerce. This includes any act that seeks to eliminate or limit the efficacy of competitors for the purpose of obtaining and maintaining monopoly rents (added profits and benefits accessible only through monopolization). Critically, consumer harm is not necessary to prove a monopoly claim under Section 2, only that the company possesses monopoly power and willfully acquired or maintained that power through anticompetitive conduct.

History of the Sherman Act

The Sherman Act was passed to address the growing centralization of the major gold age market segments including the oil and railroad industries. A landmark antitrust case to this end was Standard Oil Co. of New Jersey v. United States, which saw Standard Oil broken up into its regional subsidiaries. The fallout from this case contributed in part to the panic of 1910-1911, an event that would be pointed to by antitrust defendants as evidence of the potential economic harm in breaking up monopolies.

United States v. Microsoft Corp. (2001)

Launched in 1998, United States v. Microsoft Corp. (2001) was a seminal case in examining tech giant market dominance as a potential antitrust violation. In the 1990s, 90% of desktop computers operated using the MS-DOS operating system. Leveraging this ubiquity, Microsoft sought to centralize control of the search engine market by limiting users’ ability to uninstall the native Internet Explorer in favor of other search engines. It was this market dominance and alleged anticompetitive behavior that served as the cause of action behind the United States’ lawsuit against Microsoft. In 2001, the U.S. Court of Appeals for the District of Columbia Circuit held that Microsoft had violated the Sherman Antitrust Act, later compelling them to adjust their business practices when it came to internet search engines.

U.S. v. Microsoft represents a guiding precedent when it comes to the prosecution of large tech companies for violations of the Sherman Act. Critically, it was not Microsoft’s overwhelming market concentration alone that allowed for the initiation of this case. Instead, U.S. v. Microsoft demonstrates that a defendant engaging in anticompetitive behavior is a necessary pillar to any tech antitrust case.

Meta Antitrust Case

A similar framework to that of U.S. v. Microsoft was followed regarding the allegations made in Federal Trade Commission v. Meta Platforms, Inc. In Meta’s case, the alleged monopoly power was over the social media industry, while the alleged anticompetitive behavior was Meta’s early acquisition of competitors WhatsApp and Instagram before they were able to stand a chance at meaningfully competing. The FTC alleged that these acquisitions were anticompetitive not only because they represented horizontal consolidation of the social media industry, but also because then Facebook allegedly overpaid for their competitors.

Meta differs from Microsoft by alleging that the anticompetitive behavior exercised by the defendant occurred during the development of and in direct relation with the defendant’s monopoly power. This diverging argument, along with the judge’s finding that Meta no longer holds a monopoly on the social media industry, was ultimately fatal to the FTC’s antitrust claims.  Without a direct anticompetitive action that hurt the consumer, the FTC was unable to position their argument within the precedent set by Microsoft and other antitrust cases.

What This Means for Tech Antitrust Cases Going Forward

While Meta’s victory may represent a bad precedent for future acquisition-based antitrust claims, other tech giants are not completely out of the woods.

Apple

The facts of the Department of Justice’s 2024 antitrust suit against Apple align much more closely with those in Microsoft (2001). Specifically, the DOJ is alleging that Apple used their monopoly on the smartphone industry to diminish the functionality of non-iPhone text messaging, non-Apple smartwatches, and non-Apple smart wallets. These allegations of non-competitive behavior align far more closely with the fact pattern in Microsoft; however, the DOJ could encounter difficulties establishing Apple as a pure monopoly within the smartphone market.

Amazon

Like the allegations in Apple, the FTC’s 2023 case against Amazon alleges anticompetitive behavior relating to Amazon’s control over the products and services on their monopolized platform. In Amazon’s case, the FTC alleges that Amazon discouraged sellers from offering their products on other platforms and/or lowering prices by leveraging search result rankings and prime membership. Unlike Apple and Meta, however, Amazon’s monopoly of the online retail platform industry is largely unquestionable.

How Miller Shah can Assist in Antitrust Cases

Miller Shah is a nationally recognized leader in antitrust litigation. Our attorneys have represented corporations throughout the United States and Europe as well as individuals in competition class actions. Miller Shah has experience in litigation including but not limited to:

• Commercial disparagement (business defamation)
• Concerted refusals to deal
• Covenants not to compete
• False advertising
• Market allocations
• Monopolization
• Price-fixing
• Tying arrangements
• Unfair and deceptive trade practices
• Vertical and horizontal price agreements

The Firm also regularly works alongside the Department of Justice and Federal Trade Commission as general counsel in both antitrust and unfair competition cases. If you are interested in learning more about Miller Shah’s experience and results in antitrust litigation, fill out the form below and one of our associates will reach out to you shortly about scheduling a free consultation.