Forty-eight plaintiff states filed a lawsuit against Facebook Inc., alleging that the company harms the public by illegally stifling competition to protect its monopoly power. The states alleged that, over the last decade, the social networking giant illegally acquired competitors in a predatory manner and cut services to smaller firms that threatened its power, depriving users from the benefits of competition and reducing privacy protections and services in an effort to boost its bottom line through increased advertising revenue.
Facebook operates as a personal social networking service that facilitates sharing content online with friends and family without charging users a monetary fee. Facebook then monetizes its business by selling advertising to firms that seek the highly targeted advertising that Facebook can deliver due to the vast trove of data it collects on users.
The states alleged Face book violated both Sherman Act section 2 (monopolization) and Clayton Act section 7 (illegal acquisitions) of the Sherman Act by “burying or buying” potential competitors. The states alleged that Facebook in 2013 announced a policy of blocking interoperability for third-party, freestanding apps if they “replicate[d] [Facebook’s] core functionality” and subsequently enforced this policy. Facebook also acquired smaller rivals and potential rivals before they could threaten Facebook’s dominance. The states sought remedies including an injunction against Facebook’s illegal conduct and divestiture or restructuring of illegally acquired companies, or current Facebook assets or business lines.
The district court dismissed the states’ case, holding that Facebook’s general policy of refusing to provide API access to its competitors did not itself violate Section 2; that the situations in which Facebook revoked a competitor’s prior access to interoperability features (after previously providing it access) might have violated Section 2, the last instance occurred in 2015. under Clayton Act section 7 were barred by laches because the acquisitions at issue took place in 2012 and 2014.
The DC Circuit affirmed the district court’s dismissal of the case.