Case 5:20-cv-00363-BLF Document 72 Filed 10/16/20 Page 1 of 31
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`BATHAEE DUNNE LLP
`
`Yavar Bathaee (CA 282388)
`yavar@bathaeedunne.com
`Edward M. Grauman (pro hac vice)
`egrauman@bathaeedunne.com
`BATHAEE DUNNE LLP
`445 Park Ave.
`New York, NY 10022
`Tel: (212) 918-8188
`
`BRIAN J. DUNNE (CA 275689)
`bdunne@bathaeedunne.com
`653 West Fifth Street, 26th Floor
`Los Angeles, CA 90071
`(213) 462-2772
`
`Attorneys for Plaintiffs
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`SAN JOSE DIVISION
`
`REVEAL CHAT HOLDCO, LLC, a Delaware
`limited liability company, USA
`TECHNOLOGY AND MANAGEMENT
`SERVICES, INC. (d/b/a Lenddo USA), a
`Delaware corporation, and BEEHIVE
`BIOMETRIC, INC., a dissolved Delaware
`corporation, on behalf of themselves and all
`others similarly situated,
`
`Plaintiffs,
`
`v.
`
`Case No.: 5:20-cv-00363-BLF
`
`PLAINTIFFS’ MEMORANDUM OF
`POINTS AND AUTHORITIES IN
`OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED
`CLASS ACTION COMPLAINT
`
`Hearing Date: December 3, 2020
`Time: 9:00 am
`Hon. Beth Labson Freeman
`
`FACEBOOK, INC., a Delaware corporation,
`
`Defendant.
`
`
`
`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISSS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`Case 5:20-cv-00363-BLF Document 72 Filed 10/16/20 Page 2 of 31
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`TABLE OF CONTENTS
`
`
`I.
`
`II.
`
`III.
`
`C.
`
`FACEBOOK’S CONDUCT VIOLATES SECTION 2 OF THE SHERMAN ACT ..... 2
`A.
`The Complaint Alleges Several Exclusionary Acts by Facebook ...................... 2
`B.
`Facebook’s Refusal to Deal on the Same Terms as Whitelisted
`Developers Is Unlawful under Aspen Skiing. ..................................................... 6
`Facebook Has Market Power in the Social Data and Social Advertising
`Markets ............................................................................................................. 10
`PLAINTIFFS HAVE SUFFERED ANTITRUST INJURY ......................................... 12
`A.
`Plaintiffs Are Market Participants in the Social Data Market. ......................... 12
`B.
`Plaintiffs’ Injuries Are Inextricably Intertwined with Harm to Competition in
`Both the Social Data and Social Advertising Markets. ..................................... 18
`PLAINTIFFS’ CLAIMS ARE TIMELY ...................................................................... 20
`A.
`Plaintiffs’ Claims Could Not Have Accrued under a Discovery Rule .............. 20
`B.
`Facebook’s Conduct Restarted the Statute of Limitations ................................ 21
`C.
`Facebook Fraudulently Concealed the Claims Here. ........................................ 22
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`TABLE OF AUTHORITIES
`
`
`AFMS, LLC v. United Parcel Service Co.,
`2011 WL 13128436, at *14 (C.D. Cal. 2011) ........................................................................... 18
`Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP,
`592 F.3d 991, 1000 (9th Cir. 2010) ............................................................................................ 5
`Am. Ad Mgm’t, Inc. v. Gen. Tel. Co. of California,
`190 F.3d 1051 (9th Cir. 1999) ............................................................................................ 12, 15
`Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
`472 U.S. 585 (1985) .................................................................................................................... 7
`Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc.,
`2018 WL 3032552 (S.D. Cal. June 19, 2018) ........................................................................... 12
`Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979) ....................................... 6
`Bhan v. NME Hospitals, Inc., 772 F.2d 1467 (9th Cir. 1985) ...................................................... 17
`Bhan v. NME Hospitals, Inc., 772 F.2d 1467, 1470 (9th Cir. 1985) ............................................ 13
`Blue Shield of Virginia v. McCready, 457 U.S. 465, 483-84 (1982) ............................................ 19
`Brennan v. Concord EFS, Inc., 369 F. Supp. 2d 1127, 1133 (N.D. Cal. 2005) .............................. 4
`Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 894 (9th Cir. 2008) ............................. 2
`City of Anaheim v. S. Cal. Edison Co., 955 F.2d 1373, 1376, 1378 (9th Cir. 1992) ...................... 2
`City of Mishawaka v. Am. Elec. Power Co., 616 F.2d 976, 986 (7th Cir. 1980) ............................ 2
`CollegeNET, Inc. v. Common Application, Inc., 711 Fed. App’x 405, 407 (9th Cir. 2017) ......... 15
`Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698-99 (1962) ............... 2
`Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 783 (6th Cir. 2002) ................................. 5
`Covad Communs Co. v. Bell Atlantic Corp., 398 F.3d 666, 675-76 (D.C. Cir. 2005) ................... 7
`Dehoog v. Anheuser-Busch In Bev SA/NV, 899 F.3d 758, 764 (9th Cir. 2018) ............................ 17
`DocMagic, Inc. v. Ellie Mae, Inc., 745 F. Supp. 2d 1119, 1136 (N.D. Cal. 2010) ....................... 11
`Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 483 (1992) .................................. 3
`F.T.C. v. Qualcomm Inc., 969 F.3d 974, 933 (9th Cir. 2020) ......................................................... 7
`Fenerjian v. Nongshim Co., Ltd., 72 F. Supp. 3d 1058, 1078 (N.D. Cal. 2014) .......................... 23
`Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 545 (9th Cir. 1983) ................... 6
`Free FreeHand Corp. v. Adobe Systems Inc., 852 F. Supp. 2d 1171 (N.D. Cal. 2012) (quoting
`Tele Atlas N.V. v. NAVTEQ Corp., 2008 WL 4911230, at *1 (N.D. Cal. Nov. 13, 2008)) ........ 2
`Free FreeHand Corp., 852 F. Supp. 2d at 1182 ............................................................................. 3
`Free FreeHand, 842 F. Supp. 2d at 1180 ....................................................................................... 2
`Glen Holly Ent. Inc. v. Tektronix, Inc., 352 F.3d 367 (9th Cir. 2003) .......................................... 12
`In re Cathode Ray Tube (CRT) Antitrust Litig.,
`738 F. Supp. 2d at 1024-25 ....................................................................................................... 26
`
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`ii
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`

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`Case 5:20-cv-00363-BLF Document 72 Filed 10/16/20 Page 4 of 31
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`In re Glumetza Antitrust Litig., --- F. Supp. 3d ---, 2020 WL 1066934, at *7 (N.D. Cal. Mar. 5,
`2020) ......................................................................................................................................... 25
`In re NCAA Student-Athlete Name & Likeness Licensing Litig.,
`990 F. Supp. 2d 996, 1005 (N.D. Cal. 2013) .............................................................................. 4
`In re TFT-LCD (Flat Panel) Antitrust Litig., 586 F. Supp. 2d 1011, 1024-25 (N.D. Cal. 2008) . 25
`Novell, Inc. v. Microsoft Corp., 505 F.3d 302, 308-9 (4th Cir. 2009) .......................................... 18
`Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1078 n.4 (10th Cir. 2013) ................................... 7
`Paladin Associattes, Inc. v. Montana Power Co., 328 F.3d 1145, 1156 (9th Cir. 2003) ............... 4
`SmileCare Dental Group v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th Cir.1996) ..... 2
`Soap Opera Now, 373 F. Supp. at 1346 ........................................................................................ 17
`Soap Opera Now, Inc. v. Network Pub. Corp., 737 F. Supp. 1338, 1346 (S.D.N.Y. 1990) ......... 16
`Tucker v. Apple Computer, Inc., 493 F. Supp. 2d. 1090, 1101 (N.D. Cal. 2006) ........................... 3
`United States v. Microsoft Corp., 253 F.3d 34, 52 (D.C. Cir. 2001) ............................................ 18
`United States v. Microsoft Corp., 253 F.3d 34, 65-67 (D.C. Cir. 2001) ......................................... 3
`Viamedia, Inc. v. Comcast Corp., 951 F.3d 429, 462 (7th Cir. 2020) ............................................ 7
`Yellow Page Cost Consultants, Inc. v. GTE Directories Corp., 951 F.2d 1158 (9th Cir. 1991) .. 18
`
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`iii
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`INTRODUCTION
`Facebook’s Motion to Dismiss (“Motion”) badly mischaracterizes the facts and law of
`Plaintiffs’ Amended Class Action Complaint (“Complaint” or “ACAC”). The Complaint
`comfortably pleads Section 2 Sherman Act violations by Facebook; cognizable antitrust injury by
`each Plaintiff; and timeliness—as a matter of accrual and otherwise. The Motion should be denied.
`BACKGROUND
`In late 2011, faced with an existential threat from mobile applications ahead of its Initial
`Public Offering, Facebook devised a multiyear scheme to leverage its third-party applications
`Platform for dominance in the nascent—and network effect-laden—Social Data Market. (ACAC
`¶ 92-100, 114-151.) The scheme, which was hatched and promulgated by Mark Zuckerberg
`himself, relied on a coordinated, multi-prong pattern of deception and unfair play amongst a pool
`of thousands of app developers regarding the central commodity of Facebook’s Platform: access
`to its Core Application Programming Interfaces (APIs). (Id. ¶ 152-203.) The scheme also required
`absolute secrecy as to its true nature, even as Facebook publicly announced certain actions
`regarding API withdrawal and the availability of extended API agreements for certain developers.
`(Id. ¶ 446-475.) Thousands of promising, successful applications that relied on Facebook’s
`Platform, and that participated in the Social Data Market (and its adjutant Social Advertising
`Market), were excluded from these markets—and remain excluded from these markets—as a
`result of Facebook’s API scheme. (Id. ¶ 426-445.) The developers of three such applications—
`Plaintiffs Reveal Chat, Lenddo, and Beehive—lost social data access through the Platform,
`unsuccessfully sought extended API agreements from Facebook, then unsuccessfully sought an
`alternate platform for social data, but ultimately could not access the Social Data Market once
`Facebook excluded them. (Id. ¶ 16-65.) In November 2019, NBC News published internal
`Facebook documents revealing that Plaintiffs, and thousands of similarly-situated developers,
`were the victims of a coordinated anticompetitive scheme. (Id. ¶ 475.) In January 2020, Plaintiffs
`brought this lawsuit. After an initial round of motion practice, Plaintiffs filed the operative
`Amended Class Action Complaint on August 8, 2020. (Dkt. No. 62.) Facebook moved to dismiss
`under Rule 12(b)(6). (Dkt. No. 71 “Motion”.)
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`I.
`
`ARGUMENT
`FACEBOOK’S CONDUCT VIOLATES SECTION 2 OF THE SHERMAN ACT.
`Plaintiffs have stated an unlawful monopolization claim under Section 2 of the Sherman
`Act. To state such a claim, a plaintiff must allege (in addition to antitrust injury, which is
`addressed infra at § 2), “[p]ossession of monopoly power in the relevant market” and the “willful
`acquisition or maintenance of that power.” SmileCare Dental Group v. Delta Dental Plan of Cal.,
`Inc., 88 F.3d 780, 783 (9th Cir.1996). Both have been pleaded extensively in the Complaint.
`Additionally, the Complaint also includes adequately pleaded attempted monopolization claims—
`which Facebook does not even separately challenge.
`A.
`The Complaint Alleges Several Exclusionary Acts by Facebook
`“Anticompetitive conduct is behavior that tends to impair the opportunities of rivals and
`either does not further competition on the merits or does so in an unnecessarily restrictive way.”
`Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 894 (9th Cir. 2008). Anti-competitive
`conduct “may include otherwise legal conduct.” Free FreeHand Corp. v. Adobe Systems Inc., 852
`F. Supp. 2d 1171 (N.D. Cal. 2012) (quoting Tele Atlas N.V. v. NAVTEQ Corp., 2008 WL 4911230,
`at *1 (N.D. Cal. Nov. 13, 2008)). Moreover, “[u]nder the theory of monopoly broth, ‘there are
`kinds of acts which would be lawful in the absence of monopoly, but because of their tendency to
`foreclose competitors from access to markets or customers or some other inherently
`anticompetitive tendency, are unlawful under Section 2 if done by a monopolist.’” Free FreeHand,
`842 F. Supp. 2d at 1180 (quoting City of Mishawaka v. Am. Elec. Power Co., 616 F.2d 976, 986
`(7th Cir. 1980)). It is not “proper to focus on specific individual acts of an accused monopolist
`while refusing to consider their overall combined effect.” City of Anaheim v. S. Cal. Edison Co.,
`955 F.2d 1373, 1376, 1378 (9th Cir. 1992); see also National Football League’s Sunday Ticket
`Antitrust Litig., 933 F.3d 1136 (2019) (“[W]e are required to take a holistic view” of the
`anticompetitive scheme and should not proceed by “dismembering it and viewing its separate
`parts” (quoting Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698-99
`(1962))). Here, the Complaint alleges several exclusionary acts, all of which are alleged to be part
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`of the same anticompetitive scheme to monopolize the Social Data and Social Advertising
`Markets, most of which Facebook’s brief does not even address.
`First, Facebook entered into tying or coercive bundling agreements with developers on its
`Platform, providing access to the Core APIs beyond the withdrawal date in exchange for large
`purchases of social data in the form of advertising. (ACAC ¶¶ 227, 249, 251; see also ¶ 47.) The
`Complaint alleges—based on the words of Facebook’s own senior executives and engineers—
`that the API withdrawals had no valid business or technical justification. (ACAC ¶¶ 208-19; see
`also, infra, § I.B.) The Complaint also alleges that these agreements harmed competition in the
`relevant markets by strengthening
`the Social Data Barrier
`to Entry (“SDBE”) and
`anticompetitively bootstrapping Facebook’s otherwise fledgling mobile advertising business. (Id.
`¶¶ 3, 5, 430-31, 434.) This is sufficient to plead a claim under Section 2 of the Sherman Act. See
`Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 483 (1992) (holding that Kodak’s
`“exclusionary action to maintain its parts monopoly and us[ing] its control over parts to strengthen
`its monopoly share of the Kodak service market” violated Section 2 if no “valid business reasons”
`could explain its actions, then holding that Kodak’s proferred justifications could not be resolved
`as a matter of law); United States v. Microsoft Corp., 253 F.3d 34, 65-67 (D.C. Cir. 2001) (en
`banc) (holding that bundling or tying together Internet Explorer with the Windows operating
`system, without procompetitive justifications that outweighed district court’s findings on
`anticompetitive effects, violated § 2 of the Sherman Act); Free FreeHand Corp., 852 F. Supp. 2d
`at 1182 (“[T]he existence of valid business reasons in antitrust cases is generally a question of
`fact not appropriate for resolution at the motion to dismiss stage.” (quoting Tucker v. Apple
`Computer, Inc., 493 F. Supp. 2d. 1090, 1101 (N.D. Cal. 2006)).
`Second, Facebook also entered into agreements with developers that required those
`developers to provide their own users’ social data back to Facebook in exchange for continued
`access to the Core APIs. (ACAC ¶ 249.) This ensured that Facebook would have a superset of all
`of the data available to other potential competitors, including horizontal competitors Foursquare
`and Pinterest (id. ¶¶ 258-61, 431, 434), with Facebook serving as a “data pass-through”
`mechanism for those that entered into such agreements (id. ¶ 250). These agreements had the
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`effect of strengthening the SDBE protecting Facebook’s business, and ensured that no alternate
`platform for Social Data existed once Plaintiffs were ejected from the Facebook Platform. (Id.
`¶¶ 260-61.) Facebook argues that this was a good “business strategy” that allowed “Facebook’s
`most successful competitors to remain in the market” and to sell data among a network of
`competitors “aided by inputs provided by Facebook.” (Mot. at 19.) This misses the point—the
`agreements ensured that no independent source of social data would exist, as Facebook had
`captured its rivals’ data sources, meaning an independent rival that could erode the SDBE was
`less likely to emerge. (Id. ¶¶ 258-59.) This also ensured that the 40,000 apps Facebook destroyed,
`including Plaintiffs’ apps, would have no alternate source of data. (Id. ¶ 260; see also id. ¶ 49
`(Lenddo was unable to find an alternate data platform), ¶ 64 (same allegation as to Beehive).)
`Additionally, Facebook’s purported (and untested) procompetitive justifications for its
`agreements are not just factually baseless, they could not legally support dismissal even if
`credited—balancing an alleged monopolist’s procompetitive justifications against the alleged
`anticompetitive effects of its actions is an inherently fact-bound analysis, not a Rule 12
`determination. See In re NCAA Student-Athlete Name & Likeness Licensing Litig., 990 F. Supp.
`2d 996, 1005 (N.D. Cal. 2013) (“Although it is possible that the NCAA's ban on student-athlete
`pay serves some procompetitive purpose, such as increasing consumer demand for college sports,
`Plaintiffs' plausible allegations to the contrary must be accepted as true at the pleading stage.”
`(citing Brennan v. Concord EFS, Inc., 369 F. Supp. 2d 1127, 1133 (N.D. Cal. 2005) & Paladin
`Associattes, Inc. v. Montana Power Co., 328 F.3d 1145, 1156 (9th Cir. 2003))).
`Third, Facebook’s Onavo spyware deceptively posed as Virtual Private Network or file
`security software (ACAC ¶¶ 266, 278-82), to secretly surveil users’ phones to determine what
`apps they used and the extent to which they engaged with those apps. (Id. ¶¶ 5, 197-99, 264-332.)
`Facebook used this information to perform internal audits of competitive categories of apps to
`target potentially competitive apps for anticompetitive data sharing or advertising purchase
`agreement—or for destruction when the APIs were ultimately withdrawn. (Id. ¶¶ 197-99, 440.)
`Facebook also used this spying apparatus to target rivals with user bases independent of its
`Platform for acquisitions accretive to its monopoly power (e.g., WhatsApp and Instagram). (Id.
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`¶¶ 287-332, 440.) Facebook continued to use its Onavo surveillance system police the market for
`potential rivals after the API withdrawals (e.g., id. ¶ 311 (cloning Snap’s product in 2016), ¶ 326
`(Onavo data identifying Snapchat as a potential rival in user engagement)), ensuring that the
`SDBE remained strong and that the 40,000 apps it ejected from its Platform, including Plaintiffs’
`apps, could not reenter the market. (Id. ¶ 445.) It also ensured that no rival platform would emerge,
`meaning that the ejected apps would have no alternate source of social data. (Id. ¶ 440-42.)
`Facebook’s use of a deceptive product designed to spy on users is anticompetitive, as the
`surveillance apparatus it deployed was a necessary means for Facebook’s scheme of targeting
`rivals, whitelisting and data sharing counterparties, and potential merger targets that posed a threat
`to its business and the SDBE (see id. ¶ 440). See Microsoft, 253 F.3d at 34 (holding that deception
`of Java developers into using tools designed by Microsoft was exclusionary under Section 2);
`Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 783 (6th Cir. 2002) (deceptive “ruses” and
`dissemination of “misleading information” were exclusionary conduct under Section 2).
`Fourth, Facebook deceptively redesigned its Platform APIs for the sole purpose of
`excluding potentially competitive rivals, and it did so fraudulently, knowing years in advance that
`it would make the change (ACAC ¶ 255 (“Three years coming, but the ‘Platform Simplification’
`initiative finally lands this week.”); see also, e.g., ¶ 218 (Sukhar had been “speaking to many
`dozens of developers ‘who will get totally fucked by this and it won’t even be for the right
`reason.’”); ¶ 237 (“we’re still telling people to use” the APIs even though “we may have decided
`amongst ourselves that this is no longer the future”)), but nonetheless touting the APIs to
`developers (e.g., id. ¶¶ 451-52). Facebook’s senior executives Ilya Sukhar and engineer in charge
`of the APIs Brian Klimt internally stated that the redesign to remove the Core APIs lacked any
`technical justification (id. ¶ 209), that the rumored “abuse” reasons were “false” and pretextual
`(id. ¶¶ 209-11), and that the redesign was for solely anticompetitive reasons (id. ¶¶ 211-12).
`This is the rare sort of product redesign conduct that violates Section 2. Specifically, while
`a run-of-the-mill product redesign does not “permit balancing the benefits or worth of a product
`improvement against its anticompetitive effects,” conduct in connection with a product redesign
`can be exclusionary if the defendant “abuses or leverages its monopoly power in some other way
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`5
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
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`when introducing the product.” Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP,
`592 F.3d 991, 1000 (9th Cir. 2010). Indeed, even a “product innovation” (although no “innovation”
`could credibly be claimed here) is not “immune from antitrust scrutiny,” and the Ninth Circuit
`has held that such conduct can supply an “element in support of a claim for monopolization or
`attempted monopolization under Section 2 of the Sherman Act” if “‘it is not the product itself, but
`some associated conduct that supplies the violation.’” Foremost Pro Color, Inc. v. Eastman Kodak
`Co., 703 F.2d 534, 545 (9th Cir. 1983) (quoting Berkey Photo, Inc. v. Eastman Kodak Co., 603
`F.2d 263 (2d Cir. 1979)).
`Here, there is far more pernicious conduct than a mere product redesign. Facebook
`internally prepared in secret for years to remove the APIs (ACAC ¶ 255); catalogued precisely
`who would be affected by the change (id. ¶ 200-01; knew it would hurt developers who had relied
`on the product’s design (id. ¶¶ 175, 228); then lied about the reasons for the redesign (id. ¶ 242-
`43; and buried the design change under the fanfare of an authentication-related feature release (a
`“switcharoo plan”) (id. ¶ 238). Facebook did all of this so it could secretly negotiate the
`anticompetitive agreements described above without tipping off the developers that it needed to
`induce to build for its predoomed Platform. (Id. ¶ 452.) Indeed, without developers building for
`Facebook during those critical years (2011-2015), there would be no one to select as “winners”
`and to extort for data or advertising. (Id.) This is truly a rare sort of case, as Facebook’s own
`executives and engineers have admitted a lack of legitimate justification for their actions (ACAC
`¶¶ 209-12), making the conduct as pleaded exclusionary under Section 2. See Staley v. Gilead
`Scis., Inc., 446 F. Supp. 3d 578, 615 (N.D. Cal. 2020).
`Finally, Facebook then refused to deal with Plaintiffs and 40,000 other developers on the
`same terms as the potentially thousands of other whitelisted developers, by providing extended
`API agreements or continued access. This conduct is addressed full in the next subsection.
`B.
`Facebook’s Refusal to Deal on the Same Terms as Whitelisted Developers Is
`Unlawful under Aspen Skiing.
`Facebook excises the refusal to deal aspect of the anticompetitive scheme alleged above
`(supra, § I.A.), and analyzes it in isolation and untethered from the allegations in the Complaint.
`
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`6
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
`
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`Case 5:20-cv-00363-BLF Document 72 Filed 10/16/20 Page 11 of 31
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`As pleaded, the allegations in the Complaint easily constitute an unlawful refusal to deal; the issue
`is not particularly close. The Supreme Court articulated an exception to the general rule that a
`firm has the right to deal with whomever it wants in Aspen Skiing Co. v. Aspen Highlands Skiing
`Corp., 472 U.S. 585 (1985). This case falls squarely within that exception.
`The Ninth Circuit has identified three key aspects that help identify an Aspen Skiing claim:
`“[A] company engages in prohibited, anticompetitive conduct when (1) it ‘unilateral[ly]
`terminat[es] . . . a voluntary and profitable course of dealing”; (2) “the only conceivable rationale
`or purpose is to ‘sacrifice short-term benefits in order to obtain higher profits in the long run from
`the exclusion of competition’; and (3) the refusal to deal involves products that the defendant
`already sells in the existing market to other similarly situated customers.” F.T.C. v. Qualcomm
`Inc., 969 F.3d 974, 933 (9th Cir. 2020). Facebook says that at a “minimum,” all three aspects of
`Aspen must exist to state a claim (Mot. at 20), but cites nothing from Aspen that stands for this
`proposition and ignores courts that suggest that something less could state an Aspen claim at the
`pleading stage. See Viamedia, Inc. v. Comcast Corp., 951 F.3d 429, 462 (7th Cir. 2020) (“To the
`extent that refusal-to-deal claims require more at the pleading stage, it is enough to allege
`plausibly that the refusal to deal has some of the key anticompetitive characteristics identified in
`Aspen Skiing”); Covad Communs Co. v. Bell Atlantic Corp., 398 F.3d 666, 675-76 (D.C. Cir.
`2005) (holding that although plaintiff must ultimately show profit sacrifice to prevail on a refusal
`to deal, alleging that refusal was “predatory” is sufficient at the pleadings stage); Novell, Inc. v.
`Microsoft Corp., 731 F.3d 1064, 1078 n.4 (10th Cir. 2013) (“[O]ur cases haven't decided whether
`discrimination is essential for success in a refusal to deal case or just helpful to its cause”). In any
`event, all three aspects of Aspen Skiing are present here.
`First, Facebook entered into agreements with developers. It provided them with access to
`its Platform, and in exchange, the developers enhanced the value of Facebook and purchased
`advertising on Facebook’s Platform to reach its users, particularly to obtain new users.
`Specifically, Facebook needed third-party developers to build applications for its social network
`because it did not have the resources to build all of the possible applications needed for its
`Platform to thrive. (ACAC ¶ 134 (Vernal: “Platform is key to our strategy because we believe
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`7
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
`
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`Case 5:20-cv-00363-BLF Document 72 Filed 10/16/20 Page 12 of 31
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`there will be a lot of different social applications . . . . And we believe we can’t develop all of
`them ourselves.”).) Facebook acknowledged that developers building for their Platform and using
`their APIs enhanced Facebooks’ users’ experience and created “value for Facebook.” (Id. ¶ 138.)
`As Facebook told its shareholders in 2012: “[O]ur Platform supports our advertising business,”
`and listed several specific ways in which apps directly benefited Facebook financially and
`businesswise. (Id. ¶ 138.) Access to the APIs on Facebook’s Platform was not, as Facebook
`disingenuously suggests, some altruistic gesture or a free product (Mot. at 21)—it was a highly
`profitable exchange. Facebook provided access to the APIs, and developers drove Facebook’s
`revenues. These are the substance of Facebook’s own words in its filings with the SEC, not
`attorney argument. (Id.; see also id. ¶¶ 138-42.) Courts are clear that a Platform’s withdrawal of
`a valuable API satisfies the first prong of Aspen—and this case is no exception. Novell, 731 F.3d
`at 1076 (10th Cir. 2013) (“There's no question that Novell can satisfy the first essential component
`of refusal to deal doctrine. A voluntary and profitable relationship clearly existed between
`Microsoft and Novell. Microsoft doesn't dispute that at first it freely offered its applications rivals,
`including Novell, access to its NSEs [APIs]. Neither does Microsoft dispute that doing so was
`profitable enough, encouraging software companies to write for its new operating system and in
`that way making Windows more attractive to consumers.”).
`Second, the facts alleged as part of the first factor also show that destroying 40,000 apps,
`including some of the top iPhone apps on the Platform (ACAC ¶ 175), was unquestionably a profit
`sacrifice (see id. ¶¶ 432, 442; see also id. ¶¶ 189-90). By destroying the apps Facebook had
`identified as reliant on Facebook’s Core APIs, Facebook forwent the advertising revenue it
`received from those developers as well as the user engagement it obtained from the presence of
`those apps on its Platform. (Id. ¶¶ 10, 151.) In addition, Facebook had been charging developers
`for advertisements to its user base on a per-install basis. (Id. ¶¶ 146 (“The biggest/most efficient
`market segment for advertising on mobile today is driving app installs”), 149-50.) It had also
`devised a scheme to charge for API access, which it even presented to its board of directors. (Id.
`¶ 50.) Facebook gave all of that up to execute its anticompetitive scheme, which involved
`identifying actual and potential competitors for destruction and allowed it to capture the user data
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`8
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`PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO FACEBOOK’S
`MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT – NO. 5:20-CV-00363-BLF
`
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`Case 5:20-cv-00363-BLF Document 72 Filed 10/16/20 Page 13 of 31
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`of the apps it had targeted for whitelisting agreements. The tell-tale sign from Aspen itself is also
`present here, Aspen Skiing, 472 U.S.