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`BATHAEE DUNNE LLP
`Yavar Bathaee (CA 282388)
`yavar@bathaeedunne.com
`Edward M. Grauman (p.h.v. forthcoming)
`egrauman@bathaeedunne.com
`Andrew C. Wolinsky (p.h.v. forthcoming)
`awolinsky@bathaeedunne.com
`445 Park Avenue, 9th Floor
`New York, NY 10022
`Tel.: (332) 322-8835
`
`Brian J. Dunne (CA 275689)
`bdunne@bathaeedunne.com
`633 West Fifth Street, 26th Floor
`Los Angeles, CA 90071
`Tel.: (213) 462-2772
`
`Attorneys for Plaintiffs
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`SAN JOSE DIVISION
`
`
`TODD CROWDER, KEVIN SCHULTE, and
`GARRICK VANCE, on behalf of themselves and all
`others similarly situated,
`
` Plaintiffs,
`
`
` Case No. 5:22-cv-00237
`
`
`CLASS ACTION COMPLAINT
`
`
`DEMAND FOR JURY TRIAL
`
`v.
`
`LINKEDIN CORPORATION,
`
` Defendant.
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`
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`TABLE OF CONTENTS
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`III.
`
`IV.
`
`V.
`
`INTRODUCTION ....................................................................................................................................... 1
`PARTIES ................................................................................................................................................... 12
`I.
`PLAINTIFFS ................................................................................................................................. 12
`II.
`DEFENDANT ............................................................................................................................... 13
`JURISDICTION AND VENUE ................................................................................................................ 15
`DIVISIONAL ASSIGNMENT ................................................................................................................. 16
`I.
`LINKEDIN: THE BEGINNING OF A WINNER-TAKE-ALL BUSINESS ............................... 17
`A.
`SocialNet: A Social Network Before Its Time .................................................................. 17
`B.
`PayPal and the Power of Network Effects ......................................................................... 18
`C.
`“Blitzscaling”: Hoffman’s Insight from PayPal ................................................................ 20
`THE RISE OF LINKEDIN: A SPRINT TO DOMINANCE ........................................................ 22
`A.
`The Founding of LinkedIn ................................................................................................. 22
`B.
`LinkedIn Begins Monetizing Its Network of Users ........................................................... 24
`LINKEDIN IS ACQUIRED BY MICROSOFT WITH AN EYE TOWARD AI-DRIVEN
`MONETIZATION ......................................................................................................................... 27
`LINKEDIN’S DATA AND AI JUGGERNAUT .......................................................................... 29
`A.
`LinkedIn’s Extraction of Structured User Data to Train Machine-Learning Models ....... 30
`B.
`LinkedIn’s Data Centralization and Distribution Infrastructure ........................................ 34
`C.
`LinkedIn’s Social, Telemetry, and Inferred Data .............................................................. 37
`D.
`LinkedIn’s Acquisition of Drawbridge .............................................................................. 39
`THE LINKEDIN API AND THE SALE OF USER DATA TO PARTNERS ............................. 42
`A.
`LinkedIn’s REST and JSON API System ......................................................................... 42
`B.
`LinkedIn Privatized Its APIs in 2015 ................................................................................ 44
`C.
`LinkedIn Enters into Agreements with Select “Partners” for User Data Purchases
`through the APIs. ............................................................................................................... 46
`VII. THE DATA, MACHINE LEARNING, AND INFERENCE BARRIER TO ENTRY ................. 46
`A.
`Data Aggregation, Centralization, and Infrastructure Effects ........................................... 47
`B.
`The Effects of LinkedIn’s Machine-Learning Systems ..................................................... 50
`C.
`The Effects of Inference .................................................................................................... 54
`VIII. LINKEDIN ANTICOMPETITIVELY MAINTAINS ITS MONOPOLY ................................... 56
`LinkedIn Enters into Agreements to Anti-Competitively Sell User Data to “Partners”
`A.
`Through Its Privatized APIs .............................................................................................. 56
`
`VI.
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`
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`B.
`
`C.
`
`IX.
`
`X.
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`
`
`LinkedIn Employs Technical Countermeasures to Prevent Rivals or Potential Entrants
`from Obtaining Even Data Users Have Decided to Make Public ..................................... 62
`LinkedIn Strengthened the Data, Machine Learning, and Infrastructure Barrier to
`Entry by Integrating with Parent Microsoft’s Azure Cloud and AI Systems .................... 64
`LINKEDIN AGREES WITH FACEBOOK TO DIVIDE THE MARKET .................................. 67
`A.
`LinkedIn and Facebook Were Poised to Compete Before 2015 ....................................... 68
`B.
`Internally, LinkedIn and Facebook Secretly Negotiated an Agreement ........................... 71
`C.
`After the Negotiations, Facebook Never Entered the Market with a Rival Product ......... 74
`D.
`Facebook Has a Practice of Dividing Markets with Potential Competitors, which Is
`Consistent with the Apparent Agreement Between LinkedIn and Facebook .................... 79
`THE RELEVANT MARKETS ..................................................................................................... 81
`A.
`The Professional Social Networking Market ..................................................................... 81
`1.
`The Professional Social Networking Market Is a Distinct Submarket. ..... 83
`2.
`LinkedIn Possesses Monopoly and Market Power in the Professional
`Social Networking Market ......................................................................... 94
`Relevant Geographic Market ..................................................................... 97
`3.
`Barriers to Entry ........................................................................................ 98
`4.
`HARM TO COMPETITION ......................................................................................................... 99
`XI.
`CLASS ACTION ALLEGATIONS ........................................................................................................ 102
`CLAIMS FOR RELIEF ........................................................................................................................... 107
`PRAYER FOR RELIEF .......................................................................................................................... 114
`JURY DEMAND ..................................................................................................................................... 115
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`INTRODUCTION
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`1.
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`This lawsuit concerns the unlawful monopolization of the professional social networking
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`market by defendant LinkedIn. Plaintiffs are LinkedIn Premium subscribers who have been overcharged
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`due to LinkedIn’s unlawful conduct, which has enabled LinkedIn to extract supracompetitive profits from
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`its subscribers through inflated subscription prices and data sale revenues.
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`2.
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`After emerging as the unchallenged leader in the professional social networking market
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`through what its founder Reid Hoffman called “Blitzscaling”—the rapid race to capture network and
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`lock-in effects by scaling at any cost—LinkedIn quickly turned to protecting and monetizing its position,
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`including by using sophisticated data acquisition and analysis to maximize user attention and revenues.
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`By 2015, LinkedIn’s subscription business was protected by a powerful barrier to entry, which was the
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`net sum of LinkedIn’s data centralization and aggregation, its machine learning and AI infrastructure,
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`and the inferred data it produced. This Data, Machine Learning, and Inference Barrier to Entry
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`(“DMIBE”) became LinkedIn’s greatest asset, and in 2016 drew a $26.5 billion acquisition of the
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`company by Microsoft—owner of one of world’s largest and most powerful arsenals of massively
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`scalable on-demand computational hardware. Combining LinkedIn’s unrivaled professional data trove
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`and infrastructure with its parent Microsoft’s high-end cloud computing arrays, the companies are
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`developing an AI and machine-learning-backed monopoly of enormous scale—fortifying and profoundly
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`strengthening the DMIBE. At the time of this Complaint, the DMIBE represents a near-insurmountable,
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`and growing, barrier to meaningful entry in the professional social networking market, let alone entry at
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`sufficient scale to effectively check LinkedIn’s pricing and subscription terms.
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`3.
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`Since the Microsoft acquisition, LinkedIn has engaged in affirmative anticompetitive
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`conduct that has strengthened (and continues to strengthen) the DMIBE, that has reduced consumer
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`choice, and that has allowed LinkedIn to charge and maintain inflated Premium subscription prices and
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`subscription terms with no competitive check. This conduct has prevented—indeed, effectively
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`precluded—entry by others into the professional social networking market, insulating prices from
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`competition. Among this anticompetitive conduct was (and is): (i) LinkedIn’s non-optional sale of
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`Premium user data to unnamed “partners,” which forcibly grafts a negative value feature—one that
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`materially harms competition in the professional social networking market and at the same time lacks
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`measurable procompetitive effects, even aside from its lack of consumer benefit—onto LinkedIn’s
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`Premium subscription product; (ii) deploying sophisticated technological countermeasures specifically
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`designed by LinkedIn to prevent users’ public data from being accessed by potential or actual
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`competitors, thereby maintaining and fortifying the DMIBE and hindering potential entry at scale; (iii)
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`aggressively integrating LinkedIn’s unmatched professional social networking data repository and
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`pipeline and its powerful AI and machine-learning data and infrastructure with its parent company
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`Microsoft’s Azure cloud servers and arrays of Graphical Processing Units (“GPUs”)—an internationally
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`scarce hardware resources necessary for complex AI and machine learning computation at scale; and (iv)
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`expressly or tacitly dividing markets with LinkedIn’s most natural potential competitor, Facebook—an
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`agreement that, as explained in detail in this complaint, apparently continues to this day.
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`4.
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`Plaintiffs seek trebled damages for the price overcharge they have experienced (and
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`continue to experience) for LinkedIn Premium subscriptions due to LinkedIn’s monopolization of the
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`professional social networking market. They also seek injunctive relief to stop LinkedIn’s anticompetitive
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`conduct, including, among other things, injunctive relief allowing Premium subscribers to opt out of
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`LinkedIn’s parasitic data sale to unnamed partners and injunctive relief halting and unwinding the
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`unprecedented and anticompetitive integration of LinkedIn’s professional data, machine learning, and AI
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`infrastructure with Microsoft’s powerful cloud computing hardware. Absent abatement by this Court,
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`LinkedIn’s will continue to fortify and strengthen the DMIBE, potentially sealing off the professional
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`social networking market from competition for years and perhaps decades to come.
`
`*
`
`*
`
`*
`
`5.
`
`Reid Hoffman, the enigmatic co-founder of PayPal, took away an important insight from
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`his wildly successful early venture: rapidly scaling a online business can create powerful network effects,
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`and those network effects can be durable. Hoffman didn’t just take this lesson to heart; he designed his
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`professional life around it; evangelized it to everyone who would listen; and spent more than a decade
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`trying to harness this phenomenon on his own. Hoffman called his business strategy of deploying massive
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`first-mover resources to capture durable network effects, “Blitzscaling.”
`
`6.
`
`As Hoffman explained about his success at PayPal, “the faster we got to scale, the stronger
`
`we created network effects. . . .” In 2003, Hoffman took this key insight and applied it to his new venture,
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`a professional social network called LinkedIn.
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`7.
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`Hoffman rapidly scaled LinkedIn, and by the middle of 2005, the company had 1.7 million
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`users. By the summer of that same year, LinkedIn’s user base had doubled to 3.3 million. In Hoffman’s
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`pursuit of blitzscaling for LinkedIn, nothing was off limits—even the reviled (and likely unlawful) tactic
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`of commandeering LinkedIn users’ contact lists and spamming those contacts with invitations to
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`Hoffman’s new venture.
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`8.
`
`Hoffman recognized that LinkedIn’s exponential growth was the result of powerful
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`network effects stemming from user growth, the inelastic ubiquity of job hunting and professional
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`connection, and LinkedIn’s role as a source of professional identity. As Hoffman explained, “Just one of
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`these network effects would probably be enough to create first-scaler advantage; all three working
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`together built a massive strategic moat that protected the LinkedIn business from any new entrants.”
`
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`After a few years, LinkedIn had become the de facto standard for online professional
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`9.
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`identity, and the unchallenged market leader in professional social networking, both domestically and
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`worldwide. But although LinkedIn had rapidly, and in some sense successfully, “blitzscaled,” two
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`significant obstacles remained: user engagement and monetization.
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`10.
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`On the issue of monetization, the specific market niche LinkedIn had grown to dominate
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`was (and is) unique from other social networking markets: professional social networking participants
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`will pay upfront for important business services like advanced hiring tools and direct connections to other
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`businesspeople. LinkedIn introduced Premium subscription products, and quickly accreted subscribers
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`and subscriber revenue. But by the mid-2010s, as data aggregation and monetization technology—fueled
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`by the rise of powerful machine learning and artificial intelligence tools, including powerful GPU arrays
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`available in the cloud—transformed the business of high technology, LinkedIn realized that its monopoly
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`could be supercharged (and supra-monetized) by leveraging data anticompetitively, including against its
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`own Premium subscribers.
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`11.
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`12.
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`That is exactly what LinkedIn did—and continues to do.
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`As the 2010s reached their midpoint, it was clear to LinkedIn that the real profit-center in
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`its business going forward was data-driven—and the company took a series of coordinated actions to
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`leverage its market dominance in professional social networking to develop, deploy, and weaponize a
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`massive-scale data acquisition, machine learning, and artificial intelligence apparatus that would both
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`supercharge its overall profits, but also fortify and maintain the barrier to entry around its business. not
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`only to serve content to users that drove engagement, but to monetize user data for profit.
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`13.
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`By 2015, LinkedIn had begun developing cutting edge machine learning and artificial
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`intelligence infrastructure that could algorithmically serve content to users that drove engagement—and
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`monetize user data for profit. That infrastructure included the vectorization, centralization, and
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`structuring of user data; the streamlining of real-time updates of user data and the development of
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`machine learning and artificial intelligence models; the collection of detailed telemetry information
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`derived from user interactions with LinkedIn’s app; and a massive trove of “inferred” data about users—
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`data derived from predictions by machine learning and artificial intelligence models.
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`14.
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`As these new data tools and practices began to transform LinkedIn’s backend, a powerful
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`barrier to entry formed around the company’s business—exponentially more powerful, indeed, than the
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`network effects that had facilitated LinkedIn’s blitzscaling in the first instance.
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`15.
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`This new, incredibly powerful barrier to entry comprised (and comprises) three primary
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`aspects: (1) LinkedIn’s data centralization, (2) LinkedIn’s machine learning models, and (3) the resulting
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`trove of inferred data. What’s more, these three aspects of LinkedIn’s business together reinforced—and
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`reinforce—each other, resulting in a Data, Machine Learning, and Inference Barrier to Entry (“DMIBE”).
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`16.
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`Standing alone, LinkedIn’s AI and machine-learning juggernaut was already extremely
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`valuable (and ripe for misuse, given LinkedIn’s monopoly position in professional networking)—but in
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`the hands of a company with a ubiquitous presence in the office, it could become an impenetrable source
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`of monopoly rents for decades. This is precisely what happened after office software and cloud computing
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`giant Microsoft acquired LinkedIn.
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`17.
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`By the middle of 2016, Microsoft, which had dominated office productivity software for
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`decades, saw LinkedIn as a missing piece of its new business—artificial intelligence and machine
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`learning in the cloud. LinkedIn needed more user engagement, and Microsoft’s cloud infrastructure and
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`direct input into corporations around the world created powerful synergies.
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`18.
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`In June 2016, Microsoft announced that it would acquire LinkedIn for $26.2 billion—then
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`the largest acquisition in Microsoft’s history. As Microsoft’s CEO Satya Nadella explained, the purpose
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`of the merger was the “coming together of the professional cloud and the professional network.”
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`As the Financial Times described the merger, the acquisition was the product of “data
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`19.
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`gravity”—the “tendency for large bodies of data to attract suppliers of services and applications.” Despite
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`concerns raised by Europe’s competition chief; the CEO of Salesforce, Marc Benioff; and others, the
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`FTC did not challenge the acquisition out of a fear that if it challenged any merger based on data
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`aggregation, it would have to challenge a host of other similar deals.
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`20.
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`In Microsoft’s hands, the DMIBE protecting LinkedIn’s monopoly in the professional
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`social networking market became even more powerful. LinkedIn quickly began taking measures to
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`further strengthen the DMIBE to keep out new entrants and competitors, but also began rapid integration
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`of LinkedIn’s AI and machine-learning systems with Microsoft’s cloud computing service, Azure.
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`21.
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`From 2017 to the present, LinkedIn aggressively protected the DMIBE, including through
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`anticompetitive conduct. Among them are four primary courses of action, which have irreparably sealed
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`off LinkedIn from competition.
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`22.
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`First, LinkedIn aggregates and structures user data, then sells that data through its
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`application programming interfaces (“APIs”) to private, undisclosed “Partners.” This paid access creates
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`public-facing, permissioned endpoints that provide external access to LinkedIn’s massive trove of user
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`data, which has been carefully structured, cleaned, and centralized for programmatic use and
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`consumption.
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`23.
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`These data sale agreements with Partners dangerously expose user data. LinkedIn has no
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`control over the data while it is in the hands of its partners; it does not disclose who its “partners” are
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`with respect to the LinkedIn APIs; and the APIs create a massive security vulnerability by centralizing
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`large amounts of user data and exposing that data to outward-facing interfaces. Indeed, massive troves of
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`data corresponding to LinkedIn users—data purportedly gleaned at least in part from LinkedIn APIs—
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`are currently being sold on the dark web.
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`LinkedIn’s data sale to Partners provides no value to Premium subscribers, and those
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`24.
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`subscribers cannot opt out of the data sale—or subscribe to a Premium product that does not include the
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`sale of their data. At the same time, this data sale reinforces the DMIBE and allows LinkedIn to extract
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`monopoly rents from subscribers and from contracting API Partners. Moreover, by exclusively partnering
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`with certain consumers of its API, LinkedIn ensures that a new entrant—or even a firm that does not have
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`a contract with LinkedIn—cannot surmount the DMIBE. These data sales reduce consumer choice,
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`provide no pro-competitive effects for consumers, inflate prices, and prevent competition and entry,
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`including by reinforcing the DMIBE.
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`25.
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`Second, LinkedIn protects the DMIBE and maintains its monopoly by deploying
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`technological countermeasures that prevent any other party, competitor, or potential entrant from
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`accessing public data on its site—even data that users want to make public. Indeed, a LinkedIn page is a
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`public-facing professional resume and identity. Many (if not most) users elect to make these profiles
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`public. LinkedIn, however, uses technological countermeasures, including technology it calls Fuse and
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`Org Block, to prevent access to even public data. At the same time, LinkedIn whitelists certain companies
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`such as Google, exempting them from LinkedIn’s technological countermeasures. By doing this,
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`LinkedIn hoards millions of public identities provided by premium subscribers, preventing any potential
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`entrant or competitor from developing a rival product. This has ensured that no price check has appeared
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`or imminently will appear, allowing LinkedIn to maintain its DMIBE, monopoly, and unchallenged
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`subscription prices.
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`26.
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`Third, despite maintaining its own servers before 2016, since the Microsoft acquisition
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`LinkedIn has integrated—and is currently integrating—its standardized and structured trove of user data
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`(and inferred data) with Microsoft’s powerful AI technology and Graphics Processing Unit (“GPU”)
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`hardware, which it provides through its Azure cloud computing business. These cloud-based arrays of
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`GPUs are a scarce resource and are necessary for developing cutting-edge AI and machine learning
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`models, including large language models. Only Google, Amazon, and Microsoft have such cloud-based
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`hardware, and LinkedIn’s integration of its massive data infrastructure with Microsoft’s cutting-edge
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`hardware, including NVIDIA A100 Tensor Core GPUs, creates a full-scale AI and machine-learning
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`juggernaut acquiring, processing, analyzing, and re-analyzing LinkedIn’s unique pipeline of professional
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`social networking data—permanently sealing off LinkedIn from competition, let alone competition at
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`scale.
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`27.
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`Upon completion of the integration of LinkedIn’s AI and machine learning tools and data
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`infrastructure with Azure, the DMIBE will be irreversibly strengthened, and LinkedIn’s integration
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`efforts to date have already significantly fortified the DMIBE. This integration lacks procompetitive
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`benefits, let alone benefits that outweigh the massive anticompetitive effects in the Professional Social
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`Networking market. The net result is that LinkedIn will become virtually unchallengeable, and its
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`subscription prices and terms will remain unchecked for years—and perhaps decades—to come.
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`28.
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`Finally, LinkedIn agreed with its most obvious natural competitor—social networking
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`juggernaut Facebook—to divide markets, sealing off the last remaining source of potential rivalry to
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`LinkedIn’s professional social networking dominance. As a result of this agreement, which appears to
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`have grown of data access negotiations between the two companies in the early 2010s, LinkedIn has
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`maintained its monopoly in professional social networking without the threat of entry by Facebook, and
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`Facebook has fortified its dominance and control over personal social networking, perhaps through data
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`assistance from LinkedIn—similar to an agreement that Facebook recently struck with its would-be
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`competitor Google.
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`29.
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`By 2015, competition between Facebook and LinkedIn seemed inevitable. Press
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`speculation that Facebook was building a professional social network to rival LinkedIn had reached a
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`fever pitch, as Facebook secretly developed a new product called Facebook at Work. For example, in
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`November 2014, the Financial Times reported based on communications with “individuals familiar with
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`the matter” that Facebook at Work would “allow users to chat with colleagues, connect with professional
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`contacts and collaborate over documents, competing with Google Drive and Microsoft Office.” In
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`December 2015, Forbes predicted that “LinkedIn could face intense competition from ‘Facebook at
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`Work,’” which was at the time to be imminently released.
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`30.
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`Internally, Facebook was preparing for scorched earth competition with LinkedIn.
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`According to publicly reported internal Facebook documents, Facebook had identified LinkedIn as a
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`competitive threat, and was threatened by LinkedIn’s access to Facebook user data through Facebook
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`APIs. According to Facebook Vice President Chris Daniels, representatives of the companies had met in
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`2013, and LinkedIn had agreed with Facebook “not to access [Facebook’s] APIs until [the companies]
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`worked out an agreement both ways . . . .” Nonetheless, LinkedIn appeared to be aggressively scraping
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`Facebook user data as part of an arms race for user identities.
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`31.
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`Facebook’s senior executives scrambled to audit all of the applications using Facebook’s
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`Platform APIs, bucketing each of the thousands of apps by whether they were competitive threats.
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`Facebook identified LinkedIn as a competitive threat in the “reputation” category. After the audit,
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`Facebook prepared to remove API functionality, breaking thousands of competitive apps, sparing only
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`companies that entered into secret agreements with Facebook. Facebook internally debated what it would
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`do about LinkedIn, including whether it would demand data from LinkedIn in exchange for its access to
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`Facebook’s APIs beyond “status updates.” As Facebook Vice President Konstantinos Papamiltiadis
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`internally stated, such a meager amount of data from LinkedIn was “not good enough for [him].”
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`Facebook also sought a bargaining chip in its negotiations with LinkedIn, including a trumped-up policy
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`Case 4:22-cv-00237-KAW Document 1 Filed 01/13/22 Page 13 of 118
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`violation that it could use as a fig leaf for denying LinkedIn access to its APIs and the removal of “work
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`history” information from LinkedIn’s scope of access.
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`32.
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`Although the specific result of the then-ongoing negotiations between the companies is
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`not known, what happened after Facebook removed API functionality for thousands of developers speaks
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`volumes. From April 2015 until the present, LinkedIn suffered no public problems or deprecation after
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`Facebook privatized its APIs, indicating to some degree of certainty that a deal of some sort was in fact
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`struck between the companies. And the other side of the equation—Facebook’s behavior—has been even
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`more striking. Despite entering every adjacent market within its grasp, and seeking to leverage its
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`professional social networking data and tools in products from messaging, to video, to gaming, and
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`beyond, Facebook never entered the market for professional social networking. Even the expected
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`Facebook at Work product, which was released under the name Workplace, had a glaring omission—it
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`was released without any professional social networking functionality, and there was no competing
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`subscription social networking product to rival LinkedIn. Facebook had carefully excised from its
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`Workplace product features that would compete with LinkedIn’s professional social networking products
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`and services.
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`33.
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`From 2016 until the present, Facebook aggressively diversified its lines of business,
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`entering virtually every technology market. Facebook challenged ad giant Google in internet advertising
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`and user tracking; Facebook acquired Instagram, directly competing with photo sharing and
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`microblogging apps, including Twitter; Facebook aggressively moved into video sharing and streaming
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`with its Facebook Live product; it launched Messenger and even spent billions acquiring WhatsApp;
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`Facebook made several forays into payments, taking on the likes of PayPal and Venmo; Facebook took
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`on eBay and Amazon with its Marketplace product; Facebook planned its own crypto currency; and
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`Facebook even bought a virtual reality company, Oculus.
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`The only market it did not even attempt to enter was the one LinkedIn controlled—a
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`34.
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`market where users paid expensive subscriptions out of pocket for professional social networking. That
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`market could have supported an additional competitor, and Facebook could have undercut prices to obtain
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`market share, but Facebook never set foot near LinkedIn’s monopoly.
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`35.
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`This lack of entry is not reasonably explicable absent an agreement between LinkedIn and
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`Facebook not to compete with each other, particularly given the state of the companies’ negotiations in
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`2013 to 2015, which included potential data reciprocity terms.
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`36.
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`To this day, both companies deny that they compete with each other. Indeed, even though
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`Facebook internally considered LinkedIn potentially competitive in late 2013, and it was widely reported
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`that Facebook was preparing to launch a professional social networking product in 2015, Facebook CEO
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`and founder Mark Zuckerberg told the U.S. Senate in 2018 that Facebook “do[es]n’t consider LinkedIn
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`to be one of our direct competitors.” LinkedIn did not list Facebook as a competitor in its SEC filing
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`when it went public in 2015.
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`37.
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`All of this evidence indicates that LinkedIn and Facebook