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`BATHAEE DUNNE LLP
`Yavar Bathaee (CA 282388)
`yavar@bathaeedunne.com
`Edward M. Grauman (pro hac vice)
`egrauman@bathaeedunne.com
`Andrew C. Wolinsky
`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
`
`Interim Co-Lead Counsel for the
`Advertiser Class
`
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`FILED UNDER SEAL
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`SCOTT + SCOTT ATTORNEYS AT LAW LLP
`Kristen M. Anderson (CA 246108)
`kanderson@scott-scott.com
`230 Park Avenue, 17th Floor
`New York, NY 10169
`Tel.: (212) 223-6444
`
`Christopher M. Burke (CA 214799)
`cburke@scott-scott.com
`David H. Goldberger (CA 225869)
`dgoldberger@scott-scott.com
`Kate Lv (CA 302704)
`klv@scott-scott.com
`600 W. Broadway, Suite 3300
`San Diego, CA 92101
`Tel.: (619) 233-4565
`
`Patrick J. McGahan (pro hac vice)
`pmcgahan@scott-scott.com
`Michael P. Srodoski (pro hac vice)
`msrodoski@scott-scott.com
`156 South Main Street, P.O. Box 192
`Colchester, CT 06415
`Tel.: (860) 537-5537
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`(Additional counsel on signature page)
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`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`SAN FRANCISCO DIVISION
`
`MAXIMILIAN KLEIN, et al., on behalf of themselves
`and all others similarly situated,
`
` Plaintiffs,
`
`
`v.
`
`META PLATFORMS, INC.,
`
` Defendant.
`
`
` Case No. 20-cv-08570-JD
`
`The Hon. James Donato
`
`FIRST AMENDED CONSOLIDATED
`ADVERTISER CLASS ACTION
`COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`CLASS ACTION
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`First Amended Consolidated Advertiser Class Action Complaint – Case No. 20-CV-08570-JD
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`II.
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`III.
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`TABLE OF CONTENTS
`INTRODUCTION ....................................................................................................................................... 1
`PARTIES ..................................................................................................................................................... 5
`I.
`PLAINTIFFS ................................................................................................................................... 5
`II.
`DEFENDANT ................................................................................................................................. 6
`JURISDICTION AND VENUE .................................................................................................................. 8
`INTRADISTRICT ASSIGNMENT ............................................................................................................ 9
`FACTS ......................................................................................................................................................... 9
`I.
`FACEBOOK EMERGES AS THE DOMINANT SOCIAL NETWORK ...................................... 9
`A.
`The Last Social Network Standing ...................................................................................... 9
`B.
`A New Market of Its Own Creation .................................................................................. 11
`C.
`The Data Targeting Barrier to Entry .................................................................................. 13
`D.
`Google’s Failed Entry into the Social Advertising Market ............................................... 16
`A THREAT TO FACEBOOK’S MONOPOLY: THE RISE OF SMARTPHONES AND
`MOBILE APPS ............................................................................................................................. 19
`A.
`The Mobile App Revolution .............................................................................................. 19
`B.
`Facebook Recognizes the Looming Threat Presented by Mobile Applications ................ 22
`C.
`The Facebook Platform ..................................................................................................... 23
`D.
`The Profitable Open Graph Platform and Mobile Install Business ................................... 26
`FACEBOOK WEAPONIZES ITS PLATFORM TO DESTROY COMPETITION .................... 28
`Facebook Makes Plans to Remove Vital Platform Functionality and Refuses to Sell
`A.
`Social Data to Competing Application Developers ........................................................... 28
`Facebook’s Social Data Heist ............................................................................................ 31
`Facebook Targets Its Competitors for Reciprocity or Denial of API Access ................... 35
`Facebook Decides to Add the Events API to Its Reciprocity Scheme .............................. 39
`The Decision to Remove Developer Access to the Friends, News Feed, Events, and
`Other Crucial APIs Lacked Any Legitimate Justification ................................................. 41
`Facebook Prepares to Announce Removal of the APIs ..................................................... 45
`F.
`The Announcement at F8 .................................................................................................. 49
`G.
`THE SURVEILLANCE AND ACQUISITION OF COMPETITIVE THREATS ....................... 50
`Facebook Relies on Onavo’s Surveillance of Facebook’s Competitors, and Acquires
`A.
`and Uses Onavo’s Assets ................................................................................................... 51
`Facebook Identifies Instagram as a Threat and Acquires the Company ........................... 55
`
`B.
`C.
`D.
`E.
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`B.
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`IV.
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`PacebOGk ACQuites’ WHAGASID sees cscscscs cues cscscrcscrescacscucscucscucscucecicscacetuceiccacacucactaeacacNeCtaseL 63
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`IX.
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`LHE THREAT BEYOND: FACEBOOK?S: WALLED ‘GARDENoeicnecnccnermencenesmeermenmenney
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`A.
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`B.
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`c
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`D.
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`Pasebaike Araciacicie INCaac osnceancaancoanccunaaunaaunaainaninanansmaniaunieancaunaounaainaninaninaain 13
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`FacebookPositions Itself Against Google by Combining Atlas, Audience Network,
`STIMUTOMY eresresseesccecscceescrcessesieciriecec ecm rme ame recte cece eee aze. 14
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`ShadowProfiles and Identifying Users Outside of Facebook’s Apps................:::::00000+ 14
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`FACEBOOK AND GOOGLE AGREE NOT TO COMPETE AND TO FORTIFY THE
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`FACEBOOK-DOMINATED SOCIAL ADVERTISING MARKET ......ooocccccceeeeeneeeeeeeeees 14
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`A.
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`Google’s Dominance Over Ad Exchanges and AdServers and the Looming Facebook
`OE so soscr sec eernenestmenesnsereerosresrcenesmeeuneTesT eer nes cece cermeEeUEeTeSTeeD pence ceticieE 14
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`The Rise of Header Bidding and Facebook’s Threat to Compete with Google.............. 151
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`Google Agrees to Help Facebook Identify Facebook’s OwnUsers OutsideofIts
`Walled Garden, and Facebook Backs Off of Programmatic and Exchange-Trade
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`Cs
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`XII. THE RELEVANT MARKET ..................................................................................................... 181
`A.
`The Social Advertising Market ........................................................................................ 181
`B.
`Barriers to Entry .............................................................................................................. 188
`C.
`Relevant Geographic Market ........................................................................................... 190
`XIII. HARM TO COMPETITION AND ANTITRUST INJURY ....................................................... 191
`CLASS ACTION ALLEGATIONS ........................................................................................................ 195
`CLAIMS FOR RELIEF ........................................................................................................................... 201
`PRAYER FOR RELIEF .......................................................................................................................... 204
`JURY DEMAND ..................................................................................................................................... 205
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`INTRODUCTION
`1.
`This Complaint is brought on behalf of people and companies—including each of the
`named Plaintiffs—who bought advertising from Defendant Meta Platforms, Inc.1 (“Facebook”) at
`anticompetitively inflated prices. Over the course of the past decade, Facebook devised, executed, and
`reaped the benefits of a scheme to unlawfully monopolize the market for social advertising. As a direct
`result, Facebook was able to (and in fact, did) charge supracompetitive prices for social advertisements
`to thousands of people and businesses, including Plaintiffs Affilious, Inc., Jessyca Frederick, Mark
`Young, Joshua Jeon, 406 Property Services, PLLC, Mark Berney, and Katherine Looper.
`2.
`Facebook acquired the power to raise prices through the anticompetitive scheme described
`below and did so year after year with no competitive check.
`*
`*
`*
`3.
`By the end of 2010, Facebook had emerged the victor among social networks and had
`begun monetizing its product through targeted advertising. Facebook had obtained a monopoly in a form
`of online advertising that was distinct from others—social advertising. This form of advertising relied on
`a particular form of data, called social data, to power machine learning and AI models used for advertising
`and content targeting.
`4.
`Facebook had acquired a critical mass of social data and targeting infrastructure, giving
`rise to a Data Targeting Barrier to Entry (“DTBE”)—a network-driven barrier to entry that protected
`Facebook’s monopoly share of the Social Advertising Market.
`5.
`Facebook’s dominance was threatened in 2012, and to fend off this threat Facebook’s CEO
`Mark Zuckerberg and his senior lieutenants planned and executed a scheme between 2012 and 2015 that
`leveraged Facebook’s developer Platform to extract social data and advertising revenue from third-party
`apps, some of which posed a competitive threat to Facebook. During this period, Facebook overtly
`destroyed its actual and potential competition, and acquired two then-nascent threats to its business,
`Instagram and WhatsApp.
`
`
`1 Originally-named Defendant Facebook, Inc. changed its name to Meta Platforms, Inc., during
`the pendency of this case.
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`6.
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`By April 2015, Facebook had expelled third-party apps fromits Platform, including by
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`purporting to deprecate core functionality such as traversing a user’s Facebookfriends, news feed, or
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`Events functionality. Before this move, Facebook had beenable to harvest social data from appsbuilt on
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`its Platform. Afterwards, however, Facebook faced a social data vacuum. Facebook enteredinto a series
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`of data sharing and whitelist agreements to obtainvital data and advertising revenue,
`
`OoAYDnvA>&_WYYe=
`tN ONLilt.||
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`Yet Facebook was still in need of whatit
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`8.
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`To obtain data from these companies, from 2016 to 2018 Facebook entered targeted sub-
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`verticals, threatening ruinous competition and then
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`As the 2010s wore on, technological developments in header bidding and Google’s
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`acquisition and deployment of powerful machine learning tools across its growing data collection
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`ecosystem threatened to erode Facebook’s identity-based targeting advantage—and perhaps even
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`superset the Social Advertising Market. Facebook responded by acquiring and expanding powerful cross-
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`site and cross-device tracking tools, deploying its own machinelearning tools outside its walled garden,
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`and laying the groundwork to enter programmatic advertising and other Google-dominated online ad
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`markets. By 2018,
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`the two online advertising titans—each with its own long-running sphere of
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`dominance—wereheadedfora direct clash.
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`16.
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`Except that instead of competing, Facebook and Google actually cut an anticompetitive
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`deal. Codenamed “Jedi Blue,” this September 2018 agreement between Facebook and Google divided
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`markets between the two companiesand notonly reinforced but bolstered Facebook’s dominantposition
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`in the Social Advertising Market.
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`Pursuant to the Jedi Blue agreement, Facebook droppedits support for header bidding,
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`effectively ceding the programmatic and exchange-based ad markets to Google. At the same time, Google
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`agreed to provide Facebook powerfultools to identify, target, and monetize Facebook’s own users onthe
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`weband acrossthird-party mobile applications, then give Facebook priority over 90%of advertisements
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`to these users and twice the amountoftimeto bid on advertising to them.
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`The net effect was that Facebook remained the dominant—andonly—sourceof granularly
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`targeted advertising to its social-networking user base. In exchange, Facebook backed away from
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`Google’s advertising exchange business, including by forgoing the adoption of “headerbidding.”
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`19.
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`Asa result of the conduct set forth above, Facebook became and remained for nearly a
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`decade the dominant (and in many respects, sole) source for highly valuable advertising that could
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`precisely target networksofusers in a social network. Facebookhas used this market powerto repeatedly
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`raise advertising prices every yearsince it began its scheme.
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`22.
`Over the course of nearly a decade, Facebook has faced no meaningful competitive check
`on social advertising prices—and it has extracted supracompetitive revenues from advertisers like
`Plaintiffs throughout this period.
`23.
`Plaintiffs are advertisers on Facebook’s advertising platform that were injured by paying
`supracompetitive prices for social advertising. The prices they paid would have been lower if Facebook
`had not unlawfully monopolized the Social Advertising Market and taken unlawful acts (including an
`express anticompetitive agreement with Google) to maintain that monopoly, as those prices would have
`been subject to competitive forces that would otherwise exist as a check on Facebook’s market power
`and monopoly.
`
`PARTIES
`
`I.
`
`PLAINTIFFS
`24.
`Plaintiff Affilious, Inc. (“Affilious”) is a California corporation with its principal place of
`business in La Quinta, California. Affilious is an internet publisher firm that operates several websites,
`including WineClubReviews.net. In late 2016 and in August 2017, Affilious purchased advertising on
`Facebook’s self-service advertising platform to promote WineClubReviews.net. Until no earlier than
`November 6, 2019, Affilious did not know, and could not reasonably have known, the truth about
`Facebook’s anticompetitive conduct, including its purpose and intent to engage in anticompetitive
`conduct, nor could it have known that it had been injured by paying supracompetitive prices for
`advertising.
`25.
`Plaintiff Jessyca Frederick is a citizen of the State of California. Frederick was the sole
`proprietor of ClubsAndGifts.com, a promotional website, and a founder and CEO of Affilious. At various
`times from April 4, 2009, through August 2017, Frederick purchased advertising on Facebook’s self-
`service advertising platform to promote her businesses.
`26.
`Plaintiff Mark Young is a citizen of the State of New York. Young is the sole proprietor
`of Dinkum Hair, a hair salon located in Buchanan, New York. Young d/b/a Dinkum Hair purchased
`advertising on Facebook’s self-service advertising platform to promote the business between June 2017
`and April 2019.
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`27.
`Plaintiff Joshua Jeon is a citizen of the State of Texas. He is a pastor at Dwell Church in
`Austin, Texas. In April 2016, Jeon purchased advertising on Facebook’s self-service advertising platform
`to promote Dwell Church. Jeon did not receive reimbursement from Dwell Church for the purchase.
`28.
`Plaintiff 406 Property Services, PLLC (“406 Property Services”) is a Montana
`professional limited liability company with its principal place of business in Whitefish, Montana. 406
`Property Services is a real estate property services company. From approximately June 8, 2017, until
`approximately October 20, 2017, 406 Property Services purchased advertising on Facebook’s self-service
`advertising platform to promote its business.
`29.
`Plaintiff Mark Berney is a citizen of the State of Montana. From in or about 2016 into
`December 2018, Berney purchased advertising on Facebook’s self-service advertising platform to
`promote his personal musical work.
`30.
`Plaintiff Katherine Looper is a citizen of the State of California. From in or about 2013
`through March 2020, Looper purchased advertising on Facebook’s self-service advertising platform to
`promote free musical concerts at the Cadillac Hotel, a residential hotel for low-income persons in San
`Francisco operated by Looper’s nonprofit organization, Reality House West.
`31.
`Plaintiffs all paid prices for advertising that were higher than they would have been absent
`Facebook’s anticompetitive conduct and unlawfully acquired and/or maintained monopoly. Facebook
`caused Plaintiffs to pay supracompetitive prices for advertising as a result of the market power it obtained
`and/or maintained as a result of the anticompetitive scheme described in this Complaint.
`
`II.
`
`DEFENDANT
`32.
`Defendant Meta Platforms, Inc., is a publicly traded company, incorporated in Delaware.
`Meta Platforms, Inc. was formerly known as Facebook, Inc., and changed its name to Meta Platforms,
`Inc. on October 28, 2021. Facebook’s principal place of business and headquarters is located at 1601
`Willow Road in Menlo Park, California.
`33.
`Founded in 2004 by Mark Zuckerberg, Facebook is a social media company that provides
`online services to billions of users around the world. In exchange for providing services, Facebook
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`•
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`collects user data, which it uses to create and sell targeted advertising services. Facebook’s principal
`revenue is from targeted social media advertising that it provides to advertisers as a data broker.
`34.
`Facebook also operates as a platform for third-party applications and hardware, and owns
`and operates several business divisions:
`• Facebook. Facebook’s core application, which bears the company’s name, is, according to
`Facebook’s filing with shareholders, designed to enable “people to connect, share, discover,
`and communicate with each other on mobile devices and personal computers.” The
`Facebook core product contains a “News Feed” that displays an algorithmically ranked
`series of stories and advertisements individualized for each person.
`Instagram. Instagram is a photo-sharing application that allows users to share photos,
`videos, and messages on mobile devices. Instagram was acquired in April 2012, and at
`present, Facebook operates Instagram as a separate application from its core Facebook
`product.
`• Messenger. Facebook’s Messenger application is a multimedia messaging application,
`allowing messages that include photos and videos to be sent from person to person across
`platforms and devices.
`• WhatsApp. WhatsApp is a secure messaging application used by individuals and businesses.
`WhatsApp was acquired by Facebook in 2014 for $21.8 billion, and at the time had
`approximately 450 million users worldwide.
`• Oculus. Oculus is Facebook’s virtual reality hardware line of business, which Facebook
`acquired in March 2014 for approximately $2 billion.
`35.
`Facebook’s revenue as of year-end 2019 was $70.70 billion (up 27% from the previous
`year), with net income from operations of $23.99 billion. Almost all of this revenue came from
`advertising, particularly mobile advertising. As of year-end 2019, Facebook maintained $54.86 billion in
`cash and cash-equivalent securities. Facebook employed 44,942 people around the world at the end of
`2019 (up 26% from the previous year). Facebook’s revenue as of year-end 2020 was $85.97 billion (a
`22% increase from the previous year), with net income from operations of $32.67 billion. Again, almost
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`all of that revenue came from mobile advertising. As of year-end 2020, Facebook maintained $61.95
`billion in cash and cash-equivalent securities. Facebook employed 58,604 people around the world at the
`end of 2020 (up 30% from the previous year). In 2021, Facebook / Meta earned $117.93 billion in
`revenue, of which $114.93 billion came from advertising. The company’s 2021 total income from
`operations was $46.753 billion. Disregarding Facebook / Meta’s Reality Labs division (which operated
`at a substantial loss), Facebook / Meta’s total income from operations in 2021 was $56.95 billion.
`Facebook / Meta’s net income from operations (including Reality Labs) in 2021 was $39.37 billion
`36.
`For the 2019 fiscal year, Facebook reported to investors that on average it had 1.66 billion
`daily active users of Facebook and Messenger (“DAUs”) (up 9% from the previous year) and 2.50 billion
`monthly active users (“MAUs”) (up 8% from the previous year). Facebook also reported that on average
`it had 2.26 billion daily active people (“DAP”) who used any Facebook product (up 11% from the
`previous year) and 2.89 billion monthly active people (“MAP”) (up 9% from the previous year). For the
`2020 fiscal year, Facebook reported to investors that on average it had 1.84 billion DAUs (up 11% from
`the previous year) and 2.80 billion MAUs (up 12% from the previous year). Facebook also reported that
`on average it had 2.60 billion DAP who used any Facebook product (up 15% from the previous year).
`For the 2021 fiscal year, Facebook / Meta reported to investors that on average it had 1.91 billion DAUs,
`2.89 billion MAUs, 2.78 billion DAP, and 3.53 billion MAP, across its family of products—an increase
`from 2020 in all four categories.
`
`JURISDICTION AND VENUE
`37.
`This action arises under Sections 1 and 2 of the Sherman Antitrust Act (15 U.S.C. §§ 1,
`2) and Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15, 26). The action seeks to recover treble
`damages, interest, costs of suit, equitable relief, and reasonable attorneys’ fees for damages to Plaintiffs
`and members of the Classes resulting from Defendant’s restraints of trade and monopolization of the
`Social Advertising Market described herein.
`38.
`This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331 (federal question),
`1332 (class action diversity jurisdiction), and 1337(a) (antitrust); and under 15 U.S.C. § 15 (antitrust).
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`39.
`Venue is appropriate in this district under 15 U.S.C. § 15(a) (Clayton Act), 15 U.S.C. § 22
`(nationwide venue for antitrust matters), and 28 U.S.C. § 1391(b) (general venue provision). Facebook
`transacts business within this district, and it transacts its affairs and carries out interstate trade and
`commerce, in substantial part, in this district.
`40.
`The Court has personal jurisdiction over Facebook as it is subject to general jurisdiction
`in the State of California, where it maintains its headquarters and its principal place of business. The
`scheme, conspiracy, and monopolization alleged in this Complaint was targeted at individuals throughout
`the United States, causing injury to persons in the United States, including in this district.
`INTRADISTRICT ASSIGNMENT
`41.
`This action has been assigned to the Hon. James Donato of the San Francisco Division of
`this judicial district.
`
`FACTS
`
`I.
`
`FACEBOOK EMERGES AS THE DOMINANT SOCIAL NETWORK
`A.
`The Last Social Network Standing
`42.
`Facebook’s meteoric rise since its founding in 2004 is well documented. The company—
`started in the dorm room of its CEO Mark Zuckerberg as “the facebook”—rose to prominence in the face
`of fierce competition from several social networks. Initially an exclusive service for elite universities
`throughout the United States, Facebook eventually expanded its network to encompass a general audience
`of users throughout the United States and worldwide.
`43.
`Between 2004 and 2010, Facebook vanquished a number of rivals, emerging as the
`dominant social network in the United States.
`44.
`Facebook’s first chief competitor was MySpace. Founded in 2003 (a year before
`Facebook), MySpace targeted the same audience, provided largely the same services, and rapidly
`attracted an enormous number of users. By 2005, MySpace had 25 million active users, and was acquired
`by NewsCorp for $580 million. In 2006, MySpace registered 100 million users, passing Google as the
`most visited website in the United States.
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`45.
`However, the next three years featured a steady downward spiral for MySpace—and
`countervailing growth by Facebook. In 2008, Facebook passed MySpace in worldwide active users and
`continued to grow, reaching 307 million active users across the globe by April 2009. In May 2009,
`Facebook passed MySpace in United States, 70.28 million to 70.26 million monthly active users.
`46. MySpace never came close to Facebook again. By 2010, MySpace had mostly exited the
`market, leaving the business of social media for good. MySpace’s CEO capitulated in November of 2010:
`“MySpace is not a social network anymore. It is now a social entertainment destination.” In September
`2010, MySpace reported that it had lost $126 million, and in June 2011, NewsCorp sold the company for
`$35 million—$545 million less than it had paid just six years earlier. By then, its user base had dwindled
`to just 3 million monthly visitors.
`47.
`During the same time period, several other social networks also met their demise,
`including Google’s Orkut, AOL’s Bebo, and Friendster, which failed to scale rapidly enough to compete
`with MySpace and Facebook.
`48.
`By 2009 and through 2010, Facebook emerged as the only peer-to-peer social media
`network to exist at scale, and no other network or company rivaled Facebook’s massive user base. On
`March 2, 2010, Adweek reported that Facebook had booked revenues of up to $700 million in 2009 and
`was on track for $1.1 billion in 2010—almost all from advertising to its newly won users. Facebook had
`been roughly doubling its revenues every year up until that point—$150 million in 2007, $280-300
`million in 2008, and $700 million in 2009.
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`49.
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`Time magazine heralded Zuckerberg as its 2010 Person of the Year.
`
`50.
`Time’s cover story set out the stakes—the scope of the newly assembled social network
`was unprecedented and staggering:
`
`What just happened? In less than seven years, Zuckerberg wired together a
`twelfth of humanity into a single network, thereby creating a social entity
`almost twice as large as the U.S. If Facebook were a country it would be
`the third largest, behind only China and India. It started out as a lark, a
`diversion, but it has turned into something real, something that has changed
`the way human beings relate to one another on a species-wide scale. We
`are now running our social lives through a for-profit network that, on paper
`at least, has made Zuckerberg a billionaire six times over.
`51.
`By 2010, Facebook was unrivaled and dominant in a way no company since Microsoft
`had been in post-personal-computer history. And it had done so by riding the currents of powerful
`network effects.
`
`B.
`A New Market of Its Own Creation
`52.
`By the beginning of the millennium’s second decade, Facebook was the indisputable king
`of an entirely new market—a market built not on hardware or operating system dominance, but one built
`on a network of people, with its power and value directly derived from their engagement with that
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`network. The more data users fed into Facebook by communicating and interacting with each other,
`posting their pictures, and publishing their content, the more valuable the Facebook network became to
`third parties, who could advertise to Facebook’s users by targeting them using the very information they
`provided to Facebook’s network.
`53.
`Data about what information users shared on their personal pages; the photos and profiles
`they viewed; their connections to others; what they shared with others; and even what they put in
`messages to other users all allowed targeted advertising on a scale that had never before existed. Unlike
`search advertising, Facebook’s advertising platform allowed advertisers to target Facebook’s user base
`by their attributes and behavior, not by a query entered into a search box. More importantly, unlike in
`search, user identity was not