Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 1 of 55
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
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`
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`FEDERAL TRADE COMMISSION,
`
`Plaintiff,
`
`v.
`
`FACEBOOK, INC.,
`
`Defendant.
`
`
`
`
`
`
`Case No. 1:20-cv-03590-JEB
`
`
`
`
`
`
`MEMORANDUM IN SUPPORT OF
`FACEBOOK, INC.’S MOTION TO DISMISS
`THE FTC’S AMENDED COMPLAINT
`
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`
`

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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 2 of 55
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`
`
`TABLE OF CONTENTS
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`Page
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`TABLE OF AUTHORITIES .......................................................................................................... ii
`
`INTRODUCTION ...........................................................................................................................1
`
`LEGAL STANDARD ......................................................................................................................6
`
`ARGUMENT ...................................................................................................................................6
`
`I.
`
`THE FTC AGAIN FAILS TO ALLEGE FACTS PLAUSIBLY
`ESTABLISHING MONOPOLY POWER ..........................................................................6
`
`A.
`
`B.
`
`C.
`
`The FTC Fails To Cure the Fatal Deficiency the Court Identified
`Because the Agency Alleges No Facts Plausibly Supporting Any
`PSNS Market Share .................................................................................................6
`
`The FTC’s Alleged Facts Undermine Its Claim of Barriers to Entry ....................13
`
`The FTC Still Has No Facts To Support Its “Rare” Direct-
`Evidence Theory ....................................................................................................16
`
`II.
`
`THE FTC HAS NOT PLAUSIBLY ALLEGED LEGALLY
`COGNIZABLE EXCLUSIONARY CONDUCT .............................................................20
`
`A.
`
`B.
`
`The FTC Fails To Allege a Plausible Section 2 Acquisition
`Challenge ...............................................................................................................20
`
`The FTC’s Attempt To Revive Dismissed and Defective Platform
`Allegations Fails as a Matter of Law .....................................................................33
`
`III.
`
`THE FTC’S VOTE PURPORTING TO AUTHORIZE THE AC WAS
`INVALID; THE COURT SHOULD ACCORDINGLY DISMISS THE
`AC ......................................................................................................................................38
`
`A.
`
`B.
`
`C.
`
`Chair Khan’s Prejudgment of Facebook’s Liability Required Her
`Recusal ...................................................................................................................40
`
`In the Absence of a Valid Commission Vote, the AC Must Be
`Dismissed ...............................................................................................................44
`
`In the Alternative, the Court Should Stay the Case and Remand to
`the FTC To Resolve the Recusal Issue Now .........................................................45
`
`CONCLUSION ..............................................................................................................................45
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`
`
`
`
`i
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`

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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 3 of 55
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`
`
`CASES
`
`TABLE OF AUTHORITIES*
`
`Page
`
`* Aera Energy LLC v. Salazar, 642 F.3d 212 (D.C. Cir. 2011) ...................................................... 39, 45
`
`Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536 (9th Cir. 1991) .................................30
`
`Alberta Gas Chems. Ltd. v. E.I. Du Pont de Nemours & Co., 826 F.2d 1235
`(3d Cir. 1987) .....................................................................................................................31
`
`Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991
`(9th Cir. 2010) ......................................................................................................................4
`
`* Am. Cyanamid Co. v. FTC, 363 F.2d 757 (6th Cir. 1966) .............................................................41
`
`AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021) ...............................................................36
`
`Amos Treat & Co. v. SEC, 306 F.2d 260 (D.C. Cir. 1962) ............................................................45
`
`* Ashcroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................6, 12, 22
`
`Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) ....................................36
`
`Ass’n for Intercollegiate Athletics for Women v. NCAA, 735 F.2d 577
`(D.C. Cir. 1984) .................................................................................................................30
`
`Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters,
`459 U.S. 519 (1983) ...........................................................................................................11
`
`BanxCorp v. Bankrate, Inc., 847 F. App’x 116 (3d Cir. 2021) ........................................................ 17
`
`* Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .................................................1, 3, 6, 10, 11, 13,
`15, 22, 26, 27, 28, 29
`
`* Berryman-Turner v. Dist. of Columbia, 233 F. Supp. 3d 26 (D.D.C. 2017), aff’d,
`720 F. App’x 1 (D.C. Cir. 2018) ..................................................................................33, 34
`
`Bigio v. Coca-Cola Co., 2010 WL 3377503 (S.D.N.Y. Aug. 23, 2010), aff’d,
`675 F.3d 163 (2d Cir. 2012)...............................................................................................34
`
`Blackbook Cap., Inc. v. Fin. Indus. Reg. Auth., Inc., 2021 WL 1827268
`(D.N.J. May 5, 2021) .........................................................................................................34
`
`
`* Authorities principally relied upon are marked with an asterisk.
`
`ii
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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 4 of 55
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`
`
`Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406
`(7th Cir. 1995) ....................................................................................................................20
`
`Bookhouse of Stuyvesant Plaza, Inc. v. Amazon.com, Inc., 985 F. Supp. 2d 612
`(S.D.N.Y. 2013) .................................................................................................................10
`
`BRFHH Shreveport, LLC v. Willis Knighton Med. Ctr., 176 F. Supp. 3d 606
`(W.D. La. 2016) .................................................................................................................25
`
`Brown Shoe Co. v. United States, 370 U.S. 294 (1962) ................................................................21
`
`* Cinderella Career Coll. & Finishing Schs., Inc. v. FTC, 425 F.2d 583
`(D.C. Cir. 1970) ...........................................................................................................40, 44
`
`Connecticut v. U.S. Dep’t of the Interior, 344 F. Supp. 3d 279 (D.D.C. 2018) ............................39
`
`Cosgrove v. Oregon Chai, Inc., 520 F. Supp. 3d 562 (S.D.N.Y. 2021) ........................................40
`
`CREW v. Pompeo, 2020 WL 5748105 (D.D.C. Sept. 25, 2020) .....................................................6
`
`Cummings v. City of New York, 2021 WL 1163654 (S.D.N.Y. Mar. 26, 2021),
`appeal pending, No. 21-1380 (2d Cir.) ..............................................................................34
`
`* DeHoog v. Anheuser-Busch InBev SA/NV, 899 F.3d 758 (9th Cir. 2018) ...............................23, 27
`
`Dresses for Less, Inc. v. CIT Grp./Com. Servs., Inc., 2002 WL 31164482
`(S.D.N.Y. Sept. 30, 2002) ............................................................................................22, 29
`
`Eastman v. Quest Diagnostics Inc., 2016 WL 1640465 (N.D. Cal. Apr. 26, 2016),
`aff’d, 724 F. App’x 556 (9th Cir. 2018) ......................................................................21, 26
`
`Epic Games, Inc. v. Apple Inc., --- F. Supp. 3d ---, 2021 WL 4128925
`(N.D. Cal. Sept. 10, 2021), appeal pending, No. 21-16506 (9th Cir.) ...............................17
`
`Epicenter Recognition, Inc. v. Jostens, Inc., 81 F. App’x 910 (9th Cir. 2003) ..............................14
`
`Facebook, Inc. v. Power Ventures, Inc., 2010 WL 3291750 (N.D. Cal. July 20,
`2010) ..................................................................................................................................38
`
`Farah v. Esquire Mag., 736 F.3d 528 (D.C. Cir. 2013) ................................................................39
`
`Feitelson v. Google Inc., 80 F. Supp. 3d 1019 (N.D. Cal. 2015) ...................................................28
`
`Fraser v. Major League Soccer, L.L.C., 284 F.3d 47 (1st Cir. 2002) ...........................................27
`
`Friedman v. Dollar Thrifty Auto. Grp., Inc., 2015 WL 4036319
`(D. Colo. July 1, 2015).......................................................................................................34
`
`FTC v. Guignon, 390 F.2d 323 (8th Cir. 1968) .............................................................................44
`
`iii
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`
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`FTC v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) .................................................................23
`
`* FTC v. Libbey, Inc.:
`
`
`
`
`
`211 F. Supp. 2d 34 (D.D.C. 2002) .....................................................................................44
`
`No. 1:02-cv-00060-RBW, ECF No. 76 (D.D.C. Apr. 3, 2002) .........................................39
`
`* FTC v. Shire ViroPharma, Inc., 917 F.3d 147 (3d Cir. 2019) ...........................................32, 36, 37
`
`FTC v. Steris Corp., 133 F. Supp. 3d 962 (N.D. Ohio 2015) ..................................................24, 25
`
`Hooks v. Kitsap Tenant Support Servs., Inc., 816 F.3d 550 (9th Cir. 2016) .................................44
`
`ICC v. S. Ry. Co., 543 F.2d 534 (5th Cir. 1976) ............................................................................44
`
`Indep. Ink, Inc. v. Trident, Inc., 210 F. Supp. 2d 1155 (C.D. Cal. 2002), aff’d in
`part, rev’d in part, and remanded sub nom. Indep. Ink, Inc. v. Ill. Tool
`Works, Inc., 396 F.3d 1342 (Fed. Cir. 2005), vacated and remanded,
`547 U.S. 28 (2006) ....................................................................................................... 11-12
`
`Jones v. Shea, 532 A.2d 571 (Vt. 1987) ........................................................................................43
`
`* Kaufman v. Time Warner, 836 F.3d 137 (2d Cir. 2016) ..................................................................9
`
`LaShawn A. v. Barry, 87 F.3d 1389 (D.C. Cir. 1996)....................................................................33
`
`Lowry v. Soc. Sec. Admin., 2000 WL 730412 (D. Or. June 7, 2000) ............................................39
`
`Marchese v. Cablevision Sys. Corp., 2011 WL 3022529 (D.N.J. July 21, 2011) ...........................9
`
`Maris Distrib. Co. v. Anheuser-Busch, Inc., 302 F.3d 1207 (11th Cir. 2002) .................................8
`
`Med Vets, Inc. v. VIP Petcare Holdings, Inc., 811 F. App’x 422 (9th Cir. 2020) ...........................8
`
`* New York v. Facebook, --- F. Supp. 3d ---, 2021 WL 2643724 (D.D.C. June 28,
`2021), appeal pending, No. 21-7078 (D.C. Cir.) .........................................................35, 36
`
`Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) .....................................................................16
`
`Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ........................................... 16-17
`
`Reveal Chat Holdco, LLC v. Facebook, Inc., 471 F. Supp. 3d 981 (N.D. Cal. 2020) ...................38
`
`* Rick-Mik Enters., Inc. v. Equilon Enters., LLC, 532 F.3d 963 (9th Cir. 2008) .........................8, 10
`
`Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986) ..................11
`
`Sambreel Holdings LLC v. Facebook, Inc., 906 F. Supp. 2d 1070 (S.D. Cal. 2012) ....................38
`
`iv
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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 6 of 55
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`
`
`Set-Top Cable Television Box Antitrust Litig., In re, 2011 WL 1432036
`(S.D.N.Y. Apr. 8, 2011), aff’d sub nom. Kaufman v. Time Warner,
`836 F.3d 137 (2d Cir. 2016).................................................................................................8
`
`Shak v. JPMorgan Chase & Co., 156 F. Supp. 3d 462 (S.D.N.Y. 2016) ........................................9
`
`St. Luke’s Hosp. v. ProMedica Health Sys., Inc., 8 F.4th 479 (6th Cir. 2021) ..............................35
`
`Standard Oil Co. v. United States, 221 U.S. 1 (1911) ...................................................................32
`
`State v. Gonzales, 119 P.3d 151 (N.M. 2005) ................................................................................43
`
`State v. Hohman, 420 A.2d 852 (Vt. 1980) ...................................................................................43
`
`State v. King, 956 So. 2d 562 (La. 2007) .......................................................................................43
`
`Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690 (4th Cir. 2021) .........................................23
`
`Sunbeam Television Corp. v. Nielsen Media Rsch., Inc., 763 F. Supp. 2d 1341
`(S.D. Fla. 2011), aff’d, 711 F.3d 1264 (11th Cir. 2013)....................................................31
`
`Synthes, Inc. v. Emerge Med., Inc., 2012 WL 4473228 (E.D. Pa. Sept. 28, 2012) .........................9
`
`Texaco Inc. v. Dagher, 547 U.S. 1 (2006) .....................................................................................21
`
`* Times-Picayune Publ’g Co. v. United States, 345 U.S. 594 (1953) ..............................................19
`
`Top Rank, Inc. v. Haymon, 2015 WL 9948936 (C.D. Cal. Oct. 16, 2015) ......................................9
`
`Trudeau v. FTC, 456 F.3d 178 (D.C. Cir. 2006) .............................................................................6
`
`United States v. Aetna Inc., 240 F. Supp. 3d 1 (D.D.C. 2017) ......................................................27
`
`United States v. Am. Tobacco Co., 221 U.S. 106 (1911) ...............................................................25
`
`United States v. Anthem, Inc., 236 F. Supp. 3d 171 (D.D.C.), aff’d, 855 F.3d 345
`(D.C. Cir. 2017) .................................................................................................................23
`
`United States v. AT&T Inc., 310 F. Supp. 3d 161 (D.D.C. 2018), aff’d,
`916 F.3d 1029 (D.C. Cir. 2019) .........................................................................................16
`
`* United States v. Baker Hughes Inc., 908 F.2d 981 (D.C. Cir. 1990) .......................................15, 21
`
`United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586 (1957) ........................................25
`
`United States v. Grinnell Corp., 384 U.S. 563 (1966) ...................................................................25
`
`United States v. H & R Block, Inc., 833 F. Supp. 2d 36 (D.D.C. 2011) ........................................23
`
`v
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`
`
`United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974) ............................................27
`
`United States v. Mfrs. Hanover Tr. Co., 240 F. Supp. 867 (S.D.N.Y. 1965) ................................29
`
`* United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) .........................................3, 16, 17
`
`* United States v. Syufy Enters., 903 F.2d 659 (9th Cir. 1990) ..................................................14, 31
`
`Vasser v. McDonald, 228 F. Supp. 3d 1 (D.D.C. 2016) ................................................................40
`
`* Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398
`(2004) ...........................................................................................................................20, 22
`
`Wilcox v. Georgetown Univ., 2019 WL 132281 (D.D.C. Jan. 8, 2019) ........................................39
`
`* Wright v. United States, 732 F.2d 1048 (2d Cir. 1984) .....................................................38, 41, 43
`
`
`
`CONSTITUTION, STATUTES, REGULATIONS, AND RULES
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`U.S. Const. art. III ..........................................................................................................................42
`
`Clayton Act, 15 U.S.C. § 12 et seq. ................................................................................ 3-4, 21, 29
`
`
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`
`
`§ 7, 15 U.S.C. § 18 ...................................................................................3, 4, 21, 23, 27, 29
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`§ 7A(i)(1), 15 U.S.C. § 18a(i)(1) .......................................................................................21
`
`Federal Trade Commission Act, 15 U.S.C. § 41 et seq. ...................................................32, 36, 42
`
`
`
`§ 13(b), 15 U.S.C. § 53(b) .........................................................................32, 36, 37, 39, 44
`
`Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L. No. 94-435,
`90 Stat. 1383 ......................................................................................................................22
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`Sherman Act, 15 U.S.C. § 1 et seq. ...........................................................................................3, 20
`
`
`
`§ 2, 15 U.S.C. § 2 ..............................................................................3, 4, 5, 6, 9, 13, 20, 21,
`25, 26, 30, 31, 32, 35, 37, 40
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`5 C.F.R. § 2635.501(a) ........................................................................................................................ 43
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`16 C.F.R. § 1.61 .............................................................................................................................44
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`Fed. R. Evid. 201 ...........................................................................................................................39
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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 8 of 55
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`
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`LEGISLATIVE MATERIALS
`
`Majority Staff of Subcomm. on Antitrust, Com. & Admin. Law of the H. Comm. on
`the Judiciary, 116th Cong., Investigation of Competition in Digital Markets:
`Majority Staff Report and Recommendations (Oct. 2020),
`https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf .......... 40-41
`
`
`
`ADMINISTRATIVE MATERIALS
`
`Fed. Trade Comm’n:
`
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`Compl., In re Snapchat, Inc., File No. 132 3078 (FTC May 8, 2014)...............................18
`
`Dissenting Statement of Commissioner Christine S. Wilson, Facebook,
`Inc., Matter No. 1910134 (Aug. 19, 2021), https://www.ftc.gov/system/
`files/documents/public_statements/1594737/facebook_-_dissenting_
`statement_-_first_amended_complaint_-_final.pdf ...............................................22, 39, 42
`
`Email from April J. Tabor, Office of the Sec’y, FTC, to Geoffrey M.
`Klineberg re: Recusal Petition (Aug. 19, 2021) ..........................................................39, 42
`
`Facebook, Inc. Pet. for Recusal, In re Petition for Recusal of Chair Lina
`M. Khan from Involvement in the Pending Antitrust Case Against
`Facebook, Inc. (July 14, 2021) ..................................................................38, 39, 40, 42, 45
`
`Mem. in Support of Plaintiff FTC’s Mot. for Temp. Restraining Order and
`Prelim. Inj., FTC v. Steris Corp., No. 15-cv-01080-DAP, ECF No. 21
`(N.D. Ohio June 4, 2015) .............................................................................................23, 24
`
`Press Release, FTC Alleges Facebook Resorted to Illegal Buy-or-Bury
`Scheme to Crush Competition After String of Failed Attempts to Innovate,
`FTC (Aug. 19, 2021), https://www.ftc.gov/news-events/press-
`releases/2021/08/ftc-alleges-facebook-resorted-illegal-buy-or-bury-
`scheme-crush ......................................................................................................................42
`
`Reorganization Plan No. 8 of 1950, 15 Fed. Reg. 3175 (May 25, 1950) ..........................43
`
`Statement of Commissioner Christine S. Wilson Regarding the
`Announcement of Pre-Consummation Warning Letters (Aug. 9, 2021),
`https://www.ftc. gov/system/files/documents/public_statements/
`1593969/pre-consummation_warning_letters_statement_v11.pdf ....................................22
`
`U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines (2010) ............22, 23
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`vii
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`
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`OTHER MATERIALS
`
`Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law:
`
`
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`
`
`Vol. IV (2d ed. 1998) .........................................................................................................29
`
`Vol. IVA (4th ed. 2020) .....................................................................................................32
`
`Vol. V (4th ed. 2020) .........................................................................................................27
`
`Robert H. Jackson, The Federal Prosecutor, 31 J. Crim. L. & Criminology 3
`(1940) .................................................................................................................................43
`
`Lina Khan, Bio, http://www.linamkhan.com/bio-1 (no longer active)
`[https://perma.cc/9GB5-F78G (visited Oct. 4, 2021)] .......................................................40
`
`Lina M. Khan, The Separation of Platforms and Commerce, 119 Colum. L. Rev. 973
`(2019) .................................................................................................................................41
`
`Lina M. Khan & David E. Pozen, A Skeptical View of Information Fiduciaries,
`133 Harv. L. Rev. 497 (2019) ............................................................................................41
`
`N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 683 (June 7, 1996),
`https://nysba.org/app/uploads/1996/06/Opn683.pdf ..........................................................43
`
`New York v. Facebook, Inc., No. 1:20-cv-3589-JEB (D.D.C.):
`
`
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`Mem. in Support of Facebook, Inc.’s Mot. To Dismiss States’ Parens
`Patriae Compl., ECF No. 114-1 (Mar. 10, 2021) ..............................................................37
`
`Reply Br. in Support of Facebook, Inc.’s Mot. To Dismiss States’ Parens
`Patriae Compl., ECF No. 123 (Apr. 21, 2021)..................................................................37
`
`States’ Mem. in Opp. to Facebook’s Mot. To Dismiss, ECF No. 121
`(Apr. 7, 2021) .....................................................................................................................37
`
`Irving Scher, Antitrust Adviser (4th ed. 2001) ...............................................................................29
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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 10 of 55
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`INTRODUCTION
`
`The Federal Trade Commission (“FTC”) alleged no plausible factual basis for branding
`
`Facebook an unlawful monopolist. See FTC v. Facebook, Inc., --- F. Supp. 3d ---, No. 20-3590,
`
`ECF No. 73, at 27 (D.D.C. June 28, 2021) (“Op.”). This Court gave the agency a second chance
`
`to make a valid claim. But the same deficiency that was fatal to the FTC’s initial complaint
`
`remains: the Amended Complaint, ECF No. 82 (“AC”), still pleads no facts plausibly
`
`establishing that Facebook has, and at all relevant times had, monopoly power – the power to
`
`raise price or restrict output – in what the Court characterized as the “idiosyncratically drawn”
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`“Personal Social Networking Services” (“PSNS”) market. Op. 27. The FTC’s initial complaint
`
`asserted the unsupported conclusion that Facebook had “in excess of 60%” of that alleged
`
`market. Compl. ¶ 64, ECF No. 51. The agency provided no facts to support either the numerator
`
`(Facebook’s portion of the PSNS market) or the denominator (the total alleged PSNS market),
`
`and it offered no plausible means of calculating any market share. The AC repeats previously
`
`rejected arguments, but adds no factual allegations supporting the claim of a 60%-plus market
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`share; it merely ratchets up its groundless projection to 70% or even 80%, replacing unsupported
`
`assertion with “arguendo” assumption. The agency has to take this tack because no reliable
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`data exists for its contorted PSNS market, which is a litigation-driven fiction at odds with the
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`commercial reality of intense competition with surging rivals like TikTok and scores of other
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`attractive options for consumers. The AC rests on guesswork rather than facts and fails the
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`Twombly test for multiple reasons.
`
`The FTC Still Has No Valid Factual Basis for Alleging Monopoly Power. The FTC
`
`has again failed to allege a plausible factual basis for the necessary claim that Facebook has and
`
`had a dominant share of the alleged PSNS market. The Court dismissed for this reason, but
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`granted leave to amend so that the agency could try to supply the necessary factual allegations.
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`

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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 11 of 55
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`
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`It has not come close to doing so. To support its new, supercharged market-share numbers,
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`the FTC relies on commercial data regarding total usage of only three cherry-picked apps:
`
`Facebook, Instagram, and Snapchat. The vendor of this data disclaims any responsibility for its
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`accuracy or completeness. But the FTC uses it nonetheless to calculate PSNS market share –
`
`even though the data does not even purport to measure PSNS usage. Rather, it measures overall
`
`usage – including non-PSNS usage. Admitting this mismatch, the agency asks the Court to
`
`assume “arguendo” that data from a different market can establish share in the alleged market,
`
`without any facts to support that assumption. This is legally insufficient; as the Court has
`
`already warned, aggregate (i.e., non-PSNS) metrics cannot show PSNS market share. See Op.
`
`29-30. Courts routinely dismiss antitrust claims that rely on data that does not correspond to the
`
`market actually alleged. Our research has disclosed no decision in which a court has permitted a
`
`case to proceed based on such admittedly inapposite data paired with conceded guesswork. The
`
`absence of any data, from any source, for a “PSNS” market makes clear that the proposed market
`
`reflects the FTC’s litigation imperatives – not commercial realities.
`
`The FTC’s effort to allege market power through dominant share fails for an additional
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`reason: the agency still has not alleged any facts plausibly establishing that Facebook’s market
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`position was protected by “barriers to entry” that prevented competition. See Op. 18 (“market
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`power is meaningful only if it is durable”) (brackets omitted). Instead, the FTC’s factual
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`allegations taken as true establish the opposite: entry not only was possible, but in fact occurred,
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`including by startups like Instagram and Snapchat. And the FTC alleges nothing that would
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`prevent services with established networks – the agency names several, including YouTube
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`(Google), iMessage (Apple), Twitter, and TikTok (ByteDance) – from becoming PSNS rivals.
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`That is exactly what the FTC claims WhatsApp would have done – indeed, that is the sole basis
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`for its challenge to Facebook’s acquisition of that company.
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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 12 of 55
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`The FTC hedges its bets by returning to claims the Court already rejected, without
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`invitation to replead. It recycles the claim that direct evidence proves Facebook’s monopoly
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`power. But the FTC again fails to allege facts sufficient to support a “rare” case of such direct
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`evidence – that is, facts plausibly establishing that Facebook actually limited output to
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`“‘profitably raise prices above the competitive level.’” Id. (quoting United States v. Microsoft
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`Corp., 253 F.3d 34, 51 (D.C. Cir. 2001) (en banc) (per curiam)). The agency effectively
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`acknowledged before that it could not make that case. See FTC Opp’n 8, ECF No. 59
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`(acknowledging that such proof is “only rarely available”). And for good reason: Facebook has
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`never charged users any price and has never restricted output – not before it allegedly became a
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`monopolist and never since. The FTC also reasserts that Facebook’s quality is somehow lower
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`and that Facebook’s total revenues from advertising somehow indicate monopoly power in a
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`market for free PSNS products. These assertions differ little from those the Court already found
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`inadequate and do not come close to establishing a plausible, fact-based claim of monopoly power.
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`The FTC Still Has No Valid Factual Basis for Claiming That Facebook Maintained
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`Monopoly Power Through Unlawful Exclusionary Conduct. To satisfy Twombly, the agency
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`must also plead facts establishing a plausible claim that Facebook maintained a PSNS monopoly
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`through unlawful “exclusionary conduct.” But, as before, the AC fails to allege facts showing
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`that either Facebook’s cleared acquisitions or its lawful Platform policies violated antitrust law.
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`As to the acquisitions, the agency offers only its speculation that consumers might have
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`better products if Instagram and WhatsApp had remained independent, based on the theory that
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`each might have someday grown into a unique Facebook rival, and Facebook’s speculation that
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`these firms might become rivals. Such speculation has never been a valid basis for condemning
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`acquisitions as “exclusionary” under Section 2 of the Sherman Act. Tellingly, the agency itself
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`reviewed and cleared the Instagram and WhatsApp transactions under Section 7 of the Clayton
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`Case 1:20-cv-03590-JEB Document 83-1 Filed 10/04/21 Page 13 of 55
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`Act, which Congress passed to block acquisitions that could not amount to violations of Section 2.
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`No such cleared acquisition has ever been found years later to violate Section 2.
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`What the agency is doing here is patent: it seeks to upend settled law. Indeed, it seeks to
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`do so twice over, asking the Court both to condemn under Section 2 acquisitions that the FTC
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`cleared under Section 7, and to do so based on a novel “nascent competitor” theory that conflicts
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`with decades of settled antitrust precedent. The FTC falls back on arguing that acquisitions can
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`be unlawful merely because they “neutralize” independent firms. But that cannot be the law
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`because it would condemn every acquisition of an actual or potential competitor.
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`Taking the allegations in the AC as true, the FTC actually establishes the legality of
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`Facebook’s acquisitions when it alleges that Facebook used Instagram and WhatsApp to broaden
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`its competitive “moat” by operating both acquisitions “at scale” and introducing superior
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`services and features – making them more popular with consumers. Those allegations
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`demonstrate that the transactions were procompetitive success stories. Every firm, including
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`an alleged monopolist, is legally privileged to improve its product and service offerings for the
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`benefit of consumers. See Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP,
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`592 F.3d 991, 998-1000 (9th Cir. 2010). That is the essence of competition that the antitrust
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`laws protect, not exclusionary conduct that the antitrust laws forbid.
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`Regarding the Platform allegations, the FTC simply ignores the Court’s prior, controlling,
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`and correct decision. The AC reiterates rejected allegations and adds rhetoric but no material
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`facts. As this Court explained after review of the Platform policies themselves, those policies
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`were lawful, and the agency lacks authority to litigate long-past applications of the policies. See
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`Op. 39. And, once again, the agency has no facts whatsoever to establish a plausible claim that
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`policies ended in 2018 and last enforced even earlier are “imminently” to be restored, much less
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`that such policies will imminently be enforced in a manner that will somehow squeeze through
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`any “narrow-eyed needle” that may still be open for such claims. Op. 36.
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`The AC Was Not Approved by Valid FTC Vote; the Chair Should Have Been Recused.
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`The FTC’s vote to authorize the AC was invalid, and the AC should be dismissed for that reason.
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`The new Chair cast the decisive vote in a split 3-2 decision. As