Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 1 of 48
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`
`FEDERAL TRADE COMMISSION,
`
` Plaintiff,
`
`v.
`
`
`FACEBOOK, INC.,
`
`
`Defendant.
`
`
`
`
`
` Civil Action No. 20-3590 (JEB)
`
`
`MEMORANDUM OPINION
`
`Second time lucky? The Federal Trade Commission’s first antitrust suit against
`
`Facebook, Inc. stumbled out of the starting blocks, as this Court dismissed the Complaint last
`
`June. In doing so, the Court concluded that the Commission had failed to plausibly allege “that
`
`Facebook has monopoly power in the market for Personal Social Networking (PSN) services.”
`
`FTC v. Facebook, Inc., 2021 WL 2643627, at *1–2 (D.D.C. June 28, 2021). Because that
`
`“defect could conceivably be overcome by re-pleading,” however, the Court left the door ajar for
`
`the agency to amend the Complaint and reinstate its suit. Id. at *1.
`
`Eagerly accepting such invitation, the FTC has filed an Amended Complaint containing
`
`significant additions and revisions aimed at addressing the shortcomings identified in the Court’s
`
`prior Opinion. The core theory of the lawsuit remains essentially unchanged. The Commission
`
`continues to allege that Facebook has long had a monopoly in the market for PSN services and
`
`that it has unlawfully maintained that monopoly via two types of actions: first, by acquiring
`
`competitors and potential competitors — most notably, Instagram and WhatsApp — that it
`
`believed were well situated to eat into its monopoly; and second, by implementing and enforcing
`
` 1
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 2 of 48
`
`policies that prevented interoperability between Facebook and other apps that it viewed as
`
`nascent threats. The facts alleged this time around to fortify those theories, however, are far
`
`more robust and detailed than before, particularly in regard to the contours of Defendant’s
`
`alleged monopoly.
`
`Facebook nonetheless moves to dismiss once again, contending that the FTC’s latest
`
`effort is akin to rearranging the deck chairs on the Titanic. Although the agency may well face a
`
`tall task down the road in proving its allegations, the Court believes that it has now cleared the
`
`pleading bar and may proceed to discovery. That holding flows from several conclusions. First,
`
`the FTC has now alleged enough facts to plausibly establish that Facebook exercises monopoly
`
`power in the market for PSN services. Second, it has adequately alleged that the company’s
`
`dominant market share is protected by barriers to entry into that market. Third, the agency has
`
`also explained that Facebook not only possesses monopoly power, but that it has willfully
`
`maintained that power through anticompetitive conduct — specifically, the acquisitions of
`
`Instagram and WhatsApp. The Court will not, however, allow the allegations surrounding
`
`Facebook’s interoperability policies (also known as the Platform policies) to move forward; they
`
`founder for the same fundamental reasons as explained before: Facebook abandoned the policies
`
`in 2018, and its last alleged enforcement was even further in the past.
`
`Last, the company lets fly a new arrow this time around, urging dismissal on the
`
`independent basis that the FTC’s vote authorizing the Amended Complaint was invalid because
`
`Chair Lina Khan’s alleged prejudgment of Facebook’s antitrust liability required her recusal.
`
`The Court believes that such contention misses its target, as Khan was acting in a prosecutorial
`
`capacity, as opposed to in a judicial role, in connection with the vote.
`
` 2
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 3 of 48
`
`Ultimately, whether the FTC will be able to prove its case and prevail at summary
`
`judgment and trial is anyone’s guess. The Court declines to engage in such speculation and
`
`simply concludes that at this motion-to-dismiss stage, where the FTC’s allegations are treated as
`
`true, the agency has stated a plausible claim for relief under Section 2 of the Sherman Act. The
`
`Court, consequently, will deny Facebook’s Motion.
`
`
`
`
`
` 3
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 4 of 48
`
`
`
`
`
`Table of Contents
`
`I. Background .............................................................................................................................. 5
`
`II. Legal Standard ......................................................................................................................... 7
`
`III. Analysis ................................................................................................................................... 8
`
`A. Monopoly Power ................................................................................................................. 8
`
`1. Market Definition ....................................................................................................... 10
`
`2. Market Share............................................................................................................... 13
`
`3.
`
`Barriers to Entry ......................................................................................................... 20
`
`B. Anticompetitive Conduct .................................................................................................. 24
`
`1.
`
`Count I ........................................................................................................................ 25
`
`a.
`
`b.
`
`c.
`
`Legal Framework .................................................................................................... 25
`
`Application .............................................................................................................. 26
`
`Facebook’s Counterarguments................................................................................ 30
`
`2.
`
`Count II ....................................................................................................................... 34
`
`C. Recusal of Chair Khan ...................................................................................................... 41
`
`1.
`
`2.
`
`Chair Khan’s Role ...................................................................................................... 43
`
`Other Ethical Issues .................................................................................................... 47
`
`IV. Conclusion ............................................................................................................................. 48
`
`
`
`
`
`
`
` 4
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 5 of 48
`
`I.
`
`Background
`
`In its prior Opinions in this case and in a parallel antitrust suit filed by a number of
`
`States, the Court described in detail the background of social networking, Facebook Blue — i.e.,
`
`the product that “its millions of users think of when they think of ‘Facebook,’” — the company’s
`
`acquisitions of Instagram and WhatsApp, and the history of Facebook Platform and the
`
`company’s interoperability policies. See Facebook, 2021 WL 2643627, at *2–6; New York v.
`
`Facebook, Inc. (New York), No. 20-3589, 2021 WL 2643724, at *2–6 (D.D.C. June 28, 2021).
`
`The Court will spare the reader another factual recitation here and will instead confine this brief
`
`background section to the case’s procedural history. As the critical question in this Motion is
`
`whether the FTC’s new allegations have filled the holes in its previous Complaint, that will be
`
`the focus of the Court’s analysis below.
`
`The FTC filed this action on December 9, 2020, asserting one count of monopoly
`
`maintenance under Section 2 of the Sherman Act. See ECF No. 3 (Redacted Complaint),
`
`¶¶ 169–74. The suit was filed after three of the FTC’s five Commissioners voted to authorize it.
`
`See FTC, FTC Sues Facebook for Illegal Monopolization (Dec. 9, 2020), https://bit.ly/30Q3I8Y.
`
`Chair Khan was not yet a Commissioner at the time. Id. As noted in the Court’s previous
`
`Opinions, although this FTC suit was initially assigned to Judge Christopher R. Cooper of this
`
`district, he reassigned it to this Court, which was handling the earlier-filed and related State case.
`
`See Facebook, 2021 WL 2643627, at *7; see also No. 20-3590, Minute Order of Jan. 12, 2021.
`
`Facebook subsequently moved to dismiss both cases. While the Court granted the dismissal of
`
`the States’ entire case, New York, 2021 WL 2643724, at *29, here it dismissed only the
`
`Complaint, “leaving the agency the chance to replead if it believes it can successfully remedy the
`
`infirmities described” in the Court’s Opinion. Facebook, 2021 WL 2643627, at *7.
`
` 5
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 6 of 48
`
`Despite a change in leadership since the lawsuit was initially filed, the FTC took the
`
`Court up on its offer, filing an Amended Complaint in August 2021. See ECF No. 76 (Amended
`
`Complaint filed under seal); ECF No. 82 (Redacted Am. Compl.). (In this Opinion, the Court
`
`cites a copy of the Amended Complaint that has minor redactions to protect confidential business
`
`information.) As with the initial Complaint, three of the five Commissioners voted to authorize
`
`the updated filing. See FTC, FTC Alleges Facebook Resorted to Illegal Buy-or-Bury Scheme to
`
`Crush Competition After String of Failed Attempts to Innovate (Aug. 19, 2021),
`
`https://bit.ly/3q8Ku76. This time around, however, Chair Khan — who was appointed earlier in
`
`2021 — was one of those three. Id.; see also ECF No. 83-1 (Motion to Dismiss) at 5.
`
`The Amended Complaint again alleges unlawful monopoly maintenance under Section 2
`
`of the Sherman Act, although it now lists two counts. See Redacted Am. Compl., ¶¶ 230–42.
`
`The allegations in the second count incorporate those in the first, while also alleging additional
`
`conduct. Specifically, Count I alleges that “Facebook has willfully maintained its monopoly
`
`power through its course of anticompetitive conduct consisting of its anticompetitive
`
`acquisitions.” Id., ¶ 232. Count II, meanwhile, alleges that “Facebook has willfully maintained
`
`its monopoly power through its course of conduct that includes both anticompetitive acquisitions
`
`and . . . maintaining and enforcing anticompetitive agreements relating to Facebook Platform to
`
`deter competitive threats to its personal social networking monopoly.” Id., ¶ 238 (emphasis
`
`added). Plaintiff again invokes Section 13(b) of the FTC Act, id., ¶ 243, which authorizes the
`
`agency to seek an injunction against an entity that “is violating” or “is about to violate” the
`
`antitrust laws. See 15 U.S.C. § 53(b). The Government hopes to procure an injunction aimed at
`
`preventing the allegedly unlawful conduct in the future, as well as an order mandating
`
`“divestiture of assets, divestiture or reconstruction of businesses (including, but not limited to,
`
` 6
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 7 of 48
`
`Instagram and/or WhatsApp), and such other relief sufficient to restore the competition that
`
`would exist absent the conduct alleged in the Complaint.” Redacted Am. Compl. at 79.
`
`Believing the FTC’s recent effort as flawed as its predecessor, Facebook has now moved
`
`to dismiss the Amended Complaint.
`
`II.
`
`Legal Standard
`
`Facebook relies on Federal Rule of Civil Procedure 12(b)(6), which permits dismissal of
`
`a complaint where it fails to state a claim upon which relief can be granted. See MTD at 6. In
`
`evaluating such a motion to dismiss, courts must “treat the complaint’s factual allegations as
`
`true . . . and must grant plaintiff ‘the benefit of all inferences that can be derived from the facts
`
`alleged.’” Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting
`
`Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979)). Although “detailed factual
`
`allegations” are not necessary to withstand a Rule 12(b)(6) motion, Bell Atlantic Corp. v.
`
`Twombly, 550 U.S. 544, 555 (2007), “a complaint must contain sufficient factual matter,
`
`accepted as true, to ‘state a claim to relief that is plausible on its face,’” Ashcroft v. Iqbal, 556
`
`U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570) — that is, the facts alleged in the
`
`complaint “must be enough to raise a right to relief above the speculative level.” Twombly, 550
`
`U.S. at 555. The court need not accept as true, then, “a legal conclusion couched as a factual
`
`allegation,” Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478
`
`U.S. 265, 286 (1986)), nor “inferences . . . unsupported by the facts set out in the complaint.” Id.
`
`(quoting Kowal v. MCI Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994)). And it may
`
`consider not only “the facts alleged in the complaint,” but also “any documents either attached to
`
`or incorporated in the complaint[,] and matters of which [courts] may take judicial notice.”
`
` 7
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 8 of 48
`
`Equal Emp’t Opportunity Comm’n v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C.
`
`Cir. 1997).
`
`III. Analysis
`
`As set forth in the Court’s prior Opinion, the offense of monopoly maintenance under
`
`Section 2 of the Sherman Act “has two elements: ‘(1) the possession of monopoly power in the
`
`relevant market and (2) the willful . . . maintenance of that power as distinguished from growth
`
`or development as a consequence of a superior product, business acumen, or historic accident.’”
`
`United States v. Microsoft Corp., 253 F.3d 34, 50 (D.C. Cir. 2001) (en banc) (quoting United
`
`States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)); see Facebook, 2021 WL 2643627, at *7.
`
`Facebook seeks dismissal on the ground that the FTC has not adequately pleaded either of those
`
`prerequisites. Specifically, Defendant contends that, as before, the Commission has not alleged
`
`facts plausibly establishing monopoly power, see MTD at 6–20, and that the agency has also not
`
`adequately alleged legally cognizable exclusionary conduct. Id. at 20–38. Separately, Facebook
`
`also urges the Court to conclude that the FTC’s vote purporting to authorize the Amended
`
`Complaint was invalid because of Chair Khan’s biased participation. Id. at 38–45. The Court
`
`examines each of those arguments in turn.
`
`A. Monopoly Power
`
`Consider first the threshold inquiry of a monopoly-maintenance claim: has the FTC
`
`plausibly alleged that Facebook has monopoly power in a relevant market? “The Supreme Court
`
`defines monopoly power as ‘the power to control prices or exclude competition.’” Microsoft,
`
`253 F.3d at 51 (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391
`
`(1956)). In other words, “a firm is a monopolist if it can profitably raise prices substantially
`
`above the competitive level.” Id. (citations omitted). If a plaintiff can supply direct proof that a
`
` 8
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 9 of 48
`
`“firm has in fact profitably done so, the existence of monopoly power is clear.” Id. (citations
`
`omitted). Because such “direct proof” is “rarely available,” however, plaintiffs and courts “more
`
`typically examine market structure in search of circumstantial evidence of monopoly power.” Id.
`
`In such a case, courts may infer monopoly power from “a firm’s possession of a dominant share
`
`of a relevant market.” Id.; see Toys “R” Us, Inc. v. FTC, 221 F.3d 928, 937 (7th Cir. 2000)
`
`(market power can be proven “through direct evidence of anticompetitive effects” or, “more
`
`conventional[ly],” “by proving relevant product and geographic markets and by showing that the
`
`defendant’s share exceeds [some] threshold”); S. Pac. Commc’ns Co. v. Am. Tel. & Tel. Co.,
`
`740 F.2d 980, 1000 (D.C. Cir. 1984) (“[C]ourts frequently approach the problem of measuring
`
`market power by defining the relevant product and geographic market and computing the
`
`defendant’s market share. Monopoly power is then ordinarily inferred from a predominant share
`
`of the market.”).
`
`Because “[m]arket power is meaningful only if it is durable,” a plaintiff proceeding by
`
`the indirect method must also show that the firm’s dominant share of the relevant market is
`
`protected by “barriers to entry” into the market. See Lenox MacLaren Surgical Corp. v.
`
`Medtronic, Inc., 762 F.3d 1114, 1123–25 (10th Cir. 2014); Microsoft, 253 F.3d at 51. “‘Entry
`
`barriers’ are factors . . . that prevent new rivals from timely responding to an increase in price
`
`above the competitive level.” Microsoft, 253 F.3d at 51; see S. Pac. Commc’ns Co., 740 F.2d at
`
`1001–02.
`
`In its Opposition, the FTC contends that it has alleged both indirect and direct evidence
`
`of Facebook’s monopoly power, although it devotes far more attention to the indirect-proof
`
`argument. See ECF No. 85 (Redacted FTC Opposition) at 4–15. Because the Court concludes
`
`that the FTC has adequately alleged indirect evidence of such monopoly power, it need not
`
` 9
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 10 of 48
`
`separately address whether this is the rare case in which the agency has also pleaded direct
`
`evidence. The indirect framework first requires the plaintiff to “establish[] the relevant market”
`
`in which the defendant firm allegedly has monopoly power. See Sky Angel U.S., LLC v. Nat’l
`
`Cable Satellite Corp., 947 F. Supp. 2d 88, 102 (D.D.C. 2013) (quoting Neumann v. Reinforced
`
`Earth Co., 786 F.2d 424, 429 (D.C. Cir. 1986)). If the plaintiff succeeds at that stage, it must
`
`then adequately allege that the defendant has a dominant share of that market, and that its
`
`dominance is protected by barriers to entry. Id.; see, e.g., FTC v. AbbVie Inc., 976 F.3d 327,
`
`373–74 (3d Cir. 2020) (above 60% market share sufficient); Image Tech. Servs. v. Eastman
`
`Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1997) (“Courts generally require a 65% market share
`
`to establish a prima facie case of market power.”).
`
` Market Definition
`
`As the Court explained in its previous Opinion, even though the definition of a relevant
`
`antitrust market is typically a “factual” rather than a “legal” inquiry, certain “legal principles”
`
`nevertheless govern. Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1045 (9th Cir. 2008);
`
`see Facebook, 2021 WL 2643627, at *9. It is well established, for instance, that an antitrust
`
`market includes “two components: the product market and the geographic market.” Sky Angel,
`
`947 F. Supp. 2d at 102. “A ‘relevant product market’ is a term of art in antitrust analysis,”
`
`United States v. H & R Block, Inc., 833 F. Supp. 2d 36, 50 (D.D.C. 2011), and the Circuit has
`
`defined it as including “all products reasonably interchangeable by consumers for the same
`
`purposes.” Microsoft, 253 F.3d at 52 (internal quotation marks and citation omitted). “Because
`
`the ability of consumers to turn to other suppliers restrains a firm from raising prices above the
`
`competitive level,” id. at 51 (internal citation omitted), the analysis of market power uses as its
`
`denominator all products “roughly equivalent to another for the use to which [they are] put.”
`
` 10
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 11 of 48
`
`Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 437 (3d Cir. 1997) (citation
`
`omitted). “In other words, courts look at whether two products can be used for the same
`
`purpose, and, if so, whether and to what extent purchasers are willing to substitute one for the
`
`other.” H & R Block, 833 F. Supp. 2d at 51 (internal quotation marks and citation omitted).
`
`The Court found in its prior Opinion that the FTC had plausibly established a relevant
`
`antitrust market. Facebook, 2021 WL 2643627, at *9–11. The FTC alleges the same market in
`
`its Amended Complaint, and Defendant does not object to that market definition here. See
`
`Redacted Am. Compl., ¶¶ 165–80; Redacted FTC Opp. at 3 (“The Court has already determined,
`
`correctly, that the FTC has adequately pleaded a relevant antitrust market for PSN services in the
`
`United States.”); MTD at 6–13 (noting Court’s prior market definition without objection, while
`
`arguing that FTC still has not alleged dominant share of that market). The Court will briefly
`
`recount the relevant findings of its previous Opinion on market definition, as that will help frame
`
`the question of whether the FTC has sufficiently alleged that Facebook has a dominant share of
`
`such market.
`
`Unlike a relatively obvious market for, say, tires or doughnuts, the relevant market here is
`
`considerably more nuanced. The Court previously endorsed the agency’s definition of the
`
`market for PSN services in the United States as consisting of “online services that enable and are
`
`used by people to maintain personal relationships and share experiences with friends, family, and
`
`other personal connections in a shared social space.” Facebook, 2021 WL 2643627, at *10
`
`(quoting Redacted Compl., ¶ 52). Such PSN services are “defined, and distinguished from other
`
`services, by their having ‘[t]hree key elements.’” Id. (quoting Redacted Compl., ¶ 52). “First,
`
`[they] are built on a social graph that maps the connections between users and their friends,
`
`family, and other personal connections.” Redacted Compl., ¶ 53. “Second, [they] include
`
` 11
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 12 of 48
`
`features that many users regularly employ to interact with personal connections and share their
`
`personal experiences in a shared [virtual] social space, including in a one-to-many ‘broadcast’
`
`format.” Id., ¶ 54. And “‘[t]hird, [they] include features that allow users to find and connect
`
`with other users, to make it easier for each user to build and expand their set of personal
`
`connections. The social graph also supports this feature by informing [the user] which [new]
`
`connections’ might be available based on her existing network.” Facebook, 2021 WL 2643627,
`
`at *10 (quoting Redacted Compl., ¶ 55). Here, the Amended Complaint provides an essentially
`
`identical definition of PSN services. See Redacted Am. Compl., ¶¶ 166–69.
`
`Having approved the FTC’s definition of PSN services, the Court’s previous Opinion
`
`then turned to the agency’s allegation that certain other well-known “types of internet services”
`
`are not “adequate substitutes.” Facebook, 2021 WL 2643627, at *10 (quoting Redacted Compl.,
`
`¶ 57). The Commission put forth a number of reasons why other technology services — such as
`
`LinkedIn, YouTube, Spotify, and Netflix — do not qualify. For instance, it alleged that
`
`“‘specialized social networking services’ that ‘focus on professional . . . connections’ (e.g.,
`
`LinkedIn) are not substitutes because they are designed for and used primarily by professionals
`
`for sharing professional content,” as opposed to PSN’s design and primary use of “maintain[ing]
`
`personal relationships and shar[ing] experiences with friends, family, and other personal
`
`connections.” Id. (quoting Redacted Compl., ¶¶ 52, 58). The Amended Complaint provides
`
`substantially similar allegations here, while acknowledging other players in the PSN market,
`
`“including Snapchat, Google+, Myspace, Path, MeWe, Orkut, and Friendster.” Redacted Am.
`
`Compl., ¶¶ 171–77, 200.
`
`In its first Opinion, the Court concluded that “[w]hile there are certainly bones that one
`
`could pick with the FTC’s market-definition allegations, the Court does not find them fatally
`
` 12
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 13 of 48
`
`devoid of meat.” Facebook, 2021 WL 2643627, at *10. It rejected, for example, Facebook’s
`
`contentions that the market definition “contains an internal contradiction,” and that the FTC
`
`“neglected to allege any facts regarding the cross-elasticity of demand between [PSN services]
`
`and [potential] substitutes for it.” Id. at *10–11 (internal quotation marks and citations omitted).
`
`Notably, the Court parried Defendant’s argument “that the Complaint impermissibly
`
`distinguishes PSN services from other possible substitutes based on their primar[y] uses.” Id. at
`
`*11 (internal quotation marks and citations omitted). As the Court explained, the question of
`
`appropriate substitutes “looks to both ‘whether two products can be used for the same purpose,
`
`and, if so, whether and to what extent purchasers are willing to substitute one for the other.’” Id.
`
`(quoting H & R Block, 833 F. Supp. 2d at 51) (emphasis added); see also United States v. Aetna
`
`Inc., 240 F. Supp. 3d 1, 19 (D.D.C. 2017). In sum, although “the agency certainly could have
`
`provided more on that front, the fact that other services are not primarily used for the sort of
`
`personal sharing that is the hallmark of a PSN service seems a plausible reason why little
`
`switching would occur.” Id.
`
`Given that the Amended Complaint provides an essentially identical definition of the
`
`relevant market, see Redacted Am. Compl., ¶¶ 166–69, and that Facebook lodges no objection to
`
`the Court’s prior finding, the Court sees no reason to revisit its earlier analysis and conclusion.
`
`See MTD at 6–13; Redacted FTC Opp. at 3. The Amended Complaint’s allegations thus do
`
`enough to make out a plausible market for PSN services. See Redacted Am. Compl., ¶¶ 165–80.
`
` Market Share
`
`With the market defined, the Court now addresses what has thus far been the FTC’s
`
`Achilles’ heel: sufficiently alleging Facebook’s market dominance. In the last go-round, the
`
`Commission alleged “only that Facebook has ‘maintained a dominant share of the U.S. personal
`
` 13
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 14 of 48
`
`social networking market (in excess of 60%)’ since 2011, and that ‘no other social network of
`
`comparable scale exists in the United States.’” Facebook, 2021 WL 2643627, at *12 (quoting
`
`Redacted Compl., ¶¶ 3, 64). The Court concluded that such bare allegations — “which do not
`
`even provide an estimated actual figure or range for Facebook’s market share at any point over
`
`the past ten years — ultimately fall short of plausibly establishing that Facebook holds market
`
`power.” Id. Because it was conceivable “that the agency may be able to ‘cure [these]
`
`deficiencies’ by repleading,” however, the Court dismissed the Complaint without prejudice,
`
`leaving Plaintiff “free to amend [its] pleading and continue the litigation.” Id. at *14 (quoting
`
`Foman v. Davis, 371 U.S. 178, 182 (1962); Ciralsky v. CIA, 355 F.3d 661, 666 (D.C. Cir.
`
`2004)).
`
`The FTC has now done precisely that, adding substantial new allegations about the
`
`contours of Facebook’s market share. Most notably, the Amended Complaint alleges far more
`
`detailed facts to support its claim that “Facebook has today, and has maintained since 2011, a
`
`dominant share of the relevant market for U.S. personal social networking services.” Redacted
`
`Am. Compl., ¶ 190. Specifically, the Amended Complaint includes allegations regarding
`
`Facebook’s market share of daily average users (DAUs) and monthly average users (MAUs) of
`
`PSN services in the United States, as well as its share of users’ average time spent on PSN
`
`services. Id. For instance, the FTC alleges that, “[b]ased on an analysis of data maintained by
`
`Comscore, a commercially-available data source,” “Facebook’s share of DAUs of apps
`
`providing personal social networking services in the United States has exceeded 70% since 2016
`
`and was at least as high in 2011.” Redacted Am. Compl., ¶¶ 182, 200. Indeed, the Amended
`
`Complaint alleges that, from “September 2016 through December 2020, Facebook’s share of
`
`DAUs among apps providing personal social networking services in the United States averaged
`
` 14
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 15 of 48
`
`80% per month for smartphones, 86% per month in tablets, and 98% per month for desktop
`
`computers, and that Facebook’s share of DAUs has not dropped below 70% in any month on any
`
`device-type.” Id., ¶ 200(a). “The combined shares of other [PSN] providers,” meanwhile —
`
`which the FTC identifies as “including Snapchat, Google+, Myspace, Path, MeWe, Orkut, and
`
`Friendster” — “did not exceed 30% on any device type during any month in this period.” Id.
`
`The agency’s allegations concerning MAUs tell the same story. Again relying on
`
`Comscore data, the FTC alleges that “Facebook’s share of MAUs of apps providing personal
`
`social networking services in the United States has exceeded 65% since 2012 and was at least as
`
`high in 2011.” Id., ¶ 201. Similarly, the “combined shares of other providers . . . did not exceed
`
`32% on either device type, mobile or desktop, in any month during” the period of September
`
`2012 to December 2020. Id., ¶ 201(a). Plaintiff’s allegations concerning “Facebook’s share of
`
`the time spent by users of apps providing personal social networking services in the United
`
`States” are also in accord with the DAU and MAU data. In fact, the FTC alleges that Facebook’s
`
`share of users’ time spent on such services “has exceeded 80% since 2012 and was at least as
`
`high in 2011.” Id., ¶ 199.
`
`The Amended Complaint also adequately alleges that the three metrics offered to
`
`measure market share — DAUs, MAUs, and time spent — are appropriate indicators. The FTC
`
`explains, consistent with common sense, that “a personal social networking service’s
`
`attractiveness to users, and therefore its competitive significance, is related to its number of users
`
`and to how intensively its users engage with the service.” Id., ¶ 192. Significantly, the Amended
`
`Complaint alleges that Facebook itself uses these metrics to assess its performance, as well as
`
`that of rival PSN services. Indeed, “in the ordinary course of business, Facebook’s executives
`
`and investors, rival personal social networking providers, and industry observers have assessed
`
` 15
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 16 of 48
`
`the performance of Facebook Blue, Instagram, and other personal social networking providers
`
`using measures of active user base and how much people use the services—with DAUs, MAUs,
`
`and the amount time spent by users on the service being common units of measure.” Id., ¶ 193.
`
`For instance, “Facebook’s internal presentations assessing the performance of Facebook Blue
`
`and Instagram focus on time spent per month, MAUs, and DAUs,” and the company “relies on
`
`these same metrics to assess its rivals’ competitive significance.” Id., ¶ 194.
`
`The FTC similarly alleges that other firms offering PSN services cite these metrics.
`
`Snapchat, for example, regularly compares its performance with that of “Instagram by observing
`
`the firms’ MAUs, DAUs, and time spent” metrics. Id., ¶ 195. Relatedly, the FTC also alleges
`
`that “[c]ommercial data sources track the usage of online services within the United States”
`
`using metrics such as “MAUs, DAUs, and time spent.” Id., ¶ 196.
`
`Considering these new allegations and granting Plaintiff “the benefit of all inferences that
`
`can be derived from the facts alleged,” Sparrow, 216 F.3d at 1113 (internal citation omitted),
`
`means that the Amended Complaint “contain[s] sufficient factual matter, accepted as true, to
`
`‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly,
`
`550 U.S. at 570). In stark contrast with its predecessor, this Complaint provides reinforcing,
`
`specific allegations that all point toward the same conclusion: Facebook has maintained a
`
`dominant market share during the relevant time period. Accepting the market definition (which
`
`Defendant does) and the truth of Plaintiff’s market-share allegations (which the Court must at
`
`this stage), Facebook’s market share comfortably exceeds the levels that courts ordinarily find
`
`sufficient to establish monopoly power. See, e.g., AbbVie Inc., 976 F.3d at 373 (above 60%
`
`market share sufficient); Eastman Kodak Co., 125 F.3d at 1206 (“Courts generally require a 65%
`
` 16
`
`

`

`Case 1:20-cv-03590-JEB Document 90 Filed 01/11/22 Page 17 of 48
`
`market share to establish a prima facie case of market power.”); 2301 M Cinema LLC v. Silver
`
`Cinemas Acquisition Co., 342 F. Supp. 3d 126, 140 (D.D.C. 2018).
`
`Not prepared to throw in the towel, Defendant offers several rejoinders, none of which is
`
`persuasive at this stage. First, it contends that the Comscore data on which the FTC relies “itself
`
`warns against reliance on this data, disclaiming responsibility for its ‘ac