USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 1 of 44
`
`
`ORAL ARGUMENT NOT SCHEDULED
`No. 21-7078
`
`United States Court of Appeals
`for the District of Columbia Circuit
`–––––––––––––––––––––––––––––––––––––––––––––
`STATE OF NEW YORK, et al.,
`Plaintiffs-Appellants,
`v.
`FACEBOOK, INC.,
`Defendant-Appellee,
`––––––––––––––––––––––––––––––––––––––––––––––
`On Appeal from the United States District Court
`for the District of Columbia, No. 1:20-cv-03589
`The Honorable James E. Boasberg
`–––––––––––––––––––––––––––––––––––––––––––––
`BRIEF OF THE UNITED STATES AS AMICUS
`CURIAE SUPPORTING PLAINTIFFS-APPELLANTS
`–––––––––––––––––––––––––––––––––––––––––––––
`Jonathan S. Kanter
`Assistant Attorney General
`Doha G. Mekki
`Principal Deputy Assistant Attorney General
`David B. Lawrence
` Policy Director
`Daniel E. Haar
`Nickolai G. Levin
`Adam D. Chandler
`Cecilia Y. Cheng
`Attorneys
`U.S. DEPARTMENT OF JUSTICE
`ANTITRUST DIVISION
`950 Pennsylvania Ave., NW #3320
`Washington, DC 20530
`202-514-2886
`Nickolai.Levin@usdoj.gov
`Counsel for United States of America
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`January 28, 2022
`
`
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 2 of 44
`
`
`CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES
`
`Pursuant to D.C. Circuit Rule 28(a)(1), the undersigned counsel certifies as
`
`follows:
`
`A.
`
`Parties and Amici
`
`The plaintiffs-appellants are the State of New York, District of Columbia,
`
`State of California, State of Colorado, State of Florida, State of Iowa, State of
`
`Nebraska, State of North Carolina, State of Ohio, State of Tennessee, State of
`
`Alaska, State of Arizona, State of Arkansas, State of Connecticut, State of
`
`Delaware, Territory of Guam, State of Hawaii, State of Idaho, State of Illinois,
`
`State of Indiana, State of Kansas, Commonwealth of Kentucky, State of Louisiana,
`
`State of Maine, State of Maryland, Commonwealth of Massachusetts, State of
`
`Michigan, State of Minnesota, State of Mississippi, State of Missouri, State of
`
`Montana, State of Nebraska, State of Nevada, State of New Hampshire, State of
`
`New Jersey, State of New Mexico, State of North Dakota, State of Oklahoma,
`
`State of Oregon, Commonwealth of Pennsylvania, State of Rhode Island, State of
`
`Texas, State of Utah, State of Vermont, Commonwealth of Virginia, State of
`
`Washington, State of West Virginia, State of Wisconsin, and State of Wyoming.
`
`The defendant-appellee is Facebook, Inc. In October 2021, Facebook,
`
`Inc. changed its name to Meta Platforms, Inc.; however, the caption in this case has
`
`not been changed.
`
`i
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 3 of 44
`
`
`The parties and caption in this Court are the same as in the district court.
`
`In this Court, the United States appears as amicus curiae supporting
`
`plaintiffs-appellants. The Committee to Support the Antitrust Laws, Economists
`
`(Daron Acemoglu, Cristina Caffarra, Gregory S. Crawford, Tomaso Duso, Florian
`
`Ederer, Massimo Motta, Martin Peitz, Thomas Philippon, Nancy L. Rose, Robert
`
`Seamans, Hal Singer, Marshall Steinbaum, Joseph E. Stiglitz, Ted Tatos,
`
`Tommaso Valletti, Luigi Zinga), and Former State Antitrust Enforcement Officials
`
`and Antitrust Law Professors (Lloyd Constantine, Harry First, Aaron Edlin,
`
`Andrew Chin, Andrew I. Gavil, Andrew Rossner, Anne Schneider, Barak
`
`Richman, Barak Y. Orbach, Charles G. Brown, Christopher L. Sagers, Dan
`
`Drachler, Darren Bush, Don Allen Resnikoff, Edward Cavanagh, Eleanor Fox,
`
`Ellen Cooper, George Sampson, James Tierney, Jeffrey L Harrison, John B.
`
`Kirkwood, Joshua P. Davis, Kevin J. O’Connor, Marina Lao, Maurice Eitel
`
`Stucke, Norman W. Hawker, Pamela Jones Harbour, Paul F. Novak, Peter
`
`Carstensen, Rebecca Haw Allensworth, Robert Abrams, Robert H. Lande, Samuel
`
`N. Weinstein, Steven M. Rutstein, Susan Beth Farmer, Tam Ormiston, Thomas
`
`Greaney, Thomas J. Horton, and Warren Grimes) all appear as amicus curiae, also
`
`supporting plaintiffs-appellants.
`
`
`
`
`
`ii
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 4 of 44
`
`
`B. Rulings Under Review
`
`References to the rulings at issue appear in the Brief for Plaintiffs-
`
`Appellants.
`
`C. Related Cases
`
`A list of related cases appears in the Brief for Plaintiffs-Appellants.
`
`
`
`
`
`iii
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 5 of 44
`
`
`TABLE OF CONTENTS
`
`
`CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED
`CASES ................................................................................................................. i
`
`TABLE OF CONTENTS .......................................................................................... iv
`
`TABLE OF AUTHORITIES .................................................................................... vi
`
`GLOSSARY OF ABBREVIATIONS ...................................................................... ix
`
`INTEREST OF THE UNITED STATES .................................................................. 1
`
`STATUTORY PROVISIONS ................................................................................... 1
`
`ISSUES PRESENTED ............................................................................................... 2
`
`STATEMENT ............................................................................................................ 2
`
`ARGUMENT ............................................................................................................. 4
`
`I. THE DISTRICT COURT MISAPPLIED SECTION 2 OF THE
`SHERMAN ACT ............................................................................................... 6
`
`A. The District Court Erred By Disaggregating Plaintiffs’
`Monopolization Claim. ............................................................................... 8
`
`B. The District Court Did Not Properly Analyze Plaintiffs’
`Platform Allegations ................................................................................. 13
`
`1. Many Platform Allegations Do Not Challenge
`Unilateral Refusals To Deal.............................................................. 14
`2. No Universal Checklist Governs All Unilateral Refusal-
`To-Deal Claims. ................................................................................ 19
`3. This Case Presents Materially Different Market
`Realities From Trinko. ...................................................................... 24
`
`II. THE DISTRICT COURT ERRONEOUSLY RULED OUT THE
`POSSIBILITY OF INJUNCTIVE RELIEF ..................................................... 27
`
`CONCLUSION ........................................................................................................ 31
`
`CERTIFICATE OF COMPLIANCE ....................................................................... 33
`
`iv
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 6 of 44
`
`
`CERTIFICATE OF SERVICE ................................................................................ 34
`
`v
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 7 of 44
`
`
`TABLE OF AUTHORITIES
`
`CASES PAGE(S)
`
`*Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
` 472 U.S. 585 (1985) .......................................................................... 14, 19, 22, 23
`
`Biden v. Knight First Amendment Institution At Columbia University,
`141 S. Ct. 1220 (2021) .........................................................................................23
`
`
`Cascade Natural Gas Corp. v. El Paso Natural Gas Co.,
` 386 U.S. 129 (1967) .............................................................................................30
`
`City of Anaheim v. Southern California Edison Co.,
`955 F.2d 1373 (9th Cir. 1992) .............................................................................11
`
`
`Comcast Corp. v. Viamedia, Inc., 141 S. Ct. 2877 (2021) ......................................20
`
`*Covad Communications v. Bell Atlantic Corp.,
`398 F.3d 666 (D.C. Cir. 2005) .......................................................... 19, 20, 21, 23
`
`
`Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992) .......... 8
`
`Ford Motor Co. v. United States, 405 U.S. 562 (1972) ...........................................27
`
`FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020) ............................................23
`
`FTC v. Vyera Pharmaceuticals, LLC,
` 479 F. Supp. 3d 41 (S.D.N.Y. 2020) ....................................................................21
`
`Klein v. Facebook, Inc.,
`No. 20-08570, 2022 WL 141561 (N.D. Cal. Jan. 14, 2022) .................................. 9
`
`
`LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) ..................................................10
`
`Lorain Journal Co. v. United States, 342 U.S. 143 (1951) .............................. 15, 27
`
`Massachusetts v. Microsoft Corp., 373 F.3d 1199 (D.C. Cir. 2004) .......................29
`
`Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661 (1944) .............................18
`
`vi
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 8 of 44
`
`
`National Society of Professional Engineers v. United States,
`435 U.S. 679 (1978) .............................................................................................28
`
`
`NCAA v. Alston, 141 S. Ct. 2141 (2021) ........................................................... 24, 25
`
`Neumann v. Reinforced Earth Co., 786 F.2d 424 (D.C. Cir. 1986) ........................21
`
`Northern Pacific Railway Co. v. United States, 356 U.S. 1 (1958) .......................... 7
`
`Novell Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013) ...................... 16, 21
`
`Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) ........................... 21, 26
`
`Pacific Bell Telephone Co. v. linkLine Communications, Inc.,
`555 U.S. 438 (2009) .............................................................................................14
`
`
`Schine Chain Theatres v. United States, 334 U.S. 110 (1948) ................................30
`
`Standard Oil Co. v. FTC, 340 U.S. 231 (1951) ......................................................... 6
`
`Standard Oil Co. v. United States, 221 U.S. 1 (1911) .............................................10
`
`United States v. American Tobacco Co., 221 U.S. 106 (1911) ........................ 10, 12
`
`United States v. Bazaarvoice, Inc.,
`No. 13-00133, 2014 WL 203966 (N.D. Cal. Jan. 8, 2014) ..................................12
`
`
`United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956) .................... 6
`
`United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586 (1957) ..................12
`
`United States v. Grinnell Corp., 384 U.S. 563 (1966) .........................................7, 10
`
`United States v. ITT Continental Baking Co., 420 U.S. 223 (1975)........................12
`
`United States v. Paramount Pictures, 334 U.S. 131 (1948) ....................................10
`
`United States v. Topco Associates, Inc., 405 U.S. 596 (1972) .................................. 6
`
`United States v. United Shoe Machinery Corp., 391 U.S. 244 (1968) ....................28
`
`vii
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 9 of 44
`
`
`*United States v Microsoft Corp.,
`253 F.3d 34 (D.C. Cir. 2001) ........................ 7, 8, 9, 10, 11, 15, 16, 18, 27, 30, 31
`
`
`*Verizon Communications Inc. v. Law Offices of Curtis V. Trinko,
`LLP, 540 U.S. 398 (2004) ........................................... 7, 14, 19, 21, 22, 24, 25, 26
`
` Viamedia, Inc. v. Comcast Corp., 951 F.3d 429 (7th Cir. 2020) ....... 20, 21, 22, 23
`
` *
`
`Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969) ...................28
`
`STATUTES
`
`15 U.S.C. § 2 .............................................................................................................. 1
`
`15 U.S.C. § 26 ............................................................................................................ 1
`
`RULES
`
`Fed. R. App. P. 29 ...................................................................................................... 1
`
`OTHER AUTHORITIES
`
`Colleen Cunningham, Florian Ederer & Song Ma, Killer Acquisitions,
`129 J. Pol. Econ. 649 (2021) ................................................................................12
`
`
`DOJ-FTC Antitrust Guidelines for Licensing Intellectual Property (2027) ............18
`
`Robin C. Feldman & Mark A. Lemley, Atomistic Antitrust (Feb. 26, 2021) ..........13
`
`Herbert Hovenkamp, FRAND and Antitrust, 105 Cornell L. Rev. 1683 (2020) .....17
`
`
`
`
`
`
`
`viii
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 10 of 44
`
`
`GLOSSARY OF ABBREVIATIONS
`
`The following abbreviations and acronyms are used in this brief:
`
`App
`
`API
`
`
`
`
`
`DOJ
`
`FTC
`
`NCAA
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Application
`
`Application Programming Interface
`
`Department of Justice
`
`Federal Trade Commission
`
`National Collegiate Athletic Association
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`ix
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 11 of 44
`
`
`INTEREST OF THE UNITED STATES
`
`The United States enforces the federal antitrust laws and has a strong
`
`interest in the correct application of Section 2 of the Sherman Act, 15 U.S.C.
`
`§ 2. It frequently brings antitrust enforcement actions along with State co-
`
`plaintiffs acting in their parens patriae capacity, and thus has a strong interest
`
`in protecting States’ enforcement authority under Section 16 of the Clayton
`
`Act, 15 U.S.C. § 26, including their ability to seek effective antitrust relief to
`
`restore lost competition. The federal government also has an antitrust case
`
`against Facebook. FTC v. Facebook, No. 1:20-cv-03590-JEB (D.D.C.). We
`
`file this brief under Federal Rule of Appellate Procedure 29(a).
`
`STATUTORY PROVISIONS
`
`
`
`Section 2 of the Sherman Act, 15 U.S.C. § 2, provides that “[e]very
`
`person who shall monopolize, or attempt to monopolize, or combine or
`
`conspire with any other person or persons, to monopolize any part of the
`
`trade or commerce among the several States, or with foreign nations, shall be
`
`deemed guilty of a felony.”
`
`Section 16 of the Clayton Act, 15 U.S.C. § 26, provides that “[a]ny
`
`person, firm, corporation, or association shall be entitled to sue for and have
`
`injunctive relief, in any court of the United States having jurisdiction over the
`
`parties, against threatened loss or damage by a violation of the antitrust laws,
`
`
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 12 of 44
`
`
`including sections 13, 14, 18, and 19 of this title, when and under the same
`
`conditions and principles as injunctive relief against threatened conduct that
`
`will cause loss or damage is granted by courts of equity.”
`
`ISSUES PRESENTED
`
`The United States will address the following issues:
`
`1. Whether the district court misapplied Section 2 of the Sherman Act
`
`by: (a) failing to analyze plaintiffs’ monopolization claim alleging an
`
`anticompetitive course of conduct as a whole; (b) mischaracterizing plaintiffs’
`
`challenge to anticompetitive conditions in Facebook’s then-existing deals as
`
`unilateral refusals to deal; and (c) creating a rigid “three-part test” for liability
`
`for unilateral refusals to deal?
`
`2. Whether the district court erroneously ruled out the possibility of
`
`injunctive relief without any factual development on the conduct’s likelihood
`
`of recurrence or its ongoing effects on the marketplace?
`
`STATEMENT
`
`Forty-six States, the District of Columbia, and Guam (collectively,
`
`“States”) brought suit to end Facebook’s monopolization of the personal
`
`social-networking services market. Plaintiffs have alleged that Facebook
`
`engaged in a broad anticompetitive “course of conduct” to “buy or bury”
`
`emerging competitive threats and build a “moat” protecting its platform
`
`2
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 13 of 44
`
`
`monopoly. A45-A46 (¶¶ 4, 5), A69 (¶ 104). Among other alleged
`
`anticompetitive conduct, Facebook acquired Instagram and WhatsApp to
`
`neutralize them as potential rivals and to prevent competitors from owning
`
`their technology and gaining their large user networks, A47 (¶ 12), A68-A71
`
`(¶¶ 102-104, 111), A80-A81 (¶¶ 149-50), A89 (¶ 185), and Facebook
`
`leveraged its application programming interfaces (APIs) to induce app
`
`developers not to take actions potentially posing a competitive threat, A93-
`
`A94 (¶¶ 199-202), A102 (¶ 231). For instance, Facebook allegedly amended
`
`its policies to prevent third-party apps from integrating with and supporting
`
`competing platforms, and forbade them from “replicating core [Facebook]
`
`functionality” in apps operating on its platform, A93 (¶ 201), and these
`
`conditions potentially applied even as Facebook “expanded its functionality”
`
`to “new area[s],” id. These restrictive conditions allegedly dissuaded
`
`developers from creating innovative features or offering competing services,
`
`A48 (¶ 15), A90 (¶ 187), A93-A94 (¶ 202), A102 (¶ 231), and from
`
`developing apps that might have increased consumers’ ability to switch
`
`between Facebook and other platforms, A93 (¶ 199).
`
`The district court dismissed the complaint. Separating Facebook’s
`
`alleged course of anticompetitive conduct into two parts—platform conduct
`
`and acquisitions—the court held that the platform allegations either failed to
`
`3
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 14 of 44
`
`
`satisfy its “three-part test” for liability for unlawful refusals to deal, A237-
`
`A246, or were irremediable, A247-A251. It then dismissed the acquisitions
`
`claims for laches. A256-A282.1
`
`ARGUMENT
`
`The antitrust laws have endured through time because of their
`
`flexibility in addressing new technologies and changing market realities.
`
`Section 2 is able to prevent monopolization across these changes because
`
`precedent requires flexible, fact-specific analysis that accounts for the market
`
`realities relevant to particular controversies.
`
`Recent years have seen a sea change in the economy. The online
`
`digital economy has revolutionized the way people interact, how businesses
`
`engage and compete with one another, and what drives economic value.
`
`Digital platforms like Facebook can have hundreds of millions of users and
`
`massive amounts of app developers contributing to building networks that
`
`invite, and thrive on, user and third-party engagement.
`
`The complaint details how Facebook allegedly monopolized the
`
`personal social-networking services market, as that market evolved and grew,
`
`through a broad course of anticompetitive conduct that eliminated businesses’
`
`
`1 The court also divided the FTC’s complaint into “acquisitions” and
`“platform” claims and held that it could pursue the acquisitions claims but not
`the platform claims. Doc. 90, at 39-40 (Case 1:20-cv-03590-JEB).
`
`4
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 15 of 44
`
`
`incentive and ability to challenge that monopoly. Among other alleged
`
`anticompetitive conduct, Facebook welcomed app developers onto its
`
`platform to build social-networking functionality but later reversed course
`
`and conditioned such access on app developers limiting the ways in which
`
`they competed with Facebook; hobbled the success of existing competitors;
`
`and acquired emerging rivals such as Instagram and WhatsApp to extinguish
`
`nascent competitive threats. Discovery and deliberation are necessary to
`
`understand these allegations and how they intersect with the competitive
`
`dynamics of the market.
`
`In dismissing the complaint, the district court made several errors.
`
`Most significantly, the court fundamentally misapplied Section 2. Whereas
`
`the law calls for evaluating the course of conduct alleged in the
`
`monopolization claim as a whole, the court disaggregated the claim into parts
`
`that it never reassembled. Meanwhile, the court erroneously treated
`
`Facebook’s alleged use of anticompetitive conditions in deals with app
`
`developers as unconditional, unilateral refusals to deal. The court then
`
`compounded these errors by applying a rigid checklist for unilateral refusal-
`
`to-deal liability that departs from established precedent and takes no account
`
`of the market realities of Facebook’s platform, which generates value by
`
`encouraging participation from developers and users. Finally, the court had
`
`5
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 16 of 44
`
`
`an unduly narrow understanding of both the potential injunctive relief sought
`
`here and the scope of permissible antitrust remedies.
`
`These errors applying the Sherman Act’s anti-monopoly protections
`
`are highly consequential. States are key partners to the federal government in
`
`investigating antitrust cases and bringing suit, with States playing important
`
`roles in many matters of regional and national concern. Over the last ten
`
`years, States have been co-plaintiffs with either DOJ or the FTC in over thirty
`
`antitrust enforcement actions. Here, the FTC and plaintiffs brought separate
`
`lawsuits against Facebook but jointly cooperated in their investigations and
`
`litigation in pursuit of a shared mission to protect the public from unlawful
`
`monopolization. Such federal-state partnerships are essential to vigorous and
`
`effective antitrust enforcement. Yet through misapplication of federal
`
`antitrust law, the decision below improperly ended the States’ participation in
`
`this important antitrust case short of discovery.
`
`I.
`
`THE DISTRICT COURT MISAPPLIED SECTION 2 OF THE
`SHERMAN ACT
`
`The “heart of our national economic policy long has been faith in the
`
`value of competition.” Standard Oil Co. v. FTC, 340 U.S. 231, 248 (1951).
`
`The Sherman Act is the “Magna Carta of free enterprise,” United States v.
`
`Topco Assocs., Inc., 405 U.S. 596, 610 (1972)—“a comprehensive charter of
`
`economic liberty aimed at preserving free and unfettered competition as the
`
`6
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 17 of 44
`
`
`rule of trade,” N. Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958). Section
`
`2 of the Sherman Act effectuates that goal by “achiev[ing] for the Nation the
`
`freedom of enterprise from monopoly.” United States v. E.I. du Pont de
`
`Nemours & Co., 351 U.S. 377, 385-86 (1956).
`
`The offense of monopolization requires “monopoly power” and “the
`
`willful acquisition or maintenance of that power.” United States v. Grinnell
`
`Corp., 384 U.S. 563, 570-71 (1966). The latter requires proof of
`
`exclusionary or “anticompetitive” conduct. Verizon Commc’ns Inc. v. Law
`
`Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
`
`Because “the means of illicit exclusion, like the means of legitimate
`
`competition, are myriad,” this Court has adopted a flexible, fact-specific
`
`burden-shifting approach for finding anticompetitive conduct. United States
`
`v Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001) (en banc). First, the
`
`plaintiff must show that the challenged conduct has an “anticompetitive
`
`effect”—that it “harm[s] the competitive process and thereby harm[s]
`
`consumers.” Id. If the plaintiff does so, the burden shifts to the monopolist
`
`to show a sufficient “procompetitive justification” for its conduct. Id. at 59.
`
`If that is established, the plaintiff has the burden “to rebut that claim” or
`
`“demonstrate that the anticompetitive harm of the conduct outweighs the
`
`procompetitive benefit.” Id.
`
`7
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 18 of 44
`
`
`The district court, however, did not apply this flexible, fact-specific
`
`approach. Instead, the court split plaintiffs’ monopolization claim into two
`
`pieces, and subjected the platform allegations to a conduct-specific test for
`
`unilateral refusals to deal, A239-A240, while never analyzing the
`
`contributory anticompetitive effect of the acquisitions (to which it held laches
`
`applied). The court legally erred both in disaggregating plaintiffs’
`
`monopolization claim and in its analysis of the platform allegations.
`
`A. The District Court Erred By Disaggregating Plaintiffs’
`Monopolization Claim.
`
`The Supreme Court has emphasized the importance of resolving
`
`Section 2 claims on a “case-by-case basis,” focusing on “actual market
`
`realities” and the “particular facts disclosed by the record.” Eastman Kodak
`
`Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 466-67 (1992). Disaggregating
`
`plaintiffs’ monopolization claim fundamentally impeded the court’s ability to
`
`assess the market realities presented by this case.
`
`An important market reality here is that Facebook’s platform has
`
`“strong network effects.” A72 (¶ 116); see A54 (¶¶ 41-42), A92 (¶ 195),
`
`A93-A94 (¶ 202). Network effects mean that “the utility that a user derives
`
`from consumption of the good increases with the number of other agents
`
`consuming the good,” Microsoft, 253 F.3d at 49, and accordingly the
`
`platform itself derives greater value the more participants it attracts. “In
`
`8
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 19 of 44
`
`
`markets characterized by network effects,” once “a product or standard
`
`achieves wide acceptance, it becomes more or less entrenched.” Id.; see id. at
`
`83 (network effects can act as barriers to entry); Klein v. Facebook, Inc., No.
`
`20-08570, 2022 WL 141561, at *19 (N.D. Cal. Jan. 14, 2022) (“network
`
`effects create high barriers to entry in the Social Network and Social Media
`
`Markets because, even if a new service offers higher quality features than
`
`incumbent services, the new service is inherently less valuable because it has
`
`a smaller user base than incumbent services”).
`
`Because of network effects on Facebook’s platform, multiple
`
`anticompetitive acts can exponentially reinforce the exclusionary impact. For
`
`example, multiple anticompetitive acts can work synergistically to exacerbate
`
`network effects and further entrench the dominant player by depriving rivals
`
`of the scale necessary to compete effectively.2 See A57 (¶ 51), A71-A72 (¶¶
`
`114-115); Microsoft, 253 F.3d at 60, 71 (conduct preserved Microsoft’s
`
`monopoly by keeping usage of Navigator “below the critical level necessary”
`
`to “pose a real threat to Microsoft’s monopoly”). Because “[c]ompetition” is
`
`often “‘for the field’ rather than ‘within the field’” in network industries, id.
`
`at 49, anticompetitive conduct can prevent the emergence of better products
`
`
`2 Multiple anticompetitive acts also can have synergistic effects in non-
`network industries through means other than network effects.
`
`9
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 20 of 44
`
`
`that could replace it for some or all users. Id. at 79 (the Sherman Act does
`
`not “allow monopolists free reign to squash nascent, albeit unproven,
`
`competitors at will—particularly in industries marked by rapid technological
`
`advance and frequent paradigm shifts”).
`
`Plaintiffs’ legal theory reflects these distinctive market realities,
`
`alleging that Facebook took advantage of the strong network effects on its
`
`platform and scale advantages over potential rivals, and used both
`
`acquisitions and other anticompetitive conduct to build a “moat” protecting
`
`its platform monopoly. See pp. 2-3, supra. The validity of such
`
`monopolization claims challenging the combined effect of acquisitions and
`
`other anticompetitive conduct is well-established. See Grinnell, 384 U.S. at
`
`576; United States v. Paramount Pictures, 334 U.S. 131 (1948); United States
`
`v. Am. Tobacco Co., 221 U.S. 106, 181-83 (1911); Standard Oil Co. v. United
`
`States, 221 U.S. 1, 71-77 (1911). In these cases, the Supreme Court focused
`
`on whether the evidence as a whole established the proscribed result, not
`
`whether particular acts did so in isolation. See Am. Tobacco, 221 U.S. at 182-
`
`83 (emphasizing that it was “not considering” the legality of certain conduct
`
`“isolatedly viewed”); LePage’s Inc. v. 3M, 324 F.3d 141, 162 (3d Cir. 2003)
`
`(en banc) (“The relevant inquiry is the anticompetitive effect of [the
`
`defendant]’s exclusionary practices considered together,” i.e., “taken as a
`
`10
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 21 of 44
`
`
`whole rather than considering each aspect in isolation.”); City of Anaheim v.
`
`S. Cal. Edison Co., 955 F.2d 1373, 1376 (9th Cir. 1992) (“it would not be
`
`proper to focus on specific individual acts of an accused monopolist while
`
`refusing to consider their overall combined effect.”).
`
`Citing Microsoft, the district court acknowledged that a “‘course of
`
`conduct’ could amount to a separate and independent violation,” but held that
`
`such a theory was not viable because the platform allegations challenged
`
`unilateral refusals to deal, and subjecting them to liability risked the policy
`
`consequences discussed in Trinko. A245, A278-A280.3 But these are not
`
`valid reasons for forgoing cumulative consideration of plaintiffs’
`
`monopolization claim: Many of the platform allegations do not challenge
`
`unilateral refusals to deal, see infra Section I.B.1, and the policy
`
`consequences for allowing enforcement in this area are significantly different
`
`than in Trinko due to the distinct market realities in both cases, see infra
`
`Section I.B.3. Because synergistic anticompetitive effects could be especially
`
`pronounced for digital platforms that exhibit powerful network effects and
`
`
`3 In Microsoft, this Court declined to “pass upon plaintiffs’ [course-of-
`conduct] argument” because the district court failed to explain the specific
`acts composing it—not because of concerns regarding the validity of the
`underlying theory of harm. 253 F.3d at 78. In any event, Microsoft reached
`this conclusion based on a full trial record.
`
`11
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 22 of 44
`
`
`have scale advantages over potential rivals, the costs to competition of
`
`misclassifying challenged conduct as lawful refusals to deal—and thus
`
`missing its role in an overall anticompetitive scheme—are particularly
`
`significant in this context.
`
`Moreover, by separating the acquisitions from the rest of the
`
`monopolization claim, the district court may have overlooked the full
`
`potential for anticompetitive effects. It sometimes takes many years for an
`
`acquisition “to ripen into a prohibited effect,” United States v. E.I. du Pont de
`
`Nemours & Co., 353 U.S. 586, 597 (1957), because an acquisition can
`
`facilitate or give rise to anticompetitive conduct later through the “use” of the
`
`purchased assets, United States v. ITT Cont’l Baking Co., 420 U.S. 223, 241-
`
`42 (1975); see Am. Tobacco, 221 U.S. at 183. And in the platform context,
`
`acquisitions of smaller or nascent competitors can take on even greater
`
`significance because they eliminate rivals that could have competed within—
`
`or, even more likely, for—the field. See United States v. Bazaarvoice, Inc.,
`
`No. 13-00133, 2014 WL 203966, at *50 (N.D. Cal. Jan. 8, 2014)
`
`(Bazaarvoice’s acquisition of PowerReviews “would definitely tip the scales
`
`in [Bazaarvoice’s] permanent favor on the network front.”); Colleen
`
`Cunningham, Florian Ederer & Song Ma, Killer Acquisitions, 129 J. Pol.
`
`Econ. 649, 655 (2021) (“Incumbents in already-concentrated markets further
`
`12
`
`

`

`USCA Case #21-7078 Document #1932867 Filed: 01/28/2022 Page 23 of 44
`
`
`reduce competition by acquiring future product market competitors.”); Robin
`
`C. Feldman & Mark A. Lemley, Atomistic Antitrust at 5 (Feb. 26, 2021) (“an
`
`atomistic focus [in antitrust cases] misses important modern harms to
`
`competition including those related to large tech companies buying
`
`startups”), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3793809.
`
`B.
`
`The District Court Did Not Properly Analyze Plaintiffs’
`Platform Allegations.
`
`The district co