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`ORAL ARGUMENT NOT YET SCHEDULED
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`No. 21-7078
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`In the United States Court of Appeals
`for the District of Columbia Circuit
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`STATE OF NEW YORK, et al.,
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` Plaintiffs-Appellants,
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`v.
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`META PLATFORMS, INC.,
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` Defendant-Appellee.
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`On Appeal from the United States District Court for the
`District of Columbia, No. 20-cv-3589 (Hon. James E. Boasberg)
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`BRIEF OF J. GREGORY SIDAK AND
`DAVID J. TEECE AS AMICI CURIAE
`IN SUPPORT OF DEFENDANT-APPELLEE
`
`Lauren R. Goldman
`Mitchell C. Johnston
`MAYER BROWN LLP
`1221 Avenue of the Americas
`New York, N.Y. 10020
`(212) 506-2500
`
`
`Nicole A. Saharsky
`Christopher B. Leach
`Minh Nguyen-Dang
`MAYER BROWN LLP
`1999 K Street, N.W.
`Washington, D.C. 20006
`(202) 263-3000
`nsaharsky@mayerbrown.com
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`
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`Counsel for Amici Curiae
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 2 of 35
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`CERTIFICATE AS TO PARTIES, RULINGS,
`AND RELATED CASES
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`1. Parties and Amici. All parties and amici appearing before the
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`district court and in this Court are listed in the Brief for Defendant-Ap-
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`pellee.
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`2. Rulings Under Review. References to the rulings at issue ap-
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`pear in the Brief for Defendant-Appellee.
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`3. Related Cases. A list of related cases appears in the Brief for
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`Defendant-Appellee.
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`i
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 3 of 35
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`CIRCUIT RULE 29 CERTIFICATE
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`No counsel for a party authored this brief in whole or in part, and
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`no person other than amici or their counsel made a monetary contri-
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`bution to fund the preparation or submission of this brief. The parties
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`each have filed letters with the Court consenting to the filing of all ami-
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`cus briefs.
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`ii
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 4 of 35
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`TABLE OF CONTENTS
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`Page
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`INTEREST OF THE AMICI CURIAE ...................................................... 1
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`INTRODUCTION AND SUMMARY OF ARGUMENT ........................... 4
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`ARGUMENT ............................................................................................. 7
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`THE CONDUCT AT ISSUE IS NOT ANTICOMPETITIVE ................... 7
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`A.
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`Facebook Is Not Required To Share Its Innovations
`With Competitors .................................................................... 8
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`B. Companies Do Not Harm Competition By Changing
`From One Lawful Business Practice To Another ................. 12
`
`C.
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`Legal Business Practices Do Not Become Illegal In
`Combination .......................................................................... 16
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`D. Courts Should Proceed With Caution Before Ordering
`Companies To Do Business With Their Rivals .................... 19
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`1.
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`2.
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`Economists Often Have Difficulty Determining
`Whether New Business Practices Are
`Anticompetitive ............................................................. 19
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`Plaintiffs’ Proposed Remedy Is Likely To Mire The
`Courts In Litigation Without Any Significant
`Economic Benefit .......................................................... 22
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`CONCLUSION ........................................................................................ 25
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`iii
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 5 of 35
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`TABLE OF AUTHORITIES
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`Cases
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`Page(s)
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`Brown Shoe Co. v. United States,
`370 U.S. 294 (1962) ............................................................................... 9
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`FTC v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) ............................................................... 21
`
`Ohio v. Am. Express Co.,
`138 S. Ct. 2274 (2018) ......................................................................... 21
`
`Olympia Equip. Leasing Co. v. W. Union Tel. Co.,
`797 F.2d 370 (7th Cir. 1986) ............................................................... 13
`
`Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc.,
`555 U.S. 438 (2009) ............................................................. 9, 16, 17, 21
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`Reveal Chat HoldCo LLC v. Meta Platforms, Inc.,
`No. 21-15863, 2022 WL 595696 (9th Cir. Feb. 28, 2022) ................... 13
`
`United States v. Microsoft Corp.,
`147 F.3d 935 (D.C. Cir. 1998) ............................................................... 9
`
`Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP,
`540 U.S. 398 (2004) ......................................................................... 9, 22
`
`Other Authorities
`
`Ronald H. Coase, Industrial Organization: A Proposal for
`Research, in 3 Economic Research: Retrospect and
`Prospect: Policy Issues and Research Opportunities in
`Industrial Organization 59 (Victor R. Fuchs ed., Nat’l
`Bur. Econ. Res. 1972) .......................................................................... 19
`
`Daniel A. Crane, Rules Versus Standards in Antitrust
`Adjudication, 64 Wash. & Lee L. Rev. 49 (2007) ............................... 17
`
`Frank H. Easterbrook, On Identifying Exclusionary Conduct,
`61 Notre Dame L. Rev. 972 (1986) ..................................................... 15
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`iv
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 6 of 35
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`TABLE OF AUTHORITIES
`(continued)
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`Other Authorities (continued)
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`Page(s)
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`Frank H. Easterbrook, The Limits of Antitrust,
`63 Tex. L. Rev. 1 (1984) .......................................................... 20, 21, 24
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`Geoffrey A. Manne & Joshua D. Wright, Innovation and the
`Limits of Antitrust, 6 J. Competition L. & Econ. 153 (2010) ....... 10, 20
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`Richard A. Posner, Antitrust Law: An Economic Perspective
`(Univ. of Chicago Press 1976) ............................................................. 11
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`Howard A. Shelanski & J. Gregory Sidak, Antitrust Divestiture
`in Network Industries, 68 U. Chi. L. Rev. 1 (2001) .......... 10, 22, 23, 24
`
`J. Gregory Sidak & Daniel F. Spulber, Deregulatory Takings
`and the Regulatory Contract: The Competitive
`Transformation of Network Industries in the United States
`(Cambridge Univ. Press 1997) ............................................................ 24
`
`J. Gregory Sidak & David J. Teece, Dynamic Competition in
`Antitrust Law, 5 J. Competition L. & Econ. 581 (2009) ...................... 9
`
`J. Gregory Sidak, Debunking Predatory Innovation,
`83 Colum. L. Rev. 1121 (1983) ...................................................... 18, 24
`
`J. Gregory Sidak, Monopoly, Innovation and Due Process:
`FTC v. Qualcomm and the Imperative to Destroy,
`6 Criterion J. on Innovation 1 (2020) ................................................. 18
`
`David J. Teece & Greg Linden, Business Models, Value Capture,
`and the Digital Enterprise, 6 J. Org. Design 1 (2017)........................ 14
`
`David J. Teece, Business Models and Dynamic Capabilities,
`51 Long Range Planning 40 (2018) .................................................... 14
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`David J. Teece, Business Models, Business Strategy and
`Innovation, 43 Long Range Planning 172 (2010) ............................... 13
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`v
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 7 of 35
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`TABLE OF AUTHORITIES
`(continued)
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`Other Authorities (continued)
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`Page(s)
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`David J. Teece, Profiting From Technological Innovation:
`Implications for Integration, Collaboration, Licensing and
`Public Policy, 15 Res. Pol’y 285 (1986) ............................................... 11
`
`Rachel S. Tennis & Alexander Baier Schwab, Business Model
`Innovation and Antitrust Law, 29 Yale J. on Reg. 307 (2012) .......... 20
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 8 of 35
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`INTEREST OF THE AMICI CURIAE
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`Amici are scholars in law and economics who have researched and
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`taught on antitrust law and the economics of industrial organization.
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`They share a professional interest in ensuring that antitrust law devel-
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`ops in a manner consistent with sound economic principles, particularly
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`in the context of dynamic industries where innovation is critical to com-
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`petition. They previously have filed amicus briefs in cases that raise such
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`issues. See, e.g., Br. of Amicus Curiae J. Gregory Sidak, Sanofi-Aventis
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`U.S., LLC v. Mylan, Inc., No. 21-3005 (10th Cir. Sept. 22, 2021); Br. of
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`Amici Curiae 37 Economists, Antitrust Scholars, and Former Govern-
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`ment Antitrust Officials, United States v. AT&T, Inc., No. 18-5214 (D.C.
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`Cir. Sept. 26, 2018); Br. of Amici Curiae Antitrust Law & Economics
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`Scholars, Ohio v. Am. Express Co., No. 16-1454 (U.S. Jan. 23, 2017); Br.
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`of Amici Curiae Professors and Scholars in Law and Economics, Pacific
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`Bell Tel. Co. v. linkLine Commc’ns, Inc., No. 07-512 (U.S. Sept. 3, 2008).
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`J. Gregory Sidak is the chairman of Criterion Economics, which
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`he founded in 1999. He has testified as an expert economic witness in
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`complex business disputes throughout the world, and he twice served as
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`Judge Richard Posner’s court-appointed neutral economic expert.
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`1
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`

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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 9 of 35
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`Mr. Sidak co-founded the Journal of Competition Law & Economics, pub-
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`lished by the Oxford University Press. He has held the Ronald Coase
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`Professorship of Law and Economics at Tilburg University in the Neth-
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`erlands and the F.K. Weyerhaeuser Chair in Law and Economics at the
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`American Enterprise Institute for Public Policy Research. He has been
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`a senior lecturer at the Yale School of Management and a visiting profes-
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`sor at Georgetown University Law Center. Mr. Sidak was Judge Posner’s
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`first law clerk, served on the senior staff of the Council of Economic Ad-
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`visers in the Executive Office of the President, and was deputy general
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`counsel of the Federal Communications Commission. He has published
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`six books and approximately 150 scholarly articles, primarily on anti-
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`trust, telecommunications regulation, and intellectual property. The Su-
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`preme Court, this Court, and many other courts and regulatory bodies
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`have cited his writings approvingly. He received A.B. and A.M. degrees
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`in economics and a J.D. from Stanford University.
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`David J. Teece is the Thomas W. Tusher Professor in Global Busi-
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`ness at the University of California’s Haas School of Business (Berkeley).
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`He also is the Faculty Director of the Tusher Center for the Management
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`of Intellectual Capital and Executive Chairman of Berkeley Research
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`2
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 10 of 35
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`Group, a global expert services and consulting firm. Professor Teece is
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`an expert on industrial organization, technological change, and innova-
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`tion, particularly as it relates to antitrust and competition policy and in-
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`tellectual property. He has authored over 30 books and 200 scholarly
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`papers and is co-editor of the Palgrave Encyclopedia of Strategic
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`Management and Industrial & Corporate Change. The Supreme Court
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`and many other courts and regulatory bodies have cited his writings ap-
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`provingly. He received his B.A. and Master of Commerce (with first-class
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`honors) from the University of Canterbury and his Ph.D. in economics
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`from the Wharton School of the University of Pennsylvania.
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`This case concerns whether Facebook1 violated Section 2 of the
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`Sherman Act by declining to permit applications that competed with Fa-
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`cebook’s own product to use its platform. In amici’s view, the district
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`court correctly concluded that Facebook’s conduct is not anticompetitive.
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`Antitrust law generally imposes no obligation on companies to deal with
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`rivals because such a requirement would decrease innovation and harm
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`consumers – contrary to the main goals of antitrust law. Amici submit
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`1 Because the events at issue took place before Facebook, Inc. changed
`its name to Meta Platforms, Inc., this brief refers to the company as
`Facebook.
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`3
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`

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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 11 of 35
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`this brief to provide the Court with their unique perspective as antitrust
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`economists on the questions in this case.
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`INTRODUCTION AND SUMMARY OF ARGUMENT
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`This case is about whether Facebook violated the antitrust laws
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`when it made changes to its social-network business as that business
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`grew in the early 2010s. Before that time, Facebook allowed third-party
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`developers to build applications for its platform with relatively few re-
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`strictions.2 But then, according to the complaint, Facebook realized that
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`developers were building applications that undercut Facebook’s business,
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`by creating applications that mimicked Facebook’s core features or that
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`diverted users to rival social networks. So Facebook decided to restrict
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`applications from accessing its platform to do those things. Plaintiffs say
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`this is anticompetitive – that Facebook had to continue allowing others
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`to build applications on its platform that would hurt Facebook’s business.
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`That is wrong. Under Plaintiffs’ view, the antitrust laws would discour-
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`age the innovation essential to advancing consumer welfare. And the
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`order that Plaintiffs seek is fundamentally unworkable.
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`2 Because this case comes to the Court on a motion to dismiss, this brief
`takes all of the allegations in the complaint as true.
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`4
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 12 of 35
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`First, Plaintiffs argue that Facebook should be required to deal with
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`its rivals. But any rule forcing companies to do business with their rivals
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`would substantially discourage innovation. Companies develop new
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`products and services in the hope that they will reap economic benefits –
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`benefits that could disappear if successful companies are required to
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`share the benefits with their competitors. Less financial incentive to in-
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`novate means less innovation, which ultimately will harm consumers be-
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`cause they will be offered fewer products and services. Antitrust law is
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`supposed to encourage innovation, not punish those companies that in-
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`novate.
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`Second, Plaintiffs argue that Facebook violated the Sherman Act
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`because it changed its business model, by modifying what it allowed
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`third-party applications to do on its platform. But companies are allowed
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`to change their business models over time; something that once worked
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`may no longer make sense as the products and the market change. A
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`contrary rule would penalize companies that experiment in how they
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`commercialize new products or services. Facebook’s experience bears
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`this out. According to the complaint, it was only after Facebook created
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 13 of 35
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`and opened its platform that it realized that allowing third-party devel-
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`opers to use its platform in certain ways ultimately would hurt Face-
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`book’s business by diverting users away from Facebook. So Facebook
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`changed its policies to prohibit developers from using the platform to
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`build applications that replicated Facebook’s core features or to funnel
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`Facebook data to rival platforms. If a company could be held liable for
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`changing its products once it gains experience on how those products op-
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`erate in the real world, that would substantially discourage innovation.
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`Third, Plaintiffs argue that even if each of Facebook’s practices was
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`not anticompetitive, they somehow become anticompetitive in combina-
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`tion. The Supreme Court already has rejected that argument, explaining
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`that if a company engages in two lawful business practices, the combina-
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`tion of the two practices does not become unlawful. And there is good
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`reason for that rule. It is difficult enough for a business to assess whether
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`a court is likely to find a new practice to be anticompetitive; it would be
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`virtually impossible for the business to make that determination for
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`every combination of new and existing practices. At the very least, that
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`approach would substantially raise compliance costs and legal fees. The
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`result, again, would be to deter experimentation and to harm consumers.
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 14 of 35
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`Finally, courts should proceed cautiously in deeming novel conduct
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`anticompetitive, and should be particularly wary of imposing remedies
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`that would require courts to micromanage companies’ business opera-
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`tions. Economists often have found that conduct that sometimes initially
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`seems anticompetitive ultimately is pro-competitive, particularly when it
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`comes to new technologies and services. Further, if a practice actually is
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`anticompetitive, the market often can correct any abuses. So it is better
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`for courts to take a cautious approach to deeming novel conduct anticom-
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`petitive and in imposing remedies. Besides, Plaintiffs’ proposed remedy
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`would enmesh the judiciary in the technical details of Facebook’s deal-
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`ings with a wide range of competitors, even though Facebook’s products
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`will change, its competitors will shift, and its business needs will evolve.
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`A district court should not become the central planner of Facebook’s busi-
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`ness.
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`This Court should affirm the decision of the district court.
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`ARGUMENT
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`THE CONDUCT AT ISSUE IS NOT ANTICOMPETITIVE
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`Facebook is a social-networking platform on which users connect
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`and share content with other users. In 2007, Facebook opened up its
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`platform to allow third-party developers to build applications that would
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 15 of 35
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`operate on Facebook’s platform. For example, developers created games
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`for Facebook’s platform in which users could compete with other users.
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`At issue in this case are two changes Facebook made to limit what
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`applications built by third-party developers could do on its platform.
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`First, Facebook adopted a policy of not allowing third-party applications
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`to access its platform to divert users to competing social platforms. JA 93
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`(Compl. ¶ 199). Second, Facebook adopted a policy of not allowing third-
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`party applications to access its platform to replicate core functions of Fa-
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`cebook. Id. (Compl. ¶ 201). Plaintiffs claim that Facebook made those
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`changes to stop third-party applications from driving users away from
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`Facebook. Facebook did not prohibit third-party developers from build-
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`ing applications for Facebook’s platform or prohibit the developers from
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`developing applications for other platforms. Nonetheless, Plaintiffs as-
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`sert that Facebook’s changes were anticompetitive. They are wrong.
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`A. Facebook Is Not Required To Share Its Innovations
`With Competitors
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`Plaintiffs’ principal argument is that Facebook acted anticompeti-
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`tively when it changed its policies to prevent third-party developers from
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`building applications for Facebook’s platform that drive traffic to rivals,
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`because the changes reduced competition among social platforms. That
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 16 of 35
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`is wrong as a legal matter, because companies generally owe no duties to
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`deal with their rivals. See Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc.,
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`555 U.S. 438, 443-44 (2009); Verizon Commc’ns Inc. v. Law Offices of Cur-
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`tis V. Trinko, LLP, 540 U.S. 398, 407-09 (2004). And it does not make
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`sense as an economic matter. Accepting Plaintiffs’ legal rule would harm
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`consumers by discouraging companies with innovative ideas from invest-
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`ing in those new ideas in the first place.
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`The central aim of federal antitrust law is to advance consumer wel-
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`fare. See Brown Shoe Co. v. United States, 370 U.S. 294, 319 (1962). One
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`key way that the antitrust laws do that is by encouraging innovation.
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`United States v. Microsoft Corp., 147 F.3d 935, 948 (D.C. Cir. 1998)
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`(“[A]ny dampening of technological innovation would be at cross-pur-
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`poses with antitrust law.”). This concept is not new. More than eight
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`decades ago, the economist Joseph Schumpeter explained that radical
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`gains in consumer welfare come from new or innovative products; minor
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`improvements result only in marginal welfare gains. See J. Gregory
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`Sidak & David J. Teece, Dynamic Competition in Antitrust Law, 5 J.
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`Competition L. & Econ. 581, 602 (2009) (citing Joseph A. Schumpeter,
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`Capitalism, Socialism and Democracy (Harper & Bros. 1942)).
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 17 of 35
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`Innovation is particularly important in the technology sector.
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`Many technology industries do not function as described in Econ 101,
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`with firms selling undifferentiated products at marginal cost in perfect
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`competition. Instead, companies in these markets often compete by in-
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`vesting in new technology for a market, not in a market – using technol-
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`ogy and innovation to jump over competitors to displace them. See How-
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`ard A. Shelanski & J. Gregory Sidak, Antitrust Divestiture in Network
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`Industries, 68 U. Chi. L. Rev. 1, 14-15 (2001). For example, IBM’s domi-
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`nance in 1960s mainframe computers was not replaced by a company
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`making better or cheaper mainframe computers, but rather by an en-
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`tirely new product, the personal computer. Id. at 14. Similarly, Mi-
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`crosoft’s dominance in the personal computing space was eroded not by
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`competitors offering superior personal computers and operating systems,
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`but by competitors offering new products like smartphones and open-
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`source software, products that reimagined both markets. Cf. Geoffrey A.
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`Manne & Joshua D. Wright, Innovation and the Limits of Antitrust, 6 J.
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`Competition L. & Econ. 153, 182 (2010).
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`Because investment drives innovation, antitrust economics has fo-
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`cused on how to encourage investment in new products. Investing in a
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 18 of 35
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`new product is costly because the innovator firm must bear all of the costs
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`involved in creating and marketing the new product, including vital re-
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`search and development. It also is risky, because there is no guarantee
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`of success. In contrast, once the innovator firm has proven that a market
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`for the new product exists, the costs and risks of entry are much lower
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`for rivals, which can simply follow the innovator’s lead. See David J.
`
`Teece, Profiting From Technological Innovation: Implications for Inte-
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`gration, Collaboration, Licensing and Public Policy, 15 Res. Pol’y 285,
`
`290-91 (1986). Accordingly, a fundamental principle of antitrust econom-
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`ics is that each market entrant should bear its own costs of entry. See
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`Richard A. Posner, Antitrust Law: An Economic Perspective 59 (Univ. of
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`Chicago Press 1976). That minimizes free riding and ensures that inno-
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`vators retain a financial incentive to innovate.
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`Plaintiffs’ proposed rule, under which companies would be forced to
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`share their innovations with their rivals, would directly undermine the
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`incentives to innovate. Companies would be significantly less likely to
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`invest in new products if rivals could just wait until the innovator is suc-
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`cessful, and then use the antitrust laws to force the innovator to share
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`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 19 of 35
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`the fruits of their investments. The result would be a reduction in inno-
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`vation, which ultimately would reduce the products and services availa-
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`ble to consumers.
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`Although Facebook’s platform has become incredibly successful, its
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`creation involved substantial risk and expense. Facebook made signifi-
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`cant investments to create a platform attractive to third-party developers
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`and to billions of end users. It created not only the platform itself, but
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`also tools for developers to build applications on the platform – tools for
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`which Facebook did not charge. The antitrust laws should permit Face-
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`book to benefit financially from its risk-taking and innovation, rather
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`than requiring Facebook to share those rewards with competitors.
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`B. Companies Do Not Harm Competition By Changing
`From One Lawful Business Practice To Another
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`Plaintiffs also argue that Facebook violated the Sherman Act by
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`changing its business model. According to the complaint, Facebook at
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`first allowed third-party applications to access its platform to replicate
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`Facebook’s core functions and to divert users to competing platforms;
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`then, Facebook changed course and restricted those uses of the platform.
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`JA 93-95. Plaintiffs do not argue that either the original business model
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`or the revised business model is itself unlawful. Rather, they argue that
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`
`the change from one model to the other is unlawful. Pls. Br. 66-67; see
`
`also Br. of Am. Antitrust Institute 14-18.
`
`Plaintiffs are wrong on the law. The antitrust laws do not require
`
`companies that initially choose to deal with rivals to continue doing so.
`
`Olympia Equip. Leasing Co. v. W. Union Tel. Co., 797 F.2d 370, 376 (7th
`
`Cir. 1986) (Posner, J.) (“If a monopolist does extend a helping hand,
`
`though not required to do so, and later withdraws it as happened in this
`
`case, does he incur antitrust liability? We think not.”). Instead, the an-
`
`titrust laws have long recognized that businesses have the right to choose
`
`who they deal with, and to change who they deal with as circumstances
`
`change. See, e.g., Reveal Chat HoldCo LLC v. Meta Platforms, Inc., No.
`
`21-15863, 2022 WL 595696, at *2 (9th Cir. Feb. 28, 2022) (citing cases).
`
`Plaintiffs’ change-theory of antitrust law also runs counter to basic
`
`economic principles. Experimenting with different business models goes
`
`hand in hand with innovating new products. See David J. Teece, Busi-
`
`ness Models, Business Strategy and Innovation, 43 Long Range Planning
`
`172, 176-79 (2010) (describing the historical link between business model
`
`innovation and new products). For every new product that a company
`
`introduces, the company must develop a business model that provides
`
`
`
`13
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`

`

`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 21 of 35
`
`
`consumers with enough benefits to justify adopting the new product,
`
`while also ensuring that the company obtains a sufficient return on its
`
`investment. See David J. Teece, Business Models and Dynamic Capabil-
`
`ities, 51 Long Range Planning 40, 45 (2018) (Teece, Dynamic Capabili-
`
`ties). If the company cannot find such a model, then there will be no
`
`business case to produce the new product. See David J. Teece & Greg
`
`Linden, Business Models, Value Capture, and the Digital Enterprise, 6 J.
`
`Org. Design 1, 1 (2017).
`
`Companies must be able to experiment with different business
`
`models because they may not get it right on the first try. Instead, com-
`
`panies learn from experience, “fine-tun[ing] – and sometimes completely
`
`overhaul[ing] – [business models] before they can become profit engines.”
`
`Teece, Dynamic Capabilities, supra, at 42. A company that introduces a
`
`new product thus needs to be able to experiment with different business
`
`models to determine which best fits with the new product. Id. at 45 (“It
`
`takes time for business model innovation to catch up to technological pos-
`
`sibilities, perhaps because business models are more context-dependent
`
`than technology.”). Accordingly, economists have long argued against
`
`forcing a company to deal with its rivals because it limits a company’s
`
`
`
`14
`
`

`

`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 22 of 35
`
`
`ability to choose among competing strategies. See, e.g., Frank H. Easter-
`
`brook, On Identifying Exclusionary Conduct, 61 Notre Dame L. Rev. 972,
`
`973 (1986).
`
`Plaintiffs’ approach would severely hinder this necessary experi-
`
`mentation. If prior lawful business models are used as evidence that
`
`later models are unlawful, that would discourage experimentation. And
`
`if firms cannot experiment with how to commercialize their innovations,
`
`they simply will invest less in innovation. Plaintiffs’ approach would dis-
`
`courage investment in radical innovations aimed at creating entire new
`
`markets or product categories, because companies would not have expe-
`
`rience with those markets or products to develop the right business mod-
`
`els without experimentation. Yet those are the innovations that are most
`
`likely to significantly advance consumer welfare. See Sidak & Teece, su-
`
`pra, at 602.
`
`Plaintiffs’ approach also would deter companies from doing busi-
`
`ness with rivals. Plaintiffs claim that Facebook violated the antitrust
`
`laws by restricting applications from accessing its platform to divert us-
`
`ers onto competing platforms after having first allowed that conduct. If
`
`Facebook is penalized for switching its platform from being more open to
`
`
`
`15
`
`

`

`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 23 of 35
`
`
`being less open, then the next company like Facebook that launches a
`
`new product will be reluctant to start with a more open business model.
`
`Instead, the prospect of antitrust liability will drive innovators to ini-
`
`tially choose more closed models that exclude competitors, and to adopt
`
`more open models only when they are sure there will be no negative im-
`
`pacts to their businesses. So the ultimate consequence of adopting Plain-
`
`tiffs’ theory would be to discourage, rather than encourage, firms to deal
`
`with their competitors.
`
`C. Legal Business Practices Do Not Become Illegal In
`Combination
`
`Plaintiffs and their amici fault the district court for evaluating the
`
`legality of each of Facebook’s practices individually, arguing instead that
`
`they should be evaluated “as a whole” or as a “course of conduct.” Pls.
`
`Br. 57-58; Br. of Acemoglu et al. 25-26. The Supreme Court has rejected
`
`this argument, explaining that “[t]wo wrong claims do not make one that
`
`is right.” Pac. Bell Tel. Co., 555 U.S. at 457. The Court explained if a
`
`company that has no obligation to deal with a rival chooses to do business
`
`with the rival in two different ways, both of which are lawful, the rival
`
`cannot bring an antitrust claim because the combination of the two prac-
`
`
`
`16
`
`

`

`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 24 of 35
`
`
`tices allegedly hurt the rival’s profit margins. Id. at 452. The Court ex-
`
`plained that because a company does not have a duty to deal with a rival
`
`in general, it “certainly” does not have a duty to deal with the rival in the
`
`manner the rival would prefer. Id.
`
`But even if this Court were writing on a blank slate, it should reject
`
`Plaintiffs’ rule. Adopting Plaintiffs’ rule would massively increase litiga-
`
`tion uncertainty, which ultimately would discourage innovation. Com-
`
`panies generally assess the legal risk of their practices as they are devel-
`
`oped. That process already is difficult and costly, especially when it
`
`comes to antitrust issues, because there may be little that separates law-
`
`ful, pro-competitive conduct from anticompetitive conduct. See Daniel A.
`
`Crane, Rules Versus Standards in Antitrust Adjudication, 64 Wash. &
`
`Lee L. Rev. 49, 86 (2007).
`
`Plaintiffs’ rule would only increase litigation uncertainty, because
`
`it would be amorphous and difficult to apply. Each company would need
`
`to assess every business innovation from 30,000 feet and decide whether,
`
`in totality, some new change will cause the company to violate the anti-
`
`trust laws. That is a much more difficult than evaluating the lawfulness
`
`of a single practice. See Pac. Bell Tel. Co., 555 U.S. at 453 (recognizing
`
`
`
`17
`
`

`

`USCA Case #21-7078 Document #1940873 Filed: 03/28/2022 Page 25 of 35
`
`
`the heightened difficulty of assessing the lawfulness of “a moving tar-
`
`get”); see also J. Gregory Sidak, Debunking Predatory Innovation, 83
`
`Colum. L. Rev. 1121, 1142 (1983). Even if this task were possible, it
`
`would sharply i

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