Facebook lawsuits don't show much consumer harm, but must they?

WASHINGTON (Reuters) - The lawsuits filed against Facebook allege the company’s pattern of buying up competitors has turned it into a monopoly, but several experts said the complaints fell short on explaining how the social media platform’s actions have hurt consumers.

FILE PHOTO: An illustration photo shows the Facebook page displayed on a mobile phone internet browser held in front of a computer screen at a cyber-cafe in downtown Nairobi, Kenya April 18, 2019. REUTERS/Stringer

The U.S. Federal Trade Commission and nearly every U.S. state filed lawsuits against the social media company on Wednesday - making Facebook the second big tech company to face a major legal challenge this year after the U.S. Justice Department sued Alphabet Inc’s Google in October.

Stephen Yelderman, a professor at Notre Dame law school and a former trial attorney at the Justice Department’s antitrust division, said the lawsuits lack compelling examples of consumer harm. “I think if they had great stories about such harm, they definitely would have featured those,” he added.

Yelderman and other antitrust experts said that as the case proceeds the agency and states will call economic and market experts to testify about the harms they say are caused by Facebook, even as such examples were largely missing from the initial complaints.

Newer legal theories are taking a broader approach to what may constitute harm given the big changes in how consumers interact with and can be impacted by companies.

The lawsuits against Facebook allege the social media platform’s conduct around its acquisitions of Instagram in 2012 and WhatsApp in 2014 was anti-competitive and that those mergers must be unwound.

Some experts said it would be a challenge to argue an antitrust case retrospectively, and that it is easier to establish that an acquisition would cause consumers harm before a merger is approved.

Andrew Gavil, a professor at Howard University School of Law, cited a landmark case against Microsoft in 1998, in which U.S. regulators struggled to define harm to consumers and went instead with the theory that Microsoft’s conduct had prevented future competition - helping the company eventually avoid a forced breakup.

“The Facebook lawsuits can be hard to prove because you have to persuade the court that the inference of that kind of harm is strong based on the conduct,” Gavil said.


A source familiar with Facebook’s thinking also told Reuters the idea of whether the company’s actions have caused consumers harm “will be at the core of this litigation.”

“(Regulators) wave their hands at this a little bit and say there might have been more choice and other options for people but they don’t have any evidence that suggests ... that ‘but for’ (Facebook) the world will be more competitive,” the source said.

Facebook has called the lawsuits “revisionist history” and will continue making that a part of its defense, the source said.

On Thursday, Facebook founder and chief executive Mark Zuckerberg told employees during a Q&A that the company faces vigorous competition, according to audio of the meeting reviewed by Reuters.

Some antitrust experts have pushed back against the idea of seeking to prove harm to consumers and argued that new antitrust lawsuits must focus on a much broader definition of harm.

This idea has found increasing support in Washington. A House panel released a wide-ranging report on tech companies earlier this year in which it called for establishing a legal standard “designed to protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals.”

Sarah Miller, executive director of the American Economic Liberties Project, a Washington-based group focused on monopolies, said it is illegal to foreclose competition or acquire rivals to maintain monopoly power.

“Poor content, more misinformation and disinformation, poor privacy protections ... the lawsuits make a clear case about the harms caused by the lack of competition,” she said.

Reporting by Nandita Bose; Additional reporting by Katie Paul; Editing by Chris Sanders and Daniel Wallis