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Antitrust Suit Against Facebook Must Return to Drawing Board

The Federal Trade Commission suffered a huge blow in its effort to break up Facebook with a federal judge seeing little evidence so far that Silicon Valley giant has a social media monopoly.

WASHINGTON (CN) — A federal judge dismissed the first attempt by regulators Monday to force Facebook's divestment of Instagram and WhatsApp, popular social networks that nearly outshine its flagship business.

The Federal Trade Commission and 48 state attorneys general had taken on Facebook in December of last year with separate lawsuits, both filed in U.S. District Court for the District of Columbia. They claimed that Facebook's acquisitions of Instagram and WhatApp, and its policies preventing compatibility between Facebook and any app that it saw as a threat, allowed the aging social media company to illegally maintain a monopoly. 

U.S. District Judge James Boasberg tossed both suits Monday, opening with a note about how Facebook's ascension marks the passage of years in the tech world.

“At the time of the last great antitrust battle in our courthouse — between the United States and Microsoft — Mark Zuckerberg was still in high school,” the Obama appointee said of Facebook's founder. “Nearly twenty years later, both federal and state regulators contend, in two separate actions before this Court, that Facebook is now the one violating the antitrust laws.”

As the FTC had noted in its original lawsuit, this was reflective of a view Zuckerberg expressed in a 2008 email, that “it is better to buy than compete.”

Boasberg nevertheless needled the commission for failing to show how it calculated that Facebook controls more than 60% of the social networking market.

“The FTC’s complaint says almost nothing concrete on the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market,” Boasberg wrote. “It is almost as if the agency expects the court to simply nod to the conventional wisdom that Facebook is a monopolist.”

With nary "an estimated actual figure or range for Facebook’s market share at any point over the past ten years," and light allegations regarding preferences of consumers to hop from one social network to another, Boasberg said that the commission fell short of establishing Facebook's market share.

Boasberg only dismissed the commission’s complaint, however, rather than the case, calling it conceivable that the commission could firm up its claims in an amended filing. The commission will get 30 days to refile — an opportunity Boasberg refused to similarly offer the state challengers.

"Ultimately, this antitrust action is premised on public, high-profile conduct nearly all of which occurred over six years ago — before the launch of the Apple Watch or Alexa or Periscope, when Kevin Durant still played for the Oklahoma City Thunder, and when Ebola was the virus dominating headlines," he wrote in a separate ruling. "The complaint’s allegations themselves make clear that the states could easily have brought suit then, just as they make clear that any equitable relief this court could or would order now would greatly prejudice both Facebook and third parties. The system of antitrust enforcement that Congress has established does not exempt plaintiffs here from 'the consequences of [their] choice' to do nothing over the last half decade. The court accordingly finds that, as a matter of law, their challenges to Facebook’s acquisitions — whether they are targeted independently or as part of a larger scheme of anticompetitive behavior — are barred by the doctrine of laches or otherwise furnish no basis for the injunctive relief sought."

Following the ruling, Facebook shares spiked by 4.4%, allowing the company to hit $1 trillion in market capitalization for the very first time, the fifth U.S. company to ever do so. The company joins Apple, Microsoft, Amazon and Alphabet in hitting the milestone. 

A Facebook spokesperson lauded the court Monday for tossing the two suits. "We compete fairly every day to earn people’s time and attention and will continue to deliver great products for the people and businesses that use our services,” a Facebook spokesperson said in an email.

The Federal Trade Commission said in an email that it is closely reviewing the opinion and assessing the best option forward.

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