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Thursday, June 20, 2024 | Back issues
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App Developers Say Facebook Gamed Them

(CN) - Facebook reaped billions by forcing social-game developers to use only its virtual-currency services, the owner of a vanquished competitor claims in a federal complaint.

Social Ranger LLC, successor in interest of Super Rewards, an early entrant into the virtual-currency services market, filed the complaint against Facebook on Monday in Delaware.

"Super Rewards was a business that Facebook destroyed through its anticompetitive conduct," the complaint says.

Though Facebook now boasts over a billion users, it was "not always the monolithic social network it is today," Social Ranger claims. "In 2007, when it had only approximately 50 million users, Facebook launched its development platform to grow its user base and increase the amount of time consumers spent on Facebook.com."

The plaintiff says "Facebook urged third-party software developers to create games for its platform. Thousands of developers did. They built 'social games' -- a distinct kind of game that exploits the unique gameplay characteristics available on a social-networking website. The explosion in social games increased Facebook's user base, revenue, and value, and made it the dominant player in the social-game network market."

Social Ranger claims when Facebook launched the platform, Mark Zuckerberg, the company's CEO, "promised that social-game developers could keep any revenue they generated without limits on how developers could make money."

"Zuckerberg further promised not to impose limitations on how developers could make money on the Facebook platform, 'they can sell sponsorships, they can have ads, they can sell things, they can link off to another site -- we are just agnostic,'" the complaint states.

Based on these promises, the plaintiff says, game developers sought out virtual-currency service providers and asked for their help in generating revenue.

Social Ranger claims that in order "to compete with Super Rewards and its rivals," Facebook began offering Facebook Credits, its own virtual-currency service, in early 2009.

"Yet Facebook charged a much higher rate than the market -- often two or three times as much as its competitors," according to the complaint. "Facebook also provided a narrower range of services. Facebook Credits failed to gain a significant share of the virtual currency services market when competing on the merits."

But "by May 2010, the platform had more than 1,000,000 developers and more than 550,000 applications," Social Ranger says.

In July 2011, Facebook allegedly "prohibited social-game developers from publishing games on Facebook.com unless they used Facebook to provide virtual-currency services."

"Facebook's new policy wiped out the once-vibrant virtual-currency services market, including Super Rewards," Social Ranger claims. "By seizing this market for itself, Facebook reaped billions of dollars."

Facebook then discontinued its Credits in June 2012, "requiring social-game developers to share 30 percent of all revenue with Facebook," the complaint states. "But Facebook stopped providing services that the virtual-currency services market competitively provided before Facebook captured it."

Social Ranger asserts violations of the Sherman Act and seeks Super Rewards' lost profits, three times its actual damages, attorney fees, and injunctive relief.

It is represented by Kenneth Dorsney of Morris James LLP in Wilmington, Del.; Derek Newman of Newman Du Wors LLP in Seattle, Wash.; Brian Strange of Strange & Carpenter in Los Angeles; and Bruce Van Dalsem of Quinn, Emanuel, Urquhart & Sullivan LLP, also in Los Angeles.

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