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Federal judge poised to greenlight advertisers’ antitrust action against Meta

Advertisers seeking $67.8 billion in damages for overpaying for Facebook ads will get to defend their claims in court, as a judge said it's too premature to dismiss the case without expert testimony.

SAN FRANCISCO (CN) — A federal judge said Thursday he will advance advertisers' $67.8 billion antitrust class action against Facebook despite doubts that the social media giant barred competitors from entering the social advertising market.

"This is intensely fact-based and will require expert testimony. I'm not going to turn off the spigot just on the papers. That would be unreasonable,” U.S. District Judge James Donato told attorneys for Facebook parent Meta Platforms at a hearing on its motion to dismiss the case.

But Donato expressed qualms about the advertisers’ proposed market for a narrow type of targeted online advertising, where Facebook allegedly rose to dominance between 2015 and 2019 by making an anticompetitive agreement with rival Google and deceiving users about data privacy.

Details of the pact, codenamed Jedi Blue, are laid out in a 212-page, heavily-redacted amended complaint the advertisers filed earlier this year that claims the companies agreed to divide markets in 2018. Meta allegedly ceded dominance in the programmatic and exchange-based ad markets to Google and Google agreed to help Meta track its own users across third-party mobile apps and give it priority to target them with ads.

These tactics, the advertisers argue, led to them paying higher prices for ads than they would have absent Meta’s monopoly.

Class attorney Yavar Bathaee with Bathaee Dunne LLP tried to convince the judge that Meta's walled empire kept competitors like Twitter, LinkedIn and Snap from entering the social advertising market.

“The level of targeting is extremely different,” he explained. “It is one thing to enter something into a search term and buy that term and target ads that way, and it's another thing to pick exactly the kinds of people you want to see those ads.”

He said anyone who wanted to break into that market would have to spend an obscene amount of money to acquire a critical mass of social data and targeting infrastructure.

But Donato, who took over the case from U.S. District Judge Lucy Koh after she was elevated to the Ninth Circuit, pointed to the emergence of TikTok as evidence that Meta may not be as good a monopolist as the advertisers claim.

“This upstart came out of nowhere and turned out to be the product everyone under age of 25 seems to prefer. It's hard to see that there's any meaningful barriers to entry when TikTok has come on the scene and has had a significant impact on eating up Facebook’s market share,” Donato said.

Bathaee noted Koh had already found the advertisers have adequately pleaded a distinct market for social advertising in an order advancing part of consumers’ and advertisers' antitrust claims this past January, prompting Donato to pointedly respond, “Judge Koh is not here anymore. Now you’ve got me.”

Bathaee said TikTok, whose algorithm learns to curate a user’s feed to target them with videos they might like, was only able to enter the market by spending a lot of money.

“TikTok did pull it off in 2020 but they were heavily bankrolled to do it,” Bathaee said, adding, “They pulled it off maybe in a sort of innovative way where they learn from you and your behavior. No one else could do it without a critical mass of data.”

Donato said, “Listen, I don't use social media as a principled matter but I have seen TikTok and it’s lot closer to Facebook than Google. The fact is a major competitor entered this market at a time when you all were saying in the complaint that Facebook had dug a moat around the castle.”

Bathaee reminded Donato that the advertisers’ claims only run from 2015-2019, before TikTok became a wild success.

“So in your view Meta's monopoly power ended in 2019?” Donato asked, to which Bathaee replied, “It may have. We don't know. That's a fact-based question. By 2020 we are looking at completely different things.”

Meta’s counsel Sonal Mehta, a partner with Wilmer Hale, said the advertisers are trying to contrive a market that excludes many obvious Meta competitors.

“They admit that LinkedIn was in the market, that Twitter was in the market, Snap, TikTok, and many others,” she said. “The core of their theory is that there was some sort of barrier to entry. The fact that there were all of these players who entered the market undermines that argument. The fact Facebook has a strong platform and performed well because it had a good product is not anticompetitive.”

Donato said it would be premature to dismiss the case, and proposed a relevant market tutorial on barriers to entry and exclusionary conduct. “I'd like to get the relevant market issues addressed early rather than later. This is a gatekeeper,” he said. “I'm a little at sea about what the barriers to entry are and who was excluded; who was kept out of the advertising game.”

Antitrust expert Warren Boulton will give testimony on behalf of the advertisers, while Meta has tapped economist Dennis Carlton as its expert.

Donato also suggested that Meta and the advertiser class consider a settlement, asking both sides to propose a mediator to guide the talks. He further warned Meta against "cutting deals" in its subpoenas to third parties for data and documents, an allegation Mehta strenuously denied.

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