Meta's Victory Over the Federal Trade Commission Shows the Market Moves Faster Than Antitrust Enforcement

The federal government’s yearslong case to label Meta a monopoly ended on Tuesday when a federal court ruled in favor of the tech giant. The ruling sets the important precedent that the current market in which a dominant firm competes is the relevant one to consider when determining whether or not it is a monopolist.

The Federal Trade Commission (FTC) first brought the lawsuit against Meta in December 2020, during the first Trump administration, alleging that the tech giant had run afoul of the Sherman Antitrust Act by monopolizing the personal social networking market through its acquisition of then-nascent Instagram and WhatsApp in 2012 and 2014, respectively. The case was dismissed in 2021, but refiled later that year. In April, Lina Khan, who served as the FTC chair when the case was refiled, said that “there’s no expiration date when it comes to the illegality of a transaction.”

On Tuesday, Judge James Boasberg of the U.S. District Court for the District of Columbia contradicted Khan in his decision, saying the FTC must prove Meta continues to wield monopoly power “whether or not Meta enjoyed [such] power in the past.” Citing Heraclitus’ philosophy of universal flux, Boasberg says, “while it once might have made sense to partition apps into separate markets of social networking and social media, that wall has since broken down.”

Determining whether Meta is a social networking or social media company was the critical point of contention. The FTC argued that Meta occupied the “personal social networking” (PSN) market, which comprises Facebook, Instagram, Snapchat, and MeWe. (Even the FTC excluded WhatsApp from its PSN market, despite complaining about Meta’s acquisition of it.) Successfully arguing that Meta was only a social networking company would make it easier to prove that it was a monopolist. Meta argued that, as a social media company, its competitors also include TikTok and YouTube, as well as social networking platforms.

Boasberg found the FTC’s market definition to be overly narrow, and agreed with Meta that TikTok and YouTube should be considered its competitors in the social media market. Boasberg determined this to be the case based on the preponderance of controlled and natural experiments that found strong evidence of substitution between Facebook and Instagram, both of whose most popular feature is short-form video content, with TikTok and YouTube.

By this more inclusive and accurate market definition, Boasberg ruled that Meta’s “modest share cannot establish monopoly power.” Even excluding YouTube from the social media market, Boasberg found that “Meta still would not hold a monopoly.”

While Boasberg redacted market share estimates from his opinion, we can be confident that Meta’s is at or below 33 percent, given his citation of U.S. v. Aluminum Co., which found 33 percent market share insufficient for monopoly power. Boasberg noted that the Supreme Court has never found a party with less than 75 percent market share to be a monopolist.

Meta’s victory over the FTC shows that markets evolve faster than antitrust litigation moves. In this case, antitrust enforcers assumed that Meta was immune to competition and that its acquisitions of Instagram and WhatsApp would foreclose the social networking market to newcomers. In reality, social networking and social media have become so intertwined that, if Meta hadn’t acquired Instagram and pivoted to focus on short-form video content, it could have gotten its lunch eaten by TikTok and YouTube.

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