FTC v. Meta Platforms Inc. has gone to court, and trial is just underway in the U.S. District Court for the District of Columbia. The Federal Trade Commission (FTC) alleges that Meta is currently, in 2025, engaged in monopolization in violation of Section 2 of the Sherman Antitrust Act by dint of having acquired Instagram in 2012 and WhatsApp in 2014.
Quasi-spoiler alert: I’m going to discuss various aspects of the case, burdened by a nagging question: What’s the point of the FTC’s lawsuit? It’s a simple question, but I’m not sure I have a good answer. I have reviewed, among other things, the FTC’s December 2020 complaint; its August 2021 first amended complaint; its September 2021 substitute amended complaint; its pre-trial brief; and the slides submitted with its opening statement, and I’m still not sure why they brought the case.
What, if anything, do they hope to accomplish for competition and consumers if they win? How do they propose to do it? What gives them any confidence that some remedy will prove both tractable and beneficial?
Trigger warning: I’m going to go on a bit (surprise), but I’m just going to scratch the surface. For now, I’ll focus on the FTC’s proposed market definition, its proffered assessment of monopoly power, and its allegations of competitive harm. I’ll point to some other issues and sources, but leave them for another day. It’s like they say: all finitary things come to end.
The ‘Big Tech’ Mission
In case anyone’s forgotten, the federal agencies have been on the attack in the tech sector since about 2021, when Jonathan Kanter was installed at the head of the U.S. Justice Department (DOJ) Antitrust Division and Lina Khan was appointed chair of the Federal Trade Commission (FTC). In 2023, I cracked wise about the FTC’s “Bureau of Let’s-Sue-Meta.” I was kidding, at least partly. There is no such bureau on the FTC org chart, however much FTC leadership might be happy to have one, and to keep it busy.
What had piqued my snark? We were barely into May, yet we were seeing a third FTC case involving Meta. That seemed a lot. There’d been an “Order to Show Cause Why the Commission Should Not Modify Its [prior] Decision and Order” settling privacy allegations with the firm formerly known as Facebook. And the FTC had struck out in its attempt to block Meta’s acquisition of Within.
And those two matters stood against the backdrop of the FTC’s aging yet ongoing (some would say ever-flailing) case against Meta’s (then Facebook’s) acquisitions of Instagram and WhatsApp–deals that had seemed to go smoothly enough in 2012 and 2014, respectively. Both deals had been reviewed by the FTC when they were noticed. The Instagram deal had received an extra measure of scrutiny, as it was subject to a “second request.” Neither deal faced any opposition at the time. (Here’s the FTC’s 2012 closing letter to Facebook about the Instagram acquisition—no drama there.)
The complaint was not brought in 2012 or 2014, when either acquisition might have been challenged under Section 7 of the Clayton Act, had the FTC identified significant competitive concerns in reviewing the proposed mergers. It hadn’t. Yet in January 2021, the FTC filed a complaint, alleging that the consummated acquisitions were unlawful, and that Meta was continuing to engage in monopoly maintenance (monopolization) via the acquisitions, in violation of Section 2 of the Sherman Act. That complaint was dismissed by Judge James E. Boasberg in June 2021.
Unbarred from filing an amended complaint, the FTC did so in August 2021, and then filed a substitute amended complaint that September. As Judge Boasberg asked in his January 2022 memorandum opinion: “Second time lucky”? There, he ruled that the FTC’s amended complaint had finally cleared the pleading bar, while also observing that: “Ultimately, whether the FTC will be able to prove its case and prevail at summary judgment and trial is anyone’s guess.”
Still with me?
The trial has begun because, among other reasons, Meta has not caved (and why should they?); the FTC has not caved (they should, but they won’t); and because, in November 2024, Judge Boasberg issued a memorandum opinion in which he “largely denied both parties’ Cross-Motions for Summary Judgment.” In that opinion, Boasberg told us that the case “must go to trial” because:
In the end, while the parties’ legal jousting is both impressive and comprehensive, it leaves no clear victor.
At the same time, he seemed to signal that the FTC might find it tough going on both the facts and the law. As he noted:
Under the forgiving summary-judgment standard, the FTC has put forward evidence sufficient for a reasonable factfinder to rule in its favor. Prevailing here, however, does not obscure the fact that the Commission faces hard questions about whether its claims can hold up in the crucible of trial. Indeed, its positions at times strain this country’s creaking antitrust precedents to their limits.
What does the FTC need to show? That is a matter of some dispute, although the FTC is right about the basic elements of a monopolization claim under Section 2. It courts no controversy in quoting the U.S. Circuit Court of Appeals for the D.C. Circuit’s Microsoft decision and the U.S. Supreme Court’s 1966 decision in United States v. Grinnell:
(1) the possession of monopoly power in the relevant market and (2) the willful . . . maintenance of that power as distinguished from growth or development as a consequence of superior product, business acumen, or historic accident.
The controversies lie at a finer level of grain. And in the facts.
Market-Definition Meanders and Gerrymanders
Let’s start with the FTC’s “indirect” evidence of monopoly power, which turns on the commission’s narrow and eccentric (some have said “gerrymandered”) product-market definition. The FTC argues that the relevant market is a small subset of social-media apps: personal-social-networking (PSN) services, which, according to the FTC, depend (centrally?) on “a particular type of social graph built around friend and family connections.”
If you’re wondering which services are PSN services, it’s just Facebook, Instagram, Snapchat, and MeWe. MeWe, you ask? Yep, it’s a thing. I looked it up. Its U.S. usage is growing, and whether it is or ought to be deemed part of a distinct PSN market is another issue entirely.
According to the FTC, X.com/Twitter, TikTok, YouTube, and most of the myriad messaging apps that people may use to communicate with, well, their friends and family members—e.g., iMessage (Apple), Discord, Signal, Google Message, Line, Kik, Skype, and WeChat—are not in the market.
To get there, the FTC partly relies on some subjective hair-splitting and the Brown Shoe factors derived from the Supreme Court’s 1962 opinion in Brown Shoe Co. v. United States—long disfavored, but not forgotten or, to be fair, fully overruled.
Herbert Hovenkamp (a leading scholar of antitrust law—arguably, the leading scholar of antitrust law) has argued that “[t]he so-called Brown Shoe factors are wrong in most cases” and that, in any case, even as described by the Court in its poorly aging opinion, “there is no reason to think that it was doing anything more than summarizing fact findings for that particular case.” The misfit of the Brown Shoe factors to a monopolization case is captured neatly in one of his tweets:
Courts should NEVER rely on the Brown Shoe factors for the simple reason that B.S. was not the least bit interested in IDing a grouping of sales capable of being monopolized. If you want to know whether a practice reduces costs, as BS did, market definition is irrelevant.
To be sure, Facebook has some distinctive features. This is differentiated competition, not ball bearings, and all social-media apps have some distinctive features. As an aside—if highly relevant to the trial—those features seem to be multiplying, and bundles of features seem to be converging across the industry. There are many accounts of this, but here’s a neat graphic of convergence from Meta’s opening statement:
At some level, of course, a product’s subjective features—even its look and feel—are relevant to consumers and competition. At some level, the bundle of a product’s features are constitutive of that product. But musing on various similarities and differences that appeal (or not) to this or that consumer, and guessing as to their competitive significance, is frolic and detour, and it can go on to no end.
It all seems so arbitrary. Or contrived. And there are better ways to do it.
Conjuring Monopoly Power
Why muck about with the Brown Shoe factors if there are better alternatives? Mainly, I think, because there’s a legal (or litigation strategy) point to it, if not an economic one: an exceedingly narrow or eccentric market definition is a way to hype a defendant’s alleged market share. A market definition that includes Coke and only Coke (but not other colas, such as RC or Pepsi, much less other soft drinks, like 7-Up or Dr. Pepper) makes Coca-Cola seem like a monopolist, even though they have actual competitors.
Similarly, a market definition that includes Facebook and only Facebook makes Meta a de-facto monopolist. More credibly—if only barely—Facebook has a greater market share if the market includes only Facebook, Instagram, Snapchat, and MeWe than it does if the market also includes, say, X/Twitter, TikTok, YouTube, LinkedIn, iMessage, Discord, Signal, Google Message, Line, Kik, Skype, WeChat, etc.
Antitrust law and economics have largely moved away from the simple structural approaches to merger scrutiny favored (resurrected) by Lina Khan’s FTC and Jonathan Kanter’s Antitrust Division (see, e.g., Harold Demsetz; Richard Schmalensee, and William Evans, Luke Froeb, and Gregory Werden, among others; for recent reviews of the literature on structural presumptions and the structure-conduct-performance paradigm, see these comments from the International Center for Law & Economics and the Global Antitrust Institute). Still, those approaches are touted by the FTC/DOJ 2023 merger guidelines that are being maintained by new leadership (here’s a memo from FTC Chairman Andrew Ferguson), and they can still persuade some courts, even if they shouldn’t.
Curiouser still is the FTC’s assessment of market share, and its inference to monopoly power therefrom. As noted, the FTC’s complaint spends a good deal of time arguing that certain features of its select PSN providers—certain functions, and the manner in which those functions are provided—are constitutive of a unique PSN market, the gradual multiplication and convergence of apps notwithstanding. Facebook is in, but Signal and iMessage are out, even if users of all three might use them to send text messages, images, and short clips to friends, relatives, and others with shared interests.
Suppose the court accepts the FTC’s market definition, even if it shouldn’t. What is Facebook’s share of the FTC’s narrow (or gerrymandered) market? The FTC has an answer. Its expert—Scott Hemphill of New York University Law School—has calculated market share “drawn from multiple ordinary course metrics.” Specifically, he has used “time spent, monthly active users (‘MAU’), daily active users (‘DAU’), and user broadcast posts—for usage across all PSN apps.”
Established metrics applied by an established scholar. Well done. As a shell game. The sleight of hand lies in “across all PSN apps.” Facebook’s share is time spent, MAU, DAU, and posts on Facebook relative to that short list of PSN apps, including Facebook. So, time spent by Facebook users watching short video clips counts toward Meta’s share, even for users that primarily or exclusively use Facebook to watch short video clips, but time spent watching short video clips (even precisely the same clips) on TikTok does not, because the FTC argues that TikTok is not in the market.
And the same goes for messages to friends, family, or others with shared interests: time spent, daily users, etc. sharing text messages (exclusively, primarily, or occasionally) on Facebook count, but users sharing precisely the same messages on X, iMessage, Google Message, or Discord do not count, because those apps are not deemed PSN providers.
That’s a bit like arguing that a football stadium that hosts the occasional concert has a certain share of a local “big act” concert market by counting tickets sold to Taylor Swift concerts, Bruce Springsteen concerts, religious revivals, National Football League games, and Major League Soccer matches, while excluding tickets sold at dedicated concert venues, including those large enough to hold major acts that are not doing a stadium tour. I think that the technical term for this sort of approach is “bonkers.”
Sure, Meta might provide countervailing evidence of substitution effects. During the 2021 Facebook outage, TikTok and YouTube led the way in diversion to alternative apps. And during the short 2025 TikTok ban, Facebook and Instagram usage jumped. But TikTok and YouTube are deemed not to be in the same market because they do not provide “the same friends and family sharing experience.”
The FTC’s case seems heavy on story-telling and old emails, and light on hard evidence and analysis. Yes, further evidence may be developed at trial. But the FTC still employs many expert and experienced staff in both its Bureau of Competition and its Bureau of Economics. And the FTC’s expert is a well-known antitrust scholar. And the FTC screened the relevant acquisitions in 2012 and 2014 and then, years later, undertook an additional investigation that led to its original December 2020 complaint.
Given all of that, and four additional years of preparation, is bonkers really the best it can do for market-share metrics and monopoly power?
Where’s the Competitive Harm?
The FTC has also said that it has direct evidence of competitive harm. But cognizable harms typically include increased prices or decreased output. A decrease in product or service quality (or increase in quality-adjusted prices) can also count, but quality-only cases are rare. Under most circumstances, they can, and should, be tough sledding.
If a hospital merger leads to increased rates of post-operative infection and in-hospital mortality, and no other changes in established outcomes measures, there’s a clear argument that quality has declined on net. There’s no real controversy over the question whether those quality metrics matter. So, if they drop significantly, and prices remain flat, we might reasonably see a quality-driven case.
But that’s not the standard case, and not just because one doesn’t commonly see monotonic quality effects in isolation. One thing that’s right about the FTC’s Brown Shoe musings is that products and services typically have numerous qualitative attributes (one could argue there are indefinitely many). Some are isolable and some not; some–like optional features on a car–may be priced by the market and some not. Where there’s no market price, and no defensible market proxy, it gets hard to know how to value tradeoffs across nonprice features, as products and services change in numerous and diverse ways over time. Even the sign of the net change in quality may be entirely unclear.
Here, there’s really no way for the FTC to show that the mergers led to (or even are associated with) higher prices, as the price of Meta’s PSN apps have held steady at zero. And there’s really no way for the FTC to show that the merger has led to (or even has been associated with) reduced output, given the explosion in usage in the decade-plus since the acquisitions.
So they are left with a qualitative argument: they allege that Facebook is exploiting its monopoly to decrease the quality of its product, and that they do so by increasing the ad load. On the surface, the argument might seem similar to the hospital example that I gave above. Consumers might well prefer zero ads, all else equal, so an increase in ad frequency might be seen as a reduction in quality, all else equal.
But that’s a red herring. First, with social media (or PSN services, if one prefers the FTC’s market definition), it’s really just a way of saying consumers would prefer to have their goods and services but not pay for them—not with money and not in any other way. As it happens, Facebook and its competitors alike depend on ad revenue, not least because the zero-monetary-price option seems attractive to many, many consumers (not incidentally, WhatsApp was not free before it was acquired by Facebook, and its user base was tiny).
Second, nobody thinks that “all else equal” applies here. The apps have added and improved features since the acquisitions, and they’ve done so considerably. That’s not really in dispute, but one can look to Meta’s pre-trial brief for details or, for example, here and here. They’ve invested considerably in improvements (one might surmise that they did it because they had to—because, well, competition). For a simple perspective on that investment, we can look at Meta’s 10k filings; their 2024 filing with the Securities and Exchange Commission (SEC) notes R&D expenditures of $38.483 billion in 2023, $35.338 billion in 2022, and $24.655 billion in 2021. Even in Washington, that’s real money.
So we have a complex of new features—both new functions and various qualitative changes to the implementation of those features. How do we value those diverse qualitative changes, plus the change in the frequency of ads, plus the change in the quality of ads (how they are served or displayed to various consumers, how easy it is to parse ads, to scroll past them, etc.) on net?
Third, as far as I can tell, the FTC has made no serious effort to establish a competitive baseline—to describe a “but-for” world. The key qualitative question is not whether some, many, or even most consumers would prefer to see fewer ads, all else equal. The question is harder than that. It comes in two parts, and the FTC’s filings answer neither of them: first, how does the FTC intend to assess Facebook’s change in quality overall—across all of its nonprice attributes? Second, even assuming it develops an account of the magnitude (and direction) of such changes on net, how does the FTC mean to establish the competitive baseline with which to compare such changes?
Meta is alleged to be harming the market now. What would the market look like—what would the apps look like—if Facebook had never acquired Instagram and WhatsApp (or had acquired them and spun them off at some point)?
I don’t think the FTC knows how to answer those questions. It’s not easy. The acquisitions being challenged involved not just going concerns, but technical expertise and developed software functions. These, and Facebook, have developed together for well over a decade in an extremely dynamic space, with new firms, features, and even technologies developing and shaping competition. Constructing the but-for world absent the acquisitions, and establishing the relevant (putative) competitive baseline, is a complex challenge indeed. As I said, I don’t think that the FTC can credibly meet those challenges. And in any case, I can see that they haven’t.
And as I mentioned above, the question of remedies looms. I’m reminded of Gregory Werden’s discussion of the Google Search case:
While the bifurcation [of liability and remedy phases] had the potential to save judicial resources, it imposed a cost by taking away a crucial focus. A civil plaintiff asks the court to grant it some particular relief: That the court is being asked to do something is what distinguishes a court case from an academic debate, and the specific ask brings the case into focus.
What benefits to competition and consumers does the FTC project, contingent on what intervention? If it’s to be divestiture (into a market with multiplying and morphing social-media apps), on what basis would the FTC project a better state of affairs as a result? And if it doesn’t know, what’s the case about?
Addenda
C-Suites Say the Darndest Things, But So What?
This is the “hot docs” question, with the FTC spending a good deal of time attending to hoary emails in an attempt to show anticompetitive intent. Such evidence is not necessarily irrelevant, to the extent it might provide a circumstantial bolster for allegations of effects.
Still, effects matter directly, and intent is not an element of a Section 2 claim: there’s no mens rea issue here. Moreover, a decade or more post-merger, that sort of evidence can cut both ways, as it underscores the question of why there isn’t better direct evidence of competitive effects.
The problem with email generally is that C-suite executives, like kids, can say the darndest things. Indeed, they should say and consider many things. Selected excerpts from a multitude of documents (and discovery yields multitudes) might suggest any number of things about intent. What dated excerpts show about current intent is anyone’s guess.
More than that, the excerpts in question seem suggestive of complex concerns and interests, just as one might expect. It’s not at all obvious that they signal an intent to acquire instead of competing. The deals were not “killer acquisitions”; Instagram and WhatsApp were nurtured, not killed. But for some unpacking of the complexity of the concerns that were voiced, see Will Rinehart’s 2023 discussion. And more generally, see this article by Geoff Manne and E. Marcellus Williamson. Maybe the docs are not that hot after all.
Legal Burdens at an Even Finer Level of Grain
There are interesting and important questions about the legal standards for challenging consummated mergers under Section 2. There are various reasons the FTC might have been hesitant to bring a Clayton Act challenge at this late date, but one might involve the agency’s view that the plaintiff’s burden is lower under Sherman §2 than under Clayton §7. That’s not a unique view, but I believe it to be a mistake—one that rests on a misreading of the D.C. Circuit’s opinion in Microsoft (on Section 2 liability more broadly).
I’ll circle back to this issue in a different post. For now, I’ll note that I wrote about it here, and my ICLE colleague Geoff Manne wrote about it here. But if I have to point you to one article in the meantime, I’ll suggest “Challenging Consummated Mergers under Section 2” by Douglas H. Ginsburg and Koren Wong-Ervin. (Judge Ginsburg sits on the D.C. Circuit and was chief judge when the court issued its per curiam opinion in Microsoft. Wong-Ervin is a leading antitrust practitioner in private practice and an FTC veteran.) In their piece, they argue that the position of the FTC (and, not incidentally, Judge Amit Mehta’s opinion in the Google Search case) misreads both Microsoft and the circuit’s subsequent Rambus opinion.
And Again with the Network Effects
I skipped over the FTC’s handwaving about network effects. I think that they botch it. Fortunately, my ICLE colleague Brian Albrecht posted an excellent piece on just this issue yesterday right here on Truth on the Market.
That’s all for now, folks.
