FTC expected to reveal new strategy in Facebook antitrust fight

The Federal Trade Commission (FTC) this week is expected to lay out its new legal strategy in an ongoing antitrust battle with Facebook that will also reveal how FTC chief Lina Khan plans to take on the market power of U.S. tech giants.

The FTC has until Thursday to disclose whether it plans to proceed with the case after a major courtroom setback earlier this year. The agency is largely expected to move forward, and is likely to do so by filing an amended complaint.

The stakes are high not just for the FTC but also for its new chair, a critic of big tech who is facing calls from Silicon Valley to recuse herself from this case and others.

“One of the most important things for the commission is, and I suspect they understand this, is to realize even before you do more things this is the most important case you have. Succeeding in this case is, I think, vital to carving out a broader path of enforcement in the future,” said William Kovacic, who served as FTC chairman from 2008-2009.

A spokesperson for the FTC declined to comment on the agency’s plans and said officials will make a public announcement about the case “at the appropriate time.”

The commission’s case against Facebook centers on the company’s acquisitions of WhatsApp and Instagram, and the FTC seeks to restructure the company.

The FTC voted to file the lawsuit against Facebook during the Trump administration, with then-Chairman Joseph Simons, a Republican, joining Democrats in support of pursuing an antitrust case. GOP commissioners Noah Joshua Phillips and Christine S. Wilson, who remain at the agency, voted against proceeding.

Judge James E. Boasberg, an Obama nominee, dismissed the FTC’s complaint in June, arguing the agency did not provide sufficient evidence to prove that Facebook controls more than 60 percent of the social media market.

But unlike the case brought by state attorneys general, which Boasberg dismissed entirely in his June ruling, he left open the possibility for the FTC to file an amended complaint addressing the concerns he raised.

It will be Khan’s first major action as President Biden’s FTC chair.

“If you fail here, that does not bode well for the rest of your programs. So in some sense, her program depends a lot on making this existing case a success,” said Kovacic, who’s now a professor at George Washington University Law School.

The FTC’s next move is further complicated by Facebook’s request that Khan recuse herself from the case. Amazon has made a similar request, calling for Khan to step aside from any antitrust investigation into the online retail giant.

Facebook cited critical comments Khan made about the company before being confirmed by the Senate in June. The social media giant highlighted Khan’s time working for the advocacy group Open Markets Institute, her academic writings and her time as an aide on the House Judiciary Committee’s antitrust investigation into the biggest U.S. tech firms.

During her Senate confirmation hearing, Khan dismissed concerns that she would need to recuse herself from any cases, saying she has “none of the financial conflicts or personal ties that are the basis for recusal under federal ethics laws.”

Several Democrats backed Khan earlier this month by sending letters to the two tech companies urging them to drop their requests.

Pursuing the Facebook case in Boasberg’s courtroom is not the only option available to Khan.

The agency could pursue what’s known as in-house adjudication, meaning the FTC commissioners would decide the case themselves.

Democrats hold a 3-2 majority on the commission, but could face a 2-2 split before a nominee is confirmed to take the spot of Democratic Commissioner Rohit Chopra, who was nominated by Biden to lead the Consumer Financial Protection Bureau. Chopra has yet to be confirmed for his new position.

The outcome of an in-house adjudication, however, would almost certainly prompt an appeal, and the calls for Khan’s recusal may have more weight, according to Stephen Calkins, an FTC general counsel from 1995-1997. 

“It’ll be interesting to see how the FTC proceeds, because the recusal argument gets stronger if they were to go through the administrative adjudication,” said Calkins, now a professor at Wayne State University Law School. “On the other hand, going to federal court didn’t work out so well the first time, so who knows how it could work out on the second try.”

Although the Facebook case Khan inherited is one of the most high profile matters facing the agency, it is part of a long list of priorities.

Biden released a sweeping list in July, outlining a series of recommendations for the FTC. And the agency is urging Congress to revive its ability to seek monetary relief for constituents harmed by companies found to engage in deceptive practices after a unanimous Supreme Court decision earlier this year dealt a harsh blow to the FTC’s authority.

As chair, Khan has to look at “all of these demands” as well as her own preferred agenda and decide what can be reasonably done with time and resource constraints, Kovacic said.

“And that’s a really tough call, because notice how many external audiences are expecting her to do everything,” he added.

“I’m not sure that the external audience — your fan base, legislators — are going to be very sympathetic when you say, ‘Hey, wait a minute I don’t have enough resources,’ or ‘Wait a minute, you gotta give me some time. Wait a minute, this is really hard.’ That’s what old management says, that is what the new team claims was a weakness of antitrust policy for the last 40 years,” Kovacic said.

The FTC under Khan has been working to put in place stricter enforcement practices, including votes to repeal former policy statements that Khan and other Democratic commissioners said were constraints on the agency’s ability to take action.

Her choices within her first two months have already earned praise from anti-monopoly groups that backed her for the FTC post.

“Under Chair Khan’s leadership, I think we’ve seen the FTC signal that it is turning the page, on a chapter in which the agency allowed a tremendous amount of lawlessness. They are eager to move forward with policy statements, with cases and with investigations that take on anticompetitive conduct, and really provide some relief for businesses, workers and entrepreneurs,” said Robyn Shapiro, a spokesperson for the American Economic Liberties Project.

“We think the FTC needs to demonstrate that they are unwilling to be bullied around by Facebook and that they’re willing to stand up for what is a really clear case of anticompetitive conduct,” Shapiro said.

Shapiro said Congress also needs to take action regardless of how the Facebook case proceeds.

A set of bipartisan bills aimed at boosting regulators’ ability to go after big tech companies was approved by the House Judiciary Committee in June. But the proposals face opposition from lawmakers on both sides of the aisle as they await a floor vote.

The slow timeline for antitrust cases against tech giants, including the Facebook case and the Department of Justice’s case against Google, may prompt Congress to take action on the bills, Kovacic said.

“As these cases unfold, including Facebook, the more difficulty the government has proceeding with its case, the longer it takes, the stronger will be the impression within Congress that we need new laws,” he added. “The status, the development of these cases will feed back directly into legislative deliberations.”