Texas, Louisiana, 46 other states sue Facebook

In addition to suing four states on Dec. 8 in the Supreme Court over alleged election irregularities, the Texas Attorney General’s Office has been very busy.

On Dec. 9, Texas joined 47 other state attorneys general and the Federal Trade Commission to sue Facebook for violating antitrust laws by monopolizing the market for personal social networking services. The complaint was filed in the United States District Court for the District of Columbia and charges Facebook with violating federal antitrust statutes prohibiting monopolization and illegal mergers.

“The States’ investigation revealed that Facebook protected its monopoly by identifying competitive threats and either absorbing them through acquisition or neutralizing them through exclusionary conduct,” Attorney General Paxton said. “The law enforcement action filed today exposes its illegal conduct and should ultimately restore competition in social networking for the benefit of millions of users in Texas and the United States as well as businesses that advertise on Facebook.”

The result of Facebook’s illegal conduct is a reduction in competition that harms its users and advertisers, the complaint argues. “Facebook’s activities have reduced the quality of user experience, suppressed innovation, blocked product improvements and degraded privacy protections. Its advertisers suffered from higher quality-adjusted prices, less transparency to assess the value they receive from ads and harm to their brands due to offensive content appearing on the platform,” AG Paxton’s office says.

Facebook is specifically charged with violating Section 2 of the Sherman Act, in addition to multiple violations of Section 7 of the Clayton Act.

The coalition asks the court to halt Facebook’s illegal, anticompetitive conduct and block the company from continuing this behavior in the future. Additionally, the coalition asks the court to restrain Facebook from making further acquisitions valued at or in excess of $10 million without advance notice to the state of New York and other plaintiff states. Finally, the court is asked to provide any additional relief it determines is appropriate, including the divestiture or restructuring of illegally acquired companies, or current Facebook assets or business lines.

“Facebook has thwarted competition and reduced consumer privacy to increase their profits,” Louisiana Attorney General Jeff Landry said. “This big tech giant has leveraged their monopolist power to extract more lucrative advertising fees while consistency undermining and abusing user trust.”

Since 2004, Facebook has operated as a personal social networking service that facilitates sharing content online without charging users a monetary fee, but, instead, monetizes a user’s time, attention, and personal data.

In an effort to maintain its market dominance in social networking, Facebook acquired smaller rivals and potential rivals before they could threaten Facebook’s dominance, to “suffocate and squash third-party developers that Facebook invited to utilize its platform – allowing Facebook to maintain its monopoly over the social networking market and make billions from advertising,” AG Landry’s office says.

“As one market participant noted, if an application (app) encroached on Facebook’s turf or didn’t consider selling, Zuckerberg would go into ‘destroy mode,’ subjecting small businesses to the ‘wrath of Mark.’

Landry listed examples of abuses committed by Facebook in the areas of privacy, acquisition of competitive threats, purchase of Instagram and Whatsapp and cutting competitors off of Facebook overnight.

  • Facebook’s unlawful monopoly gives it broad discretion to set the terms for how its users’ private information is collected and used to further its business interests. When Facebook cuts off integration to third-party developers, users cannot easily move their own information – such as their lists of friends – to other social networking services.
  • Because Facebook users have nowhere else to go, the company is now able to make decisions about how to curate content on the platform and use the personal information it collects from users to further its business interests, even if those choices conflict with the interests and preferences of Facebook users.
  • The harm to consumers over the last decade comes as a direct result of Facebook’s acquisition of smaller firms that pose competitive threats. Facebook employs unique data-gathering tools to monitor new apps all in an effort to see what is gaining traction with users. That data helps Facebook select acquisition targets that pose the greatest threats to Facebook’s dominance. Once selected, Zuckerberg and Facebook offer the heads of these companies vast amounts of money – that greatly inflate the values of the apps – all in hopes of avoiding any competition for Facebook in the future.

As laid out in the complaint, the coalition – led by New York Attorney General Letitia James – argues that Facebook targets competitors with a ‘buy or bury’ approach: if they refuse to be bought out, Facebook tries to squeeze every bit of oxygen out of the room for these companies. To facilitate this goal, Facebook has used an “open first–closed later” strategy to stop competitive threats, or deter them from competing, at the inception.

As a consequence of Facebook’s expansive user base and the vast trove of data it collects from its users and users’ connections, Facebook is able to sell highly targeted advertising that firms greatly value, the complaint states.

“The volume, velocity, and variety of Facebook’s user data give it an unprecedented, virtually 360-degree view of users and their contacts, interests, preferences, and activities. The more users Facebook can acquire and convince to spend additional time on its platforms, the more data Facebook can accumulate by surveilling the activities of its users and thereby increase its revenues through advertising – reaping the company billions every month.”

The Federal Trade Commission (FTC) also filed a complaint against Facebook in the U.S. District Court for the District of Columbia.

The attorneys general from the following states sued Facebook: New York with Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

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