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Facebook shares are moving higher after a court dismissed the FTC’s lawsuit against the social media giant. CNBC’s Julia Boorstin reports on the court’s opinion. Subscribe to CNBC PRO for access to investor and analyst insights on Facebook and more: https://cnb.cx/3dIH56N
A federal court on Monday dismissed the Federal Trade Commission’s antitrust complaint against Facebook, dealing a major setback for the agency’s complaint that could have resulted in Facebook divesting Instagram and WhatsApp.
Shares of Facebook rose more than 3% on Monday following the complaint’s dismissal, sending the social media company’s market capitalization above $1 trillion for the first time.
“Although the Court does not agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s Complaint is legally insufficient and must therefore be dismissed,” reads the filing from U.S. District Court for the District of Columbia. “The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services.”
In the filing, the court states that the FTC did not prove Facebook maintains a monopoly.
“The Court agrees that the first — the possession of monopoly power in the market for Personal Social Networking Services (as defined by the agency) — is not adequately pleaded here,” the filing reads. “No more is needed to conclude that the Complaint must be dismissed.”
The court found the FTC did not provide enough detailed data to prove Facebook has market power in the loosely defined market for Personal Social Networking Services.
“The Complaint is undoubtedly light on specific factual allegations regarding consumer-switching preferences,” the court wrote. “These allegations — which do not even provide an estimated actual figure or range for Facebook’s market share at any point over the past ten years — ultimately fall short of plausibly establishing that Facebook holds market power.”
The filing notes that the FTC’s complaint lacked any specific evidence.
“The FTC’s Complaint says almost nothing concrete on the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market,” the filings reads. “It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist.”
The court also disagreed with Facebook’s argument that the FTC does not have the power to attack the acquisitions of Instagram and WhatsApp, which took place in 2012 and 2014. On the contrary, it ruled that the FTC can still seek divestiture of these acquisitions — but only if it succeeds in its legal arguments about Facebook’s monopoly power.
The ruling is not necessarily the end of the case. The court acknowledged that the FTC may be able to cure the weaknesses in its argument so left open the possibility that it could file an amended complaint and continue the litigation.
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