Facebook’s Antitrust Woes
Tim Wu is out with a few things press keeps getting wrong about the Facebook antitrust case. Tim’s second point is most insights. The government doesn’t have a duty to prove that Instagram or WhatsApp, absent the merger, would have become significant competitors.
Too many journalists have been falling for this assertion — and reporting it as the established legal standard — when it actually is a controversial theory and misreading of precedent that comes out of a paper funded by Facebook and published in a corporate-funded journal. (The New York Times is guilty of repeating this today.)
The theory is, roughly, that the Government needs to prove the hypothetical case that Instagram (say) would have prospered and become a significant competitor without Facebook’s acquisition, so that Facebook effectively eliminated a real competitor.
But Microsoft, the authoritative case in this area, says nearly the opposite — it says that the Government does not need to prove a hypothetical:
To require that § 2 liability turn on a plaintiff’s ability or inability to reconstruct the hypothetical marketplace absent a defendant’s anticompetitive conduct would only encourage monopolists to take more and earlier anticompetitive action. . . .
[T]he underlying proof problem is . . . [that] neither plaintiffs nor the court can confidently reconstruct a product’s hypothetical technological development in a world absent the defendant’s exclusionary conduct. To some degree, “the defendant is made to suffer the uncertain consequences of its own undesirable conduct.” 3 Areeda & Hovenkamp, Antitrust Law p 651c, at 78.
The court went out of its way to reject a “would have prospered” test, because it set too high a bar. The actual inquiry into what would have happened, the court said, was “edentulous” — toothless. Here is what the case says is the standard:
Given this rather edentulous test for causation, the question in this case is not whether Java or Navigator would actually have developed into viable platform substitutes, but (1) whether as a general matter the exclusion of nascent threats is the type of conduct that is reasonably capable of contributing significantly to a defendant’s continued monopoly power and (2) whether Java and Navigator reasonably constituted nascent threats at the time Microsoft engaged in the anticompetitive conduct at issue.
Much more on this in a paper we co-authored.
and provide a good overview of the lawsuits here