Facebook Asks Court to Open FTC’s Merger Review Blackbox

Meta’s Facebook is seeking access to FTC documents that could be critical to Facebook’s defense of FTC’s antitrust suit claiming Facebook has illegally maintained its personal social networking monopoly.

Facebook hopes to mine internal FTC document for defenses based on the FTC’s allowance of Facebook’s acquisitions of Instagram and WhatsApp that the FTC now claims harmed competition.

This blog has previously written about the FTC’s monopoly maintenance claims against Facebook here and here. Central to the FTC’s claims is what the FTC characterizes as Facebook’s “anticompetitive acquisition strategy” that “has systematically tracked potential rivals and acquired companies that it viewed as serious competitive threats.”

Specifically, the FTC claims that Facebook’s 2012 acquisition of Instagram and 2014 acquisition of WhatsApp were consummated to “neutralize a competitor” (in the case of Instagram) and to “neutralize a competitive threat to its personal social networking monopoly” (in the case of WhatsApp). According to the FTC, those acquisitions enabled Facebook to unlawfully maintain monopoly power in the market for “personal social networking services.”

One of the main pillars of Facebook’s defense is that both the Instagram and WhatsApp acquisitions were reviewed and cleared by the FTC in 2012 and 2014 (the FTC did not even make a second request for information for the WhatsApp acquisition). Facebook is asserting equitable defenses of laches, estoppel, and waiver, and is sure to repeatedly use the FTC’s contemporaneous findings against it at trial.

Against this backdrop, Facebook has moved to compel the FTC to disclose eight documents, which Facebook claims include “extensive memoranda, from staff attorneys as well as from economists, recounting as of 2012 the relevant facts of competition (i.e., the relevant antitrust market) and the likely effect on competition and consumers from the then-proposed acquisition of Instagram.” Facebook asserts that these documents may contain facts and admissions that are relevant to the issues of market definition, the acquisitions’ effects on competition, and Facebook’s equitable defenses. The FTC, which has yet to file its opposition, has apparently withheld these documents on assertions of privilege, including the “deliberative process” process, attorney-client, and attorney work product privileges.

How the court will rule is anyone’s guess. But the dispute highlights the unique posture of this case insofar as the FTC is claiming anticompetitive effects of acquisitions that it allowed to close years ago. Facebook’s strategy in using this fact, and evidence related to it, could inform the defenses of other antitrust defendants, particularly in the technology sectors, accused of monopolizing product markets that were previously viewed as competitive.