The End of the Antitrust Case Against Facebook? Expert from Robert H. Smith School of Business available to discuss the ruling against the FTC and states.

David Kass, clinical professor of finance

Kass has served as an economist in senior positions with the Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis. He also is active on Twitter (@DrDavidKass) and blogs about Warren Buffett, Berkshire Hathaway and the stock market.  

Facebook isn’t going to be broken up just now. In a stunning ruling this week, a federal judge dismissed antitrust lawsuits brought against the social media behemoth by the Federal Trade Commission and some 46 states.

“My initial reaction was surprise,” says Maryland Smith’s David Kass, who as a former senior antitrust economist at the FTC, had been watching the case closely. “But I agree with the ruling of the judge. The FTC did not, first of all, provide an adequate or universally accepted definition of a personal social networking service. Second, the FTC, in its case, did not define what the relevant market was.”

Those failings, he says, left the one of federal government’s key arguments – the notion that Facebook holds a monopoly over social networking – in the dust. “How could you argue that Facebook has a 60% market share in a market that you can’t even define, without providing any backup data, apparently, that shows what the market share was in each of the past 10 years. At the very least, it is a number that is poorly supported,” says Kass, a clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business.

Viewing the case with a wider aperture, Kass says: 

• The FTC and the states’ attorneys general did not clearly establish what harm Facebook was posing to consumers. Usually, the measure of harm to consumers in the face of a monopoly or an oligopoly comes down to price gouging. But Facebook, and the company’s Instagram and WhatsApp services, are free. 

• And the social media services aren’t obligatory; its millions of members electively sign on to the networks.

• The FTC and the states had argued that Facebook’s dominance created an anticompetitive market for other social upstarts, but, Kass calls that argument “very weak.” He continues: “The thrust of the antitrust laws – primarily the century-old Clayton Act and the Sherman Act, among others – is to protect consumers, not to protect competitors. And that’s a very important distinction.” 

The rulings were seen as a major setback for lawmakers who had vowed to rein in some of the country’s tech giants, amid concerns about consumer privacy, among other matters. And Kass acknowledged that those concerns are legitimate. 

“But those concerns can and should be addressed through regulation,” he says. “You don’t need antitrust laws breaking up the company to protect the privacy of consumers. It’s a different problem with a different solution. That does indeed need to be addressed, but not through the heavy hand of antitrust laws and potential remedies of breaking up the company.”

What’s next? According to the ruling, the state attorneys general and the FTC could submit their case again within 30 days, adding detail to their arguments, but Kass is skeptical about whether they will. “I don’t know how much you can revise in 30 days,” he says. “But they may do it.”