Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Facebook Loses Bid to End Antitrust Case Over Data Use (Correct)

Jan. 18, 2022, 4:39 PMUpdated: Jan. 20, 2022, 10:23 PM

Meta Platforms Inc.'s Facebook must face antitrust litigation over its alleged advertising pact with Alphabet Inc.'s Google and its alleged strategy of building a social media empire by deceiving users about its data privacy practices, a federal judge in San Jose, Calif., ruled.

Judge Lucy H. Koh let proposed class actions advance against Facebook on behalf of consumers and advertisers, citing “more than plausible” allegations that the tech giant used lies and deceptive statements about data privacy to gain a dominant competitive edge over rival platforms that told the truth.

“By selling increased amounts of data to third parties while representing to users that it was keeping data private, Facebook increased its user base and its profits,” Koh wrote Jan. 14. “Facebook’s deception of users allowed Facebook to prevent sophisticated rivals, like Google, from entering the market.”

The ruling comes days after a federal judge in Washington, D.C., advanced an enforcement case brought by the Federal Trade Commission, which is seeking to unwind Facebook’s acquisitions of Instagram and WhatsApp over its alleged strategy of copying, acquiring, or killing promising startups.

Koh, writing for the U.S. District Court for the Northern District of California, used several statements by founder Mark Zuckerberg against the company, saying they suggested that he and other top executives knew robust competition would force Facebook to rein in its data harvesting.

The statements show Facebook bending over backwards to avoid scandal while Google was rolling out its ill-fated social network, Google+, which company executives viewed as a competitor unlike other popular digital platforms like YouTube, the judge said in a 107-page opinion.

She rejected Facebook’s wide-ranging attacks on the legal theories advanced by the consumers and advertisers, referring to them repeatedly as “meritless” and “unconvincing.”

The lawsuits adequately defined the social media market, a submarket consisting of “social network” platforms like Facebook, and the company’s dominant share in each of them, Koh found. She cited high barriers to market entry like “network effects” and “switching costs.”

Nor are the claims untimely under the four-year statute of limitations, the judge said, pointing to allegedly false statements Zuckerberg recently made about the company’s compliance with an FTC privacy settlement and the scope of its data sharing with third parties like Cambridge Analytica.

Koh did tentatively narrow the dispute, saying the consumers and advertisers failed to back up their antitrust theory based on the same alleged “copy, acquire, kill” strategy that’s at the center of the FTC case.

The company’s acquisitions of Instagram and WhatsApp were too long ago, and the consolidated suits are short on details about what, if anything, Facebook did more recently with the data it deceptively harvested from users, the judge said. Those claims can be refiled, she added.

Quinn Emanuel Urquhart & Sullivan LLP and Hagens Berman Sobol Shapiro LLP are interim co-lead counsel for the consumers, who are also represented by Lockridge Grindal Nauen PLLP.

Bathaee Dunne LLP and Scott & Scott LLP are interim co-lead counsel for the advertisers, which are also represented by Ahdoot & Wolfson PC and Levin Sedran & Berman LLP.

Facebook is represented by Wilmer Cutler Pickering Hale & Dorr LLP.

The case is Klein v. Facebook Inc., N.D. Cal., No. 20-cv-8570, 1/14/22.

(Corrects name of law firm in 13th paragraph of Jan. 18 story.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription.