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Facebook Sued by Advertisers Over Social Media Monopoly Claims

Dec. 21, 2020, 8:22 PM

Facebook Inc. was hit with new monopolization allegations in California federal court, as a group of advertisers joined the Federal Trade Commission, nearly every state, and individual social media users in claiming the tech giant has exploited its data troves to identify and gobble up startups that threaten its dominance.

“Facebook intentionally and unlawfully monopolized the social advertising market; charged supracompetitive prices to plaintiffs and other Facebook advertisers; lied about it to plaintiffs, developers, regulators, the press, and the public; and reaped billions of dollars in inflated social advertising revenues,” the new complaint says.

The lawsuit, filed Dec. 18 in the U.S. District Court for the Northern District of California, came nine days after the FTC and a coalition of states brought separate cases seeking the breakup of Mark Zuckerberg’s empire, which includes Instagram, Facebook Messenger, WhatsApp, and Oculus, in addition to the flagship platform.

The proposed class action also follows about two weeks after the first in a wave of similar suits by individual Facebook users. The company was also drawn into Google’s parallel antitrust drama Dec. 16, when a group of 10 states led by Texas alleged an illegal scheme involving both of them to rig online advertising auctions.

The suits against Facebook accuse it of deceiving users about its data practices and using the information it harvests to “acquire, kill, or clone” emerging threats. The government and consumer cases largely concern the harm to social media users who are left without viable alternatives offering less invasive privacy policies.

Although the new suit repeats those claims, it also focuses on wide-ranging harms to advertisers who will allegedly face exploitative overcharges as long as Facebook is the only “targeted social advertising” game around.

The company has “used this market power to repeatedly raise advertising prices every year since it began its scheme,” the complaint says.

Cause of Action: Section 2 of the Sherman Act.

Relief: Treble damages, an injunction, costs, fees, and interest.

Potential Class Size: Thousands of people, companies, and organizations nationwide that have advertised on Facebook since October 2012.

Response: A Facebook spokesperson didn’t immediately respond to a request for comment Monday.

Attorneys: The advertisers are represented by Bathaee Dunn LLP and Scott & Scott Attorneys at Law LLP.

The case is Affilious v. Facebook Inc., N.D. Cal., No. 20-cv-9217, complaint filed 12/18/20.

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