The trial for the Federal Trade Commission’s (FTC) case against Meta concluded last month. During the six-week-long antitrust trial before Judge Boasberg in the District Court for the District of Columbia, the FTC’s arguments centered on Meta’s alleged monopoly. As we have noted before, the agency’s case contained significant factual errors and lacked a legal leg to stand on. However, the case’s biggest flaw is the FTC’s market definition of “personal social networking services.”
Defining a “relevant market” sets parameters to determine if conduct is anticompetitive or not. Enforcers use this evaluation to weigh the competitive dynamics of a market against the effects of an alleged anticompetitive behavior. Traditionally, when defining a relevant market, agencies look to an “area of effective competition,” comprising two prongs: a product market and a geographic market. Defining a product market identifies substitutes for the specific product under scrutiny, whereas a geographic market measures how far customers would go to access the product. Using these parameters, enforcers can examine aspects such as market share, market power, and concentration levels as part of their evaluation to determine the presence of potential anticompetitive behavior.
Careful consideration of a market definition is essential. To determine monopolist behavior, objective, fact-based analyses of competitive dynamics are needed to determine whether an enforcement agency should intervene. An incorrect market definition risks distorting market realities or potentially chilling a dynamic and competitive market. This is where the FTC’s biggest error in its case lies.
Based on this inaccurate market definition, the FTC’s market share arguments against Meta are both narrow and distorted. By attempting to characterize the company only as a “personal social networking service,” the FTC argues that friends and family sharing is a key component of Meta’s applications, while other social media platforms are based on different types of sharing. Looking at the businesses that Meta’s applications compete with reveals a different picture. For instance, Meta competes with several services, including Reddit, TikTok, and Twitter, that the FTC excluded from its market definition, and industry reports indicate that Meta’s market share in the social media market is below 60 percent in the U.S.
In sum, the FTC’s arguments appear to be self-serving – carving Meta into an ambiguous market definition while ignoring that many other companies compete for user time and advertising revenue. In addition, no evidence of monopolist behavior was offered to the court, such as high barriers to entry, raised prices, restricted output, or degraded quality.
Unfortunately, this is not the only instance where the FTC has attempted to manufacture a market definition to bolster its monopoly claims. In the agency’s case against Amazon, the FTC argued for an “online superstore” market definition, which allegedly separates Amazon shoppers from most other online retailers or larger brick-and-mortar stores. As is the case here, the FTC’s reliance on this narrow market definition misconstrues a significantly more complex market reality, instead attempting to gerrymander a definition that purposely excludes key competitors.
The FTC’s artificially narrow market definition and the agency’s insistence on basing its theories of harm on unsubstantiated economic analyses should be met with judicial skepticism. It is important that the court set a clear precedent that strikes down artificial market definitions. This will ensure that longstanding legal principles surrounding anticompetitive behavior are accurately litigated to achieve an outcome that protects competition, rather than simply punishing companies because they are successful.