by Foday Turay
A monopoly is the sole supplier of goods and services, with little to no competition or price regulations. Due to a lack of competition, monopolies have significant leverage against others in the market and consumers. As a result, the U.S. Federal Trade Commission (FTC) protects against illicit and unfair business practices that allow monopolies to exploit their market.
One of the foremost responsibilities of the FTC is to prevent corporations from becoming monopolies. In December 2020, the FTC filed an antitrust complaint against Facebook, accusing them of becoming a social media monopoly. This post will discuss the legal, economic, and business components of U.S. District Judge James E. Boasber’s latest ruling that allows the FTC’s antitrust lawsuit to proceed.
Judge Boasber’s Ruling
Judge James Boasberg of the U.S. District Court of the District of Columbia made the right decision in allowing the FTC more time to amend its antitrust complaint against Facebook. The FTC’s complaint arose when Facebook purchased its competition, such as WhatsApp and Instagram. Facebook’s accumulation of start-ups and competitors has made the company significantly more powerful, leaving it with little to no competition. Judge Boasberg’s decision is a positive step toward regulation of anti-competitive business practices. If left unregulated, monopolized companies like Facebook can hinder consumers, business, and the economy.
Legal Components
Antitrust laws are statutes created by Congress to protect consumers from unfair business practices. For example, section 2 of the Sherman Act makes it unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states or with a foreign nation.” Therefore section 2 of the statute establishes three offenses, (1) monopolization, (2) attempted monopolization, and (3) conspiracy to monopolize. The FTC’s 2020 antitrust complaint accuses Facebook of violating the law by purchasing various social media companies to lessen its competition.
Economic Components
The primary purpose of antitrust law is to promote a market-based economy. A market-based economy relies on supply and demand to determine the appropriate prices and quantities for goods and services. Competition is imperative for a market-based economy to succeed as it promotes innovation, lowers consumer prices, and incentivizes companies to improve the quality of their goods and services. A lack of competition in a market-based economy suppresses innovation, gauges prices, and decreases the quality of goods and services. Antitrust laws preserve the competitive nature of the economy, thereby incentivizing healthy economic growth.
If left unregulated, monopolized companies like Facebook may hinder innovative start-up companies from succeeding in their market. Unregulated monopolies can leverage their significant resources to control consumers’ exposure to new companies, impeding possible profits. Judge Boasberg’s decision to extend the FTC’s complaint is critical in protecting consumers’ access to innovative social platforms. Facebook’s current business practices deny consumers any alternatives. By purchasing its competitors and utilizing its leverage, Facebook denies consumers access to different social media with potentially better ideas and implementations.
Facebook’s unfair business practices make it harder for other social media companies to compete, thus keeping those companies out of the market completely. By blocking various social media companies from the market, Facebook has easily become a monopoly and has even more leverage over the social media industry than before. Without an alternative for consumers, Facebook can impose harmful conditions and unfair prices while it reduces innovation.
Business Components
Prohibiting monopolies not only encourages market competition but also helps businesses to grow. Companies are encouraged to develop new ideas, resulting in better productivity and output. For example, Uber completely revolutionized the traditional taxi industry in only a few years, reducing consumer costs and generating billions of dollars in profit. Without a monopoly in the taxi industry, Uber’s inventive ideas were allowed to succeed and positively affect consumers.
Conclusion
Competition is an essential tool for a market-based economy. Thus, the Sherman Act has long stood to preserve competition and encourage low prices, high-quality goods and services, and business growth. Monopolization removes the benefits of market competition and therefore goes against the interest of consumers and businesses alike.
Judge Boasberg’s decision to allow the FTC’s claim against Facebook to proceed takes steps in the right direction. It helps to preserve the purpose of the Sherman Act, maintaining a competitive market to generate positive impacts on the economy and businesses. Judge Boasberg made the right decision, and others should follow.
This post has been reproduced and updated with the author’s permission. It was originally authored on April 11, 2023 and can be found here.
Foday Turay, at the time of this post, is a recent graduate of Penn State Dickinson Law. He is an assistant district attorney in Philadelphia. Turay is a first-generation college and law student interested in Criminal, Business, and immigration law. He is also a Deferred Action for Childhood Arrivals recipient.
Sources:
https://www.documentcloud.org/documents/21177063-memorandum-opinion