Federal Trade Commission fails to convince judge that Meta monopolizes social media

During her tenure as Federal Trade Commission (FTC) chair, Lina Khan famously said that competition authorities should be less afraid to prosecute cases rather than settle them, even if it meant taking losses. Presumably, such strong signals from the FTC and Department of Justice (DOJ) would allow the agencies to play a long game, chipping away at court precedents and demonstrating that a new, more aggressive antitrust regime was here to stay. 

But the FTC’s loss this week in its monopolization case against Meta is an unequivocal defeat for Khan and the Neo-Brandeisian antitrust movement she began, signaling instead that antitrust authorities have little basis for finding illegal monopolies among big tech’s digital platforms.

Filed under Khan’s watch under President Joe Biden in 2021 and brought to trial this year under President Donald Trump and current FTC Chairman Andrew Ferguson, the FTC alleged that Meta monopolized the market for “personalized social networking” (PSN) services, most notably through its acquisitions of Instagram and WhatsApp. In a Nov. 18 decision, Judge James Boasberg of the D.C. district court ruled that the relevant market in the case is not PSN services but a wider social media market that, at the very least, includes two other major players: YouTube and TikTok. Meta never held a monopoly in that market, Boasberg determined, because Facebook and Instagram together fall well below any threshold that courts would consider a monopoly.

An irrelevant market

According to the FTC, Facebook viewed Instagram as a competitive threat to its dominant share of the PSN market, and instead of competing, chose to buy its competitor. WhatsApp, while not an existing competitor in the PSN services market, was, according to the FTC, well-poised to enter it. Once again, Meta bought a potential competitor.

The market that the FTC chose to define as relevant for the case proved to be its undoing. The PSN services market, according to the FTC, includes Facebook, Instagram, Snapchat, and a smaller platform called MeWe. Even when the case was filed almost five years ago, the boundaries of this market were fragile. Meta argued that the FTC’s case failed to survive a wider market definition that also included YouTube and TikTok. In this larger six-firm market, Meta’s acquisition of Instagram (or potential competitor WhatsApp) would simply not involve enough market share for the monopolization allegations to hold water.

Staking an entire antitrust case on the assertion that YouTube and TikTok are not competitors of Facebook and Instagram was always, at best, a highly risky move by the FTC. In 2021, when the court decided to allow the case to proceed, it warned, “[T]he agency may well face a tall task down the road in proving its allegations.” But if the FTC’s vision of a distinct PSN services market was dubious in 2021, by 2025 it was dead on arrival.

Facebook and Instagram provide users with two broad types of content: “Connected content” refers to personal postings or media shared directly by friends within the app, while “unconnected content” refers to videos that are recommended to users by artificial intelligence (AI). As Boasberg makes clear in his ruling, Facebook and Instagram shifted over the course of a decade from providing almost exclusively connected content to providing mostly unconnected content, with connected content forming an important secondary source of value. According to evidence presented at trial, in January 2025, Facebook users spent only 17 percent of their time on the app viewing connected content, while the figure for Instagram is a mere 7 percent.

Inconveniently for the FTC, TikTok and YouTube are even more focused on the unconnected content model that now also tops the list for Facebook and Instagram. Boasberg writes that, “Facebook, Instagram, TikTok, and YouTube have thus evolved to have nearly identical main features. On all four, users spend most of their time watching videos. All four use algorithms to recommend those videos to users. And if someone finds content that she likes, all four apps let her tap a button to send it to friends—whether via a direct message on Facebook, Instagram, or TikTok, or using a text message.”

Importantly, the court held throughout the case that the FTC must show that Meta is violating the law now, and that the PSN market is properly defined as of 2025. Ten years ago, the case for Meta’s platforms existing in a distinct personalized social networking services market, excluding YouTube and TikTok, might have been plausible. Now, it causes the case to fall apart. The mere fact that users on all four platforms spend the majority of their time doing the same thing goes most of the way to placing them as competitors in a relevant market. Unfortunately for the FTC, its idea of a distinct PSN market fares just as badly by virtually all other standards accepted by courts.

Among the most compelling evidence for vigorous competition between the four platforms comes from the “natural and field experiments” that were presented at trial and summarized in the judge’s decision.  Unexpected outages of YouTube and Meta in 2018 and 2021, respectively, provide windows into short-term substitutions consumers made with their time, while TikTok bans in the United States and India provide an opportunity to track similar longer-term behavior. These are the types of studies economists outside of court would look to when considering the competitive landscape, and they confirm the existence of vigorous competition among the four platforms. Boasberg writes, “[W]hen consumers cannot use Facebook and Instagram, they turn first to TikTok and YouTube. When they cannot use TikTok or YouTube, they turn to Facebook and Instagram. That evidence leaves the Court with no doubt that TikTok and YouTube compete with Meta’s apps.”

Had the FTC been able to rescue the idea of a distinct social networking market, it would have faced several other obstacles, most notably whether consumers were actually harmed by Meta’s acquisitions of Instagram and WhatsApp. But in the wider and more accurately defined social media market, Meta’s combined share (including Facebook and Instagram) doesn’t come close to any threshold considered monopoly power in previous court cases.

Expect the unexpected

In the wake of its defeat, the FTC should carefully consider the story of how Facebook and Instagram came to be competitors with YouTube and TikTok. At the heart of that story are two sets of disruptive innovations that expanded the frontier of what social media apps were able to provide consumers. The first big change was smartphones. In 2011, according to trial evidence, just over one-third of American consumers had adopted smartphones. The majority of the time consumers spent on apps like Facebook was in front of a desktop or laptop screen. As the quality of cellular data networks increased, consumers switched to using Facebook and Instagram as smartphone apps, and it became clear that streaming videos were among the most popular uses.

At the time, the best way to recommend new content to consumers remained their network of friends. Then, social media companies discovered AI. The same technology that enables generative AI chatbots, drawing inferences from billions of points of data, proved extraordinarily successful at recommending video content to consumers.

Despite these disruptive events, the FTC clung to a rigid and out-of-date market definition that drew a hard line between social networking and video content. By 2021, when it filed suit, it should have already been clear that these markets were being remade. Much of the switch to smartphones, along with improvements in video streaming, had already taken place. In the five years since, the AI revolution dealt a final blow to the idea of a distinct social networking market. Meta, along with the parent companies of YouTube and TikTok, quickly learned that the computing power unlocked by AI could recommend content more successfully than any other method, including a user’s own friends. Sharing content with friends ultimately became a complementary feature to viewing content recommended by AI.

FTC v. Meta is the second antitrust case against a major digital platform that ended this year, in which AI technology radically altered the competitive landscape while the trial was underway. In DOJ v. Google, Judge Amit Mehta found in 2024 that Google had unlawfully monopolized the market for online search. But a year later, generative AI had emerged as a force altering how people access online information in ways that even insiders at Google and its competitors did not foresee the previous year. Judge Mehta noted the need for “a healthy dose of humility” under such uncertainty, which contributed to the final remedies against Google being lighter than many had expected.

Reflecting on the rapid pace of change in FTC v. Meta, Judge Boasberg opened his decision with wisdom from the ancients:

“Believing that the only constant in the world was change, the Greek philosopher Heraclitus posited that no man can ever step into the same river twice. In the online world of social media, the current runs fast, too. The landscape that existed only five years ago when the Federal Trade Commission brought this antitrust suit has changed markedly. While it once might have made sense to partition apps into separate markets of social networking and social media, that wall has since broken down.”

Before plotting future antitrust action against firms in the digital age, the FTC and its counterparts at the DOJ would be wise to ponder the meaning of the word “constant.” Nobody could have predicted exactly how social media would change during the last decade. But the fact that unforeseen change was significant enough to remake a digital market in a few short years should surprise nobody. In its zeal to punish Big Tech and infuse antitrust with populism and activism, the FTC rigidly stuck to a market definition that became more obsolete with every year.

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Source: https://reason.org/commentary/federal-trade-commission-fails-to-convince-judge-that-meta-monopolizes-social-media/