Meta Wins in Antitrust & Texas Loses in Redistricting

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1:54for any business. That's genius.

2:00June Grasso:This is Bloomberg Law with June Grosso from Bloomberg Radio. It's a massive blow to the federal government that's been trying to break up meta for the last five years. The tech giant has won a key ruling that its acquisitions of Instagram and WhatsApp didn't violate U.S. antitrust law. D.C. federal judge James Boesberg said the Federal Trade Commission had to show that Meta continues to hold monopoly power in social networking now, and that it had failed to do so. My guest is antitrust expert Harry First, a professor at NYU Law School. Harry, how big a blow is this to the FTC? Well, it's a blow, all right.

2:49June Grasso:So this is the first big loss in these high-tech platform cases. So two of them have now come to a conclusion of the trial, both against Google, both successful for the Justice Department. Remedy, another story maybe. So this is the third. There are five total, and it's the first loss. It's sort of not a surprising loss because this judge has been skeptical of this case, clearly from the very beginning. He had dismissed it originally. So he's been very skeptical and he's said it in his opinions. So this case has not been well received by the judiciary, shall we say. So it's not surprising. The opinion itself is a little surprising, but the result is not so surprising.

3:36Why do you say the opinion is surprising.

3:39June Grasso:So in two ways. First of all, he's taken a very novel approach to time, in the opinion. So he says that the proof has to be as of the time I make my decision almost. I mean, this is an impossible standard. He said maybe they were a monopoly. Maybe this was a properly defined product market in 2020 when the suit was filed, you know, but as time has gone by, it's not that much time. By now, it's not. And the question is not whether it was then, but whether it is now. I mean, if you take that literally, that's a completely moving standard. You could never try a case because your evidence is always outdated.

4:23June Grasso:I mean, it's always about the past. You can't try a case about the future. So that's a departure. He's got some legal reasoning for why he does that, but that's a serious problem, and I think it's a serious antitrust problem. So there is that part of it. The second part is this judge is very confident of his opinion. So normally a district court judge, he's got seven things to decide in front of him, and they proceed logically. Well, if you go for this, you know, then you're done. But if you go for this and it's okay, you go to number two, three, four, five. So he has a long trial, but he only decides the first issue.

5:02June Grasso:Now, normally a judge would say, okay, here's what I decide. This isn't a market. The market has to include such and such. They don't really have monopoly power. Okay. But if I'm wrong, here are the facts that I found about the conduct. And the conduct wasn't any competitive. So even if you had monopoly power, this was not exclusionary conduct. It wasn't any competitive. And so you go through all the things, because if a court of appeals disagrees with you, now what? You've got to retry the whole case? So this is a judge who thinks no one's going to disagree with me, man. And maybe, maybe part of it is because the narrative of the case is at least potentially stronger than the market definition.

5:47June Grasso:And so that's when, you know, all the emails about how Mark Zuckerberg's theory was to buy them or, you know, bury them. And, you know, what he tried to do with with competitors and why he paid so much for Instagram and for WhatsApp. WhatsApp drops out of this case like right away. I don't know, third word or something. He says at some point, we're done with them. We don't have to talk about them anymore because we don't get to them. that's not involved in the market definition. So that's pretty unusual, I think. And it's either hubris or confidence. I don't know which. But he does not do what I think most district court judges would do, which is decide the full case.

6:31I thought the focus would be on the market when Meta bought Instagram and WhatsApp, and whether it was anti-competitive conduct, when it's alleged that Meta couldn't compete with these two apps, and Zuckerberg said it's better to buy than compete?

6:50June Grasso:Well, what he tried to say was, well, we've got to do it as of now, in part because of the FTC's remedy powers. They're asking for an injunction, and they can only stop conduct that is illegal now. So I've got to decide what's illegal now. Now, he could have very well said, that's a remedy question. We'll decide that when we get to remedy, whether it's a continuing violation or not, we should look at whether there was a violation then. So, for example, if this were a suit for damages, you wouldn't say, well, we have to see whether there's a violation today. You would say, let's see whether there was a violation at the time that the offense was committed and what damages were caused.

7:35June Grasso:So those two things are separate. So it's really quite odd. And you're right. The argument that the commission makes is that we look at what they did and why they did it, that this was an effort to maintain their monopoly, these two acquisitions for which they wildly overpaid. Why were they paying$19 billion for a company that didn't have any revenue? That was WhatsApp. And the answer was they didn't want them to develop into competing social network platforms. So, you know, now that part also had problems. It had issues. You know, the Federal Trade Commission and its earlier guys let those acquisitions go through.

8:17June Grasso:So there were issues with it. But so in that sense, that's a really strange aspect. Did the judge come to this decision because of the way he defined the market and the fact that he put YouTube and TikTok in the market? Yeah, so the first question, you have to show that a defendant has monopoly power in a relevant market. So he says, okay, we have to start with market definition. So that's true. That's the way it's normally done. And then he says, okay, yes, let's look at the market. And what we have to do, he basically puts in, you know, he says these platforms have converged. These are all sort of similar.

9:00June Grasso:And particularly TikTok, you know, was posing a competitive threat. He says people don't want to talk to their friends anymore. They just want unconnected videos. So, you know, here's TikTok comes along. They're posing some threat and Facebook responds with reels, short videos. And so that has now changed how we define the market because users switch back and forth between the two. And we have to include TikTok and we have to include YouTube where users switch to those videos. Later, sort of at the end of the opinion, he says, well, the argument for YouTube actually is a little thinner. But even if it's just TikTok, that's enough.

9:43June Grasso:We would include that in however we define the market, whatever we want to call it doesn't really give it a name. And at that point, if we include TikTok, then there's no monopoly power. meta or Facebook does not have monopoly power, that TikTok takes away too much time. All those kids are frittering where their time on TikTok instead of frittering where their time on Facebook. They had various evidence of, you know, the willingness to switch and that people switch between those two. Normally for looking at substitutes, you say, so if the seller raised its price, what would people switch to? Well, the thing is, Facebook doesn't have a price in that sense.

10:30June Grasso:What it has is ads. I don't know if you've looked at your Facebook feed recently. I'm not on Facebook. I will confess. I got you on that one. Yeah, well, there are a lot of ads on Facebook. And so, you know, that's sort of the price. But the judge didn't seem to think that people minded those ads so much. They're nice ads. They don't really interfere so much. So not so bad. And people were switching, particularly, I think younger people were switching over to TikTok to, you know, for whatever you get in TikTok. Now, what you don't get in TikTok particularly are friends, groups of friends. And that's what the government sort of honed in on.

11:14June Grasso:It's a social network. It's put together by who your friends are. And what Boesberg observes is that at least some users don't really care so much about their friends. They want to be put together more by interests. You know, I like, I don't know, Japanese cooking. So I get lots of videos about Japanese cooking. You know, I don't know the Japanese cooks and they're not my friends, but that's what I like to look at. Or I like recipes, you know, that are easy to make or crazy to look at, whatever TikTok has. So people have switched to that and away from Facebook. Now, the odd thing in some ways is if so many people are switching, how come so many people are still on Facebook?

12:03He gives 230

12:05June Grasso:million U.S. users, I think is the number, and ad revenues of$161 billion. So when you read his description, it sounds like this is a company that is just in the throes of death from TikTok. And then he says, this is an amazingly successful product. Give people a compelling product for free, then sell ads that can be seen by millions. I guess he thinks those are good. 240 million active users in the United States. That's a lot of people. So apparently, they haven't been dissuaded by TikTok, which is also free. And, you know, they don't give all their time there. They're still on Facebook. So the argument, presumably, from the government is that by incorporating reels, they've managed to defend their core business.

13:00June Grasso:And their core business is social network, putting people together. And they still get a lot of people who like that product, even though some people also use different products. Coming up next, I'll continue this conversation with Professor Harry First of NYU Law School. Will the government appeal the decision? I'm June Grosso, and you're listening to Bloomberg. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions.

13:43Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. or if my cash balance goes above$20 ,000, move the excess into my direct index.

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15:39Make every journey more rewarding with a$300 annual travel credit and access to a network of airport lounges. whether you're looking for pre-flight productivity or time to rest and recharge. Chase Sapphire Reserve for Business. It's the card that gives back all you put in. Learn more at chase.com forward slash reserve business. Chase for Business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank N.A., member FDIC. Meta prevailed over an existential challenge to its business that could have forced the tech giant to spin off Instagram and WhatsApp.

16:19In a loss for the FTC, a judge ruled that the company doesn't hold a monopoly in social networking. I've been talking to NYU Law School Professor Harry First. Harry, here's what an FTC spokesperson said about the loss to Meta. We're deeply disappointed in this decision, but the deck was always stacked against us because of the judge. Boesberg has ruled against the Trump administration in some high-profile cases this year, and he's also been frequently criticized by the president and the attorney general. This just continues the Justice Department's attacks on judges. I hadn't read that, and you sort of wish that they hadn't done that.

17:01June Grasso:Yes, Judge Boesberg did stand up to the Trump administration, and Trump singled him out as, I forget what description. Crazy lunatic something? lunatic judge. So now I don't know which way it even goes, particularly given the fact that there was a report of Mark Zuckerberg meeting with Trump in the Oval Office to settle this case. And Trump was dissuaded, apparently from settlement by the efforts, not so much of the chair of the Federal Trade Commission, but by the head of the Justice Department Antitrust division, Gail Slater. So maybe the FTC should have settled it then. Maybe they would have done better.

17:43June Grasso:But it's just, first of all, it's in some ways so wrong because Bozberg took this position way before the immigration cases came up. From the beginning, when he dismissed the complaint, the original complaint, and let them refile it, he's been critical of this case. So to see this as a connection of, you know, some crazed judge who, what, is just against the government? I mean, it's just wrong. I wish they'd stick to the problem that they've got, which is that this is bad law for the FTC and for any trust enforcement. And, you know, now we're going to see what they're going to do about it. Are they going to appeal this decision or not?

18:27Yeah, so that was my next question. I mean, it sounds like they should appeal because of the timeline that he's defining markets on. But might they not? I mean, Zuckerberg has been courting Trump for quite some time. It's hard to assess the political wins because conservatives had been upset with Facebook,

18:48June Grasso:thinking that their algorithm has, you know, discriminated against them. I sent an email to my niece last night who uses Facebook all the time. And she says she thinks they don't post any of her left-leaning posts. They don't seem to get moved up into the feed, but the calm ones do. I don't know. I like that you're doing research at night. That's research. That's my empirical research. Fair enough. Although Zuckerberg seems to have tried to turn that around by weakening hate speech policies and eliminating fact checking. My view of Mark Zuckerberg, he hasn't turned at all, is that he just turns whichever way the politics are.

19:33June Grasso:So now it's this way, and that's fine with him too, as long as he keeps, you know, they're apparently the third largest digital advertiser after Google and Amazon. So they're doing really, really well, despite Bozberg's feeling that nobody wants to talk to their friends. Apparently, a lot of people still do. And they read those ads and click on them. If this were an administration that just based its decisions on the law, would they appeal to try to get this ruling that the government has to show monopoly power now reversed? Or because of Zuckerberg's attempts to court Trump, do you think they might not appeal?

20:16June Grasso:Who knows exactly which wins? And the wins may go the other way because, you know, a populist wing of the party feels that these platforms have too much power and need to be cut down. So who knows exactly. But if you look straight at the legal issues, usually appeals from adverse decisions of trial courts are hard to win on appeal because they're mostly fact based. So you have to look look for legal issues. And there's a, you know, an important legal issue of, you know, whether he applied the correct standard for defining the market and for assessing when a violation occurred. And that one's sort of a very pointed legal issue.

21:03June Grasso:How it will fare in the court of appeals if they do take it, I don't know. And does this decision have any implications for the other antitrust cases against tech platforms? Yeah, that's a good question. Perhaps. I'm thinking of Amazon, for example. And these are platform cases. And platform strategy is you have a core product. And what you want to do is to keep people on the platform and engaged because of the strength of the core product. And you defend the core product by acquiring things around the periphery that might challenge it or by doing things. You know, these companies are always subject to some competitive forces, even if they're monopolists.

21:47June Grasso:So certainly Facebook was. TikTok did pose a competitive threat. And Amazon similarly has competitive threats to which they respond. But the basic strategy is pretty similar. And the market definition in some ways is similar because they offer a bunch of different products in the same place, much as supermarkets do, like Whole Foods, for example. So you have a sort of core product and then other things that they offer that other firms may compete on. I mean, look at your smartphone. So 35 millimeter cameras compete on cameras, but are they in the same market? No. So you could say this is quite similar.

22:36June Grasso:Yes, TikTok competes. I'm surprised Twitter is not mentioned. Twitter competes you know, to some extent. But these are all to some extent, and it's still meta defending its core product in which it has a lot of power, as all advertisers know. Always a pleasure. Thanks so much, Harry. That's Professor Harry First of NYU Law School. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf.

23:19Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the risk. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

23:58Paid for by Public Investing. Brokered services by Open to the Public Investing,

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