Brief of J. Gregory Sidak and David J. Teece as Amici Curiae in Support of Facebook
This case is about whether Facebook violated the antitrust laws when it made changes to its social-network business as that business grew in the early 2010s. Before that time, Facebook allowed third-party developers to build applications for its platform with relatively few restrictions. But then, according to the complaint, Facebook realized that developers were building applications that undercut Facebook’s business, by creating applications that mimicked Facebook’s core features or that diverted users to rival social networks. So Facebook decided to restrict applications from accessing its platform to do those things. Plaintiffs say this is anticompetitive—that Facebook had to continue allowing others to build applications on its platform that would hurt Facebook’s business. That is wrong. Under Plaintiffs’ view, the antitrust laws would discourage the innovation essential to advancing consumer welfare. And the order that Plaintiffs seek is fundamentally unworkable.
First, Plaintiffs argue that Facebook should be required to deal with its rivals. But any rule forcing companies to do business with their rivals would substantially discourage innovation. Companies develop new products and services in the hope that they will reap economic benefits—benefits that could disappear if successful companies are required to share the benefits with their competitors. Less financial incentive to innovate means less innovation, which ultimately will harm consumers because they will be offered fewer products and services. Antitrust law is supposed to encourage innovation, not punish those companies that innovate.
Second, Plaintiffs argue that Facebook violated the Sherman Act because it changed its business model, by modifying what it allowed third-party applications to do on its platform. But companies are allowed to change their business models over time; something that once worked may no longer make sense as the products and the market change. A contrary rule would penalize companies that experiment in how they commercialize new products or services. Facebook’s experience bears this out. According to the complaint, it was only after Facebook created and opened its platform that it realized that allowing third-party developers to use its platform in certain ways ultimately would hurt Facebook’s business by diverting users away from Facebook. So Facebook changed its policies to prohibit developers from using the platform to build applications that replicated Facebook’s core features or to funnel Facebook data to rival platforms. If a company could be held liable for changing its products once it gains experience on how those products operate in the real world, that would substantially discourage innovation.
Third, Plaintiffs argue that even if each of Facebook’s practices was not anticompetitive, they somehow become anticompetitive in combination. The Supreme Court already has rejected that argument, explaining that if a company engages in two lawful business practices, the combination of the two practices does not become unlawful. And there is good reason for that rule. It is difficult enough for a business to assess whether a court is likely to find a new practice to be anticompetitive; it would be virtually impossible for the business to make that determination for every combination of new and existing practices. At the very least, that approach would substantially raise compliance costs and legal fees. The result, again, would be to deter experimentation and to harm consumers.
Finally, courts should proceed cautiously in deeming novel conduct anticompetitive, and should be particularly wary of imposing remedies that would require courts to micromanage companies’ business operations. Economists often have found that conduct that sometimes initially seems anticompetitive ultimately is pro-competitive, particularly when it comes to new technologies and services. Further, if a practice actually is anticompetitive, the market often can correct any abuses. So it is better for courts to take a cautious approach to deeming novel conduct anticompetitive and in imposing remedies. Besides, Plaintiffs’ proposed remedy would enmesh the judiciary in the technical details of Facebook’s dealings with a wide range of competitors, even though Facebook’s products will change, its competitors will shift, and its business needs will evolve. A district court should not become the central planner of Facebook’s business.
This Court should affirm the decision of the district court.