Suit Avoided

Yesterday a US federal judge dismissed two antitrust lawsuits against Facebook, brought by the Federal Trade Commission (FTC), claiming that it has a monopoly in social networking.

As long-standing Facebook investors, we were thrilled to hear the news. The stock rallied and hit an all-time high with a market capitalisation above $1 trillion.

The FTC's case was rubbish and the judge told them so. They alleged that Facebook has "monopoly power" which means the ability to raise prices above a competitive level. But what market are they actually in? Facebook says, correctly, that it's in the business of "connecting people with other people". So, its competitors include you going for a coffee and a chat with your mother. Or two people chatting about their kids on a walk.

What's more, Facebook can't jack up the price of "social" media because all of its sites are free to use, and supported by advertising. And don't even try to suggest that Facebook has a monopoly in online advertising, because they have lots of very powerful competitors there, especially Google.

What's really going on here? In truth, politicians don't like the fact that so many people use Facebook's platforms. They know the power that the platform has to shape public opinion, and they want those levers for themselves. Those in office want to ban those that they see as their political enemies. When an election outcome changes the ideology of the administration, the whole situation flips.

Lina Khan, who was just sworn in as the chair of the FTC two weeks ago is 32-years old and an ardent "progressive". This case will come back, in another wrapper.

Facebook gets lots of uphill but they have considerable power too. Billions of people around the world enjoy their services, and they are voters too. As usual, we will hold the stock and see how this all pans out.