A coalition of 40 different U.S. states — spearheaded by New York Attorney General Letitia James — have plans to file an antitrust suit against Facebook in the coming week, sources told Reuters on Wednesday.
Reuters’s sources wouldn’t name any of the other states involved in the impending case, and much about the scope of the potential lawsuit remains unknown. What’s clear is that will be part of an emerging pattern of enforcement against Facebook from all sides. Aside from the state-led suit, the FTC’s the agency is “moving closer” to potentially filing its own antitrust suit against the company, sources told the New York Times back in Octover. It would be the next step in the FTC’s sprawling investigation of the company, which this past summer brought in CEO Mark Zuckerberg to testify about his company’s practices alongside those of his fellow antitrust-y company peers. On top of that, the DOJ is reportedly spearheading its own antitrust probe into the company, alongside an ongoing investigation from members of the House Judiciary Subcommittee on Antitrust.
Back in September of last year, New York Attorney General Letitia James announced the start of a multistate probe into Facebook that involved the state AGs from Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee, and DC. A month later, The Washington Post reported that 46 attorneys general from across the country had joined the probe — all of whom, as James said in a statement at the time, are “concerned that Facebook may have put consumer data at risk, reduced the quality of consumers’ choices, and increased the price of advertising.” Right now, it’s unclear whether the allegedly impending suit is related to this particular investigation.
There are a number of avenues this impending lawsuit alleged in Reuters might take, with the advertising front being the one most likely to hurt the tech giant. From Facebook’s own account, close to 99% of its multi-billion dollar cash flow comes advertisers clamoring to get their product seen across one of Facebook’s properties. Advertisers do this because they know Facebook, is, to some degree, inescapable. In its earnings call from this past quarter, the company reported over 1.8 billion users logging onto its platforms per day. Just like its fellow ad giant Google, Facebook has the appeal of reaching a seemingly infinite stream of eyeballs — and all for a relatively decent price — which makes it nearly impossible for advertisers to leave, even if they might want to.
Overtime, this means Facebook’s put itself in a prime position to take a bigger and bigger slice of the incredibly lucrative digital ad market. It’s likely that those profits are going to keep pouring in — this week analysts from the media investment company GroupM estimated that this was the first year where more than half of every ad budget will be spent on a digital medium, rather than say, on TV, in a newspaper or magazine, or on a physical billboard. And those that are spending money on digital are typically spending money on Facebook: GroupM reported that Facebook is primed to rake in close to a quarter — 23% — of the roughly 110.1 billion dollars spent on digital ads this year. To put that into context, only Google (29.8%) and Amazon (10.2%) even come close to being anything that Facebook could remotely call a “competitor” — the fourth biggest ad earner, Microsoft, didn’t even scrape 4%.
The few competitors that Facebook actually has right now — like TikTok and Snapchat — hold their own no only because of their frankly bonkers popularity, but because they have some kind of ad software that advertisers know delivers results they can’t get anywhere else. Even still, both pale in comparison to Facebook in terms of revenue, users, and resources on hand.
Another avenue of attack that’s been hinted at so far in other proceedings has been nailing Facebook for its habit of acquiring or undermining smaller companies that could potentially grow into legitimate competitors. We won’t know how these states might proceed until their lawsuit becomes public.
We’ve reached out to Facebook and the office of Leticia James for comment on this alleged lawsuit and will update if we hear back.