Facebook
FB
shares hit a 52-week high of $358.12 on Jun 28, after the U.S. District Judge James Boasberg
dismissed an antitrust lawsuit
filed by the Federal Trade Commission (FTC) and a separate antitrust lawsuit filed by a coalition of states, per a Bloomberg report.
Facebook shares closed at $355.64 on Jun 28, up 4.2% on the day.
Markedly, both lawsuits alleged that the social networking giant has monopolized the “Personal Social Networking Services” through acquisitions of Instagram and WhatsApp. Moreover, the company adopted “policies that prevent interoperability between Facebook and certain other apps that it saw as threats,” thereby reducing competition.
Both the FTC and the states had sought to break Facebook through divestitures or reconstruction of its businesses.
However, the judge found the FTC’s claim “legally insufficient” as
the agency failed to provide enough facts
to prove that Facebook enjoys a monopoly status in the “Personal Social Networking Services” market. Judge Boasberg pointed out the FTC’s inability to provide any metric or method it used to calculate Facebook’s more than 60% market share.
Further, in the antitrust lawsuit filed by the coalition of states, the judge noted that the states were too late to challenge the Instagram and WhatsApp acquisitions. Markedly, Facebook acquired Instagram in 2012 and WhatsApp in 2014, while the complaint by the states were filed late 2020.
Moreover, regarding Facebook’s policy of preventing interoperability with other competing apps, the judge stated that there can be no claim under the current antitrust law, “as there is nothing unlawful about having such a policy.”
Markedly, the FTC lawsuit was dismissed with prejudice, which means the agency can file an amended complaint within the coming 30 days. However, the states’ lawsuit was dismissed totally.
Undoubtedly, the dismissal of the lawsuits against Facebook hurt efforts of the lawmakers to regulate big tech companies, including the likes of
Apple
AAPL
,
Amazon
AMZN
and
Alphabet
GOOGL
.
Notably, the Department of Justice (DoJ) filed its antitrust lawsuit against Google on Oct 20, suggesting that the company is unlawfully maintaining monopolies in the markets for general search services, search advertising and general search text advertising in the United States.
Moreover, in late December last year, Texas filed an antitrust lawsuit against Google for colluding with Facebook in an illegal deal to manipulate auctions for online advertising. Markedly, the two players entered into a deal in 2018 to start giving Facebook’s advertiser clients the option to place ads within Google’s network of publishing partners.
Strong Ad Revenues to Aid Facebook’s Prospects
The dismissal of the lawsuits pushed Facebook’s market share past the $1-trillion milestone, thereby joining Apple, Amazon, Alphabet and Microsoft. Markedly, shares have returned 24.9% year to date, underperforming the Zacks
Internet Services
industry.
The dismissal of the lawsuits surely reduces headwinds for Facebook. Moreover, the company continues to witness significant traction in online and mobile advertising spending.
Online video is the most lucrative component of digital advertising. As video ads generate more revenues than its photo and text-based counterparts, Facebook is trying to incorporate more and more video-oriented content to bring in more ad dollars.
Facebook expects advertising revenues to grow in the rest of 2021. For the second quarter of 2021, it expects year-over-year revenue growth to remain stable or modestly accelerate compared with the growth rate in the first quarter of 2021.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $27.89 billion, indicating 49.3% growth from the figure reported in the year-ago quarter.
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