This is Bloomberg Law with June Grossel 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 US anti trust law. DC Federal Judge James Bosberg 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 anti trust 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. 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, you know, both against Google, both successful for the Justice Department remedy another story maybe. So this is the third. They're 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 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.
What do you say? The opinion is surprising.
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 maybe they were monopoly, Maybe this was a properly defined product market in twenty twenty 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 You could never try a case because your evidence is always outdated. 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 anti trust 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 if you go for this, you know, then you're done. But if you go for this and it's okay, you go to this number two, three, four, five had a long trial, but he only decides the first issue. Now, normally a judge would say, Okay, here's what I decide. This isn't a market. 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, less than 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. 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.
I 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.
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 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 suit for damages, you wouldn't say, well, we have to see whether it'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. So those two things are 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 nineteen billion dollars for a company that have any revenue? That was what's app And the answer was they didn't want them to develop into a competing social network platforms. So you know now that that part also had problems that had issues. You know, the Federal Trade Commission and its earlier guys let those acquisitions go through, 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 and you have to show that that 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 these platforms have converged, these are all sort of similar, and particularly TikTok, you know,
was posing a competitive threat. Says, people don't want to talk to their friends anymore. They just want unconnected videos. So you know, here's TikTok comes along and they're posing some threat, and Facebook responds with reels and 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 or users switch to those videos later. The sort of at the end of the opinion says, well, the argument for YouTube actually is a little thinner. But even if it's just TikTok, that's enough. 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. Facebook does not have monopoly power. That
TikTok takes away too much time. All those kids are frittering where other time on TikTok instead of frittering where other time on Facebook. He had various evidence of, you know, the willingness to switch, and that people switched between those two normally for looking at substitutes. You say, so, if the celer rates its price, what would people switch to? Well, the thing is Facebook doesn't have a price.
In that sense.
What has his 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 didn'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. It's a social network. It's put together by who your friends are, and what Bosberg 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 I are 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. He gives two hundred and thirty million US users, I think is the number and ad revenues of one hundred and sixty
one billion dollars. 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. Yes, he thinks those are good. Two hundred and forty 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, 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 Jim Grosso and you're listening to Bloomberg. Meta prevailed over an existential challenge to its business that could have forced the tech giant to spin off Instagram and WhatsApp in a loss for the FTC A judge rule 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 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 departments attacks on judges.
I hadn't read that, and you sort of wish that they hadn't done that. Yes, Judge Bosberg did stand up to the Trump administration, and Trump singled him out as
I forget what description crazy 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 any Trust Division, Gail Slater. So maybe the FTC should have settled it,
then maybe it would have done better. But it's just, first of all, it's in some ways so wrong because Boseburg 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 craze 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?
Yeah, 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, 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 you know the calm ones do. I don't know.
I like what they're doing. Research at night.
That's research. That's my 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 so 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.
Who knows exactly which wins, and the wins may go the other way because 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 an appeal because they're mostly fact based, So you have to
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. 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. So 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 monopolis. 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 you know, sort of core product and then other things that they offer that other firms may
compete on. I mean, look at your smartphone, so thirty five millimeters cameras compete on cameras, but you know, are they in the same market. No, so you could say this is this is quite similar. You know, Yes, TikTok competes. I'm surprised Twitter's not mentioned. Twitter competes, you know, to some extent. But these are all to some extent, and it's still a 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. Texas kicked off the nationwide redistricting battle, but now, a federal court has blocked the state from using a redrawn congressional map that was engineered to give Republicans five additional House seats. The ruling is a blow to President Trump's efforts to preserve a slim Republican majority ahead of the twenty twenty six elections. Joining me is elections law expert Richard Befalt, a professor at Columbia Law School.
Rich So this was a.
Two to one decision. Will you explain why the judges decided that Texas couldn't use its new congressional plan.
In a nutshell of a court concluded that this was a racial gerry mander and not a partisan gerrymander. And as you know, the Supreme Court has said parts in jerrymanders are not unconstitutional, there's no basis for challenging them in federal court. But racial gerry manders can be unconstitutional and can be challenged in federal court. So the heart of the court's decision was that this was a racial gerry mander. And what have they based that on? The
court said what triggered this? Although we think of this as Trump demanding more Republican seats from the Texas congressional delegation. In the court's view, the Texas governor was initially reluctant to call the special Section to create the map until he got a letter from the Department of Justice in Washington that said several of the Texas districts were unconstantually
created on racial grounds. In particular, the Department of Justice focused on so called coalition districts, which are districts which are majority minority but not one particular minority group. And for a period of time in the Fifth Circuit, courts there had said that the Voting Rights Act could be interpreted to require the so called coalition district district which, let's say is is forty percent Black and thirty percent Hispanic. Neither one is a majority, but together they add.
Up to seventy percent. And so the Apartment.
Of Justice says, well, we see four districts in your current in your twenty twenty one map that looked like their coalition districts to us, and based on a recent decision in the Fifth Circuit, we think that makes them unconstitutional. So you got to fix it. You've got to redo those districts. So what the three judge panel in this case concluded is that that was what was driving the redistricting.
They looked at the statements of the governor, the governor Abbott, and of the leading members of the state legislature, and they also looked at the resulting map, and they pointed out that most of the changes in the redrawn districts went from being so called coalition districts, the districts which one race or another had a majority, and often an extremely narrow majority. They said there were three districts they were either Black or Hispanic, where the majority group had like fifteen.
Point two percent.
So they said the combination of the Department of Justice letter, the governor's statement calling the legislature decision, in statements by many of the leading members of legislature, and then the districts that were created. In their minds, this meant that race predominated the desire to create racial majority districts is what was driving this. It's through, the court said, and also clearly had partisan consequences in the nave and some
partisan motivation as well. But they said that the dominant motive that they found was race, and thatfore this made it a nonconstitutional racial gerry matter.
Even though we know that the reason that Greg Abbott called the special session was because President Donald Trump told him that he wanted to get, you know, extra seats in Texas.
I think what you would you could say is that to Barbary Shakespeare, their partner of Justice was hoist by its own petard. I think when this all began, it's now like four months later, it's amazing how much has gone in four or five months. When this all began, maybe people thought it was too blatant to say this
was all from partisan reasons. I mean, we've now been totally partisan and since June of this year in the redistricting, but maybe they thought it was just too blatant to say we're doing different partisan purposes.
So the Department of Justice trumped up this racial argument.
There was no argument actually that those coalition districts were unconstitutional. You could argue that there's no mandate that a state create them, and that's certainly true now, but there was no evidence that they were unconstitutionally drawn. Nonetheless, part of Justice having, I think, provided this kind of pretext for the state to go ahead and.
Do the partisan gerrymander.
But given that that was the stated reason, the court was able to say we think it's a racial gerrymander. They also made the point that the Democratic districts which were undone mostly fell into this category of coalition districts, and they pointed out there was one white majority Democratic district which was barely touched. So they do have some evidence suggesting that most of the focus of the legislature was on coalition districts and making them majority one race
or the other. But I think what you've got here is this irony that at least in June of this year, the governor and the Department of Justice thought it's too blatant to do it for purely partisan reasons, so we're going to give them an anti race discrimination motivation, and that, as I think, turned around to sort of bite them in the rear, at least for now.
And now the question is what will happen when this gets to the Supreme Court. Rich We've talked before about the case currently before the Supreme Court on the Louisiana maps.
Does that fit in anywhere here?
Well?
Here, I think what the court three judge paneled, really two judges.
There's a dissenter. The majority opinion is one hundred and sixty pages long. But I think.
The Court said, here, yes, the issue was sort of disentangling race from party again to restate racial gerrymandering is
on constitutional partisan is not. The Court just kind of went through a lot of evidence and said, we have all this evidence, and we think it shows that on balance, given the governor's statements, given the statement of the chair of the relevant committee, given the statements of some other prominent legislators, and then given the results, we think this is predominantly racial and therefore it violates a pre existing doctrine.
The Louisiana case turns on whether or not in fact it was predominantly racial to create a second black majority district.
But here this was really about.
You had a valid plan and existence before, and this is whether or not were the changes predominantly race based or predominantly partisan.
And the Court says, argue, with the evidence.
Is that they're so predominantly race we think preliminary injunction should be granted.
They're appealing right to the Supreme Court.
First of all, I mean, as far as timing is concerned, there's a decemberate state deadline for candidates to file campaign paperwork. Is the Supreme Court likely to make a decision here within that time frame.
Well, I think the real question is will the Supreme Court say that the lower court has made this decision too close to the election. There's this doctrine called the Percell principle, based on a Supreme Court decision now about twenty five years old, in which the Court says that federal courts should not undo state election laws if they're
too close to an election. The Court has never said what is too close to an election, but there have been some orders from the Supreme Court in recent years that treated decisions that were within six months of an election as too close to an election. And the Texas primary is in March, so looking at some recent Supreme Court decisions, there is a plausible argument that this Court's decision is too close to the election and therefore should
be stayed. Now, the Court addresses that for about twenty pages, and they make the point that the Texas plan was not signed into law until the end of August, and if you took the idea that six months is too late, it was almost too late. As of the moment the Texas redistricting was signed into law, it would have been impossible to have a challenge, have the parties, do the research, have a hearing, I have a decision in time to
take something like six months. So the court makes you kind of a strong pitch for saying that the per Sel principle has to be handled flexibly. We've got to look at how late the Texas legislature did this, and we do have to say that it is possible to come to compliance. They make two more points. One is that the old map is still in existence because Texas is about to hold an election on that old map in January, because there is a vacancy a member of
the Texas Commercial Delegation died early this year. There was just a primary thing to fill that the general election to actually fill that seat won't be until January. That's on the old map, the pre Gerrymander map. And so the court says, well, the old maps are still the law, so under our preliminary injunction, we're just going to continue to.
Live by the old map. So the old map is still on the books.
And so they're saying that in some sense, the real disruption was the state legislature's acting so late, and so therefore we should be able to do this. And yes, it's still time for everyone to come into compliance to file under the old maps. I think the first question may be the stronger argument. When Texas appeals this to the Supreme Court, I suspect they will lean heavily on this purcell idea that it's too late, that we're about three weeks away from the filing deadlines for the March
primary and it's too late. And I think secondarily they'll say, well, yes, there is a lot of race evidence, but there's also partis in evidence, and we should defer to the legislature on that. So I think that's how that's likely to go out. On what the Spreme Court will do is unclear, but there is a plausible Percel argument that it's too late. But as I said, the Court is very strong in saying, well, if that's the case, you can never bring a challenge
to a gerrymander. That indeed, it's an incentive to do the jerrymanders closer and closer to the election to make it impossible to bring challenges.
If the Supreme Court says, forget the percel principle here, how do you think they would rule on Texas's appeal. You know that this was a part is in not a racial Jerrymander. Do you have any idea on that.
It's really hard to say.
I mean, I think they're you know, I think the court acknowledges that there's evidence on the other side. But they have, and particularly the testimony of the map drawer, the Republican specialist who hire to draw the map. You said, you know, no, I never looked.
At race data.
The court said, we essentially don't believe you, partly because the discrepancies between your testimony and the testimony of the state legislator who hired you, but also because we just don't believe that you could produce three districts that are fifty point two, fifty point three to fifty point four percent majority. I think two were Hispanic, one was black. I'm not sure about that. And that's so precise, and you could do it three times, and that you were
not paying attention to race. But I mean, there is counter evidence in you know, in theory, the Supreme Court's not supposed to judge the evidence. That's really for the lower court. They're supposed to defer lower courts on evidentiary findings. But the current Supreme Court has.
Not always followed that rule. So it's hard to tell what they're.
Going to do, and we haven't seen the dissenting opinion, which may provide, you know, good arguments for Texas when it takes to the Supreme Court.
As you know, this whole redistricting national redistricting battle was yuarded by President Trump, and California has approved a redistricting plan that would offset the Texas map, which is now in serious jeopardy. Tell us about the legal challenge to California's redistricting from California Republicans and also now the Trump administration.
I mean, they're basically making the same argument that prevailed here that this is a racial gerrymander. I mean, they can't bring a parties in jerrymander argument because, as I said, the Supreme Court in La Rouco case in I think twenty nineteen said those are simply not just diiciable, it can't challenge. So I think they're bringing a claim that the state's the legislature's motivation was race. Assumely they've targeted specific districts for that, but I don't know what they've
argued in that. But I think the essence of it is that it's a racial gerrymander very similar to the argument. I don't know the details, but the basic idea is similar to the argument that the three judge court in Texas recognized in striking down the Texas a jerrymander, and is.
Sort of opposite of what happened in Texas.
The Justice Department argued that California's map illegally bolsters the voting power of Hispanics in the state.
Which is interesting because, of course, in Texas, one of the arguments Governor Abbott made is that this is going to actually strengthen the voting power of his Panics, although he combined that he was basically, Hispanics are becoming more Republican, and this is going to allow them to be able to articulate that in districts to both their preference and districts.
He had a kind of a sentence which kind of combined the two in one sentence.
But yes, so, I mean much would turn on whatever evidence they have for that. There's also an argument that there's been a lot of debate about this amongst the law professors in the last twenty four hours as to what's the significance of the fact that the California redistricting was approved by the voters, but the challengers have to prove that the voters were racially motivated as opposed to the legislature, and I think for grabs, because the public
campaign was largely on party grounds. So whether or not even if there was a racial motivation within the legislature, whether that was some kind of washed away by the voters, or whether if it really is racially tainted, whether the legislature's motivation was racial prospanic, whether it doesn't matter that the voters voted for it because they thought that I'm voting on partisan grounds.
That's interesting.
That will be an interesting fight.
You law professors have some interesting conversations.
Yeah, obviously it's been all on live, but it's been an interesting back and forth on that course.
The government on the plaintiffs first have.
To show that the plan was racially motivated and not partisanly motivated even within the legislature. And then they conclude that it was partisan even in the legislature, than the effect of the voters as becomes irrelevant.
And there are other states, both democratic and Republican, that are in play. We'll see what settles out. Thanks so much, Rich, that's professor Richard Rfault of Columbia Law School. And that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law podcasts. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com slash podcast Slash Law, And remember to tune into The Bloomberg Law Show every
weeknight at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg