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Amazon, Facebook push to move FTC antitrust cases to federal court – experts


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Amazon, Facebook push to move FTC antitrust cases to federal court – experts

Two Big Tech companies are hoping to ensure any future antitrust challenges are decided in courtrooms by federal judges rather than by federal regulators.

Both Inc. and Facebook Inc. recently filed requests with the Federal Trade Commission for the recusal of agency Chair Lina Khan over concerns of bias, essentially saying the antitrust scholar is not objective. The companies pointed to the chair's previous academic writings about the need for antitrust reform, statements about the companies engaging in anti-competitive conduct, and her lead role in a U.S. House investigation report into digital markets. "When a new Commissioner has already drawn factual and legal conclusions and deemed the target a lawbreaker, due process requires that individual to recuse herself," Facebook said in its July 14 petition.

The move is a strategy by the Big Tech companies to ensure any existing and future antitrust cases are tried against them in federal court where the companies may receive a more favorable result, policy experts say. Amazon and Facebook did not return inquiries for this story.

The push for Khan's recusal is an "excellent example of offense, not defense" on the part of the Big Tech firms, according to Tom Forte, an analyst with D.A. Davidson.

SNL ImageAmazon and Facebook each filed requests for the recusal of FTC Chair Lina Khan in recent weeks over concerns of bias.
Source: Saul Loeb-Pool via Getty Images

Facebook's call for recusal is specifically designed to prevent Khan's participation in an FTC case against it that was dismissed by a federal judge but expected to resurface when the commission refiles with an amended complaint in the coming weeks.

"I think what they are doing is playing chess, and they are positioning themselves to win in court as needed," Forte said.

Neutral site

FTC cases can either be tried before a federal district court, where a third-party judge decides the fate of the company, or administratively where the commission ultimately can make a majority ruling.

Amazon and Facebook would prefer a federal judge over an FTC administrative proceeding, experts agree, especially given the agency's current 3-2 split between Democrats and Republicans.

Khan, who was sworn in as chair June 15, is a Democratic voice on the commission, along with Rebecca Kelly Slaughter, FTC commissioner and former acting chair, and Rohit Chopra. The Republican commissioners are Noah Joshua Phillips and Christine Wilson.

"When you're in federal court, you're on a neutral site," said Andre Barlow, partner with Doyle Barlow and Mazard PLLC in Washington, D.C., and a former trial attorney with the U.S. Justice Department's antitrust division. "I think all defendants would rather have their cases tried by a federal court. No one wants an administrative hearing."

If the FTC proceeds administratively on cases against the company, Facebook would have additional opportunities to call for disqualification, said Jessica Rich, distinguished fellow at the Institute for Technology Law and Policy at Georgetown University Law Center.

An internal FTC case is tried by an administrative law judge, whose decision could ultimately be overturned, Rich noted. The commission's staff could appeal the ALJ's decision to the commission. "The commission could turn around and say 'no no, Facebook is still guilty,'" said Rich, former director of the FTC's Bureau of Consumer Protection from 2013 to 2017.

That is significant given that Judge James Boasberg of the U.S. District Court for the District of Columbia in June dismissed an FTC case against Facebook, determining the agency failed to provide enough facts that Facebook has monopoly power in the market for personal social networking services.

The FTC asked for an extension, and Boasberg is allowing the agency to refile its case with a stronger argument by Aug. 19. The filing for the extension suggests the case will again be heard in federal district court as it discusses federal district court rules and schedule.

The FTC has not made any announcement on what its next steps will be on the Facebook case and will not comment until it has does so, Betsy Lordan, a spokesperson with the FTC, said in an email message July 23.

Antitrust targets

Amazon and Facebook are among the tech companies targeted by the FTC for anticompetitive conduct at a time when both have significantly grown revenue during the pandemic.

Facebook saw revenue spike 55.6% year over year in the second quarter to $29.08 billion.

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The FTC's case against Facebook filed last year alleged that the company engaged in a strategy to eliminate threats to its monopoly. The case threatened to force the company to unwind its 2012 acquisition of the photo-sharing site Instagram LLC and its 2014 purchase of mobile messaging app WhatsApp Inc.

Facebook will certainly continue pushing for Khan's recusal if any case against it is tried administratively, said Carl Szabo, vice president and general counsel at NetChoice, a trade association whose members include Amazon, Facebook and Google LLC.

"It's unlikely that an agency will say its own work is bad," Szabo said. If Khan does not follow through with a recusal from cases against Facebook, the company is in "a very strong position to have a federal judge forcibly remove the chair," Szabo said.

Amazon, meanwhile, saw first-quarter revenue jump 43.8% to $108.52 billion and is expected to beat second-quarter earnings July 29. The FTC has been investigating Amazon's relationship with third-party sellers since last year and is reviewing the e-commerce giant's planned purchase of MGM Holdings Inc. for $8.45 billion.

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Key precedents

Ultimately, recusal decisions are up to Khan and the commission, experts say.

Ethics laws generally focus recusal arguments around financial conflicts, including situations where a commissioner has invested in one of the companies that the FTC is investigating or where a commissioner's spouse is representing the defendant company or its competitors, Rich said.

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Khan has not made any announcements about recusals in specific cases, said Lordan, the FTC spokesperson.

But it would not be the first time a commissioner has recused themselves from cases. Former FTC Commissioner Joshua Wright in 2012 recused for two years in law enforcement matters pertaining to Google, which had indirectly funded some of Wright's academic research. Former FTC Commissioner Julie Brill recused in 2013 from a case involving medical laboratory LabMD, which accused Brill of bias due to previous statements made about the company.

If Khan recuses, doing so could lead to a split vote between two Democrats and two Republicans on any case decisions made administratively, Barlow said. "It would make it more difficult for chair Khan to follow through with her agenda," Barlow said.