Facebook tries to beat FTC lawsuit by pushing Chair Lina Khan off the case

Lina Khan speaking and gesturing with her hands at a Senate committee hearing.
Enlarge / Lina Khan speaks to the Senate Commerce Committee on April 21, 2021, when her nomination to the FTC was being considered.

In an attempt to avoid government scrutiny, Facebook today petitioned the Federal Trade Commission to have Chair Lina Khan removed from the antitrust case against the social media giant.

Facebook’s petition comes shortly before the FTC must decide whether to continue its lawsuit against Facebook, which seeks to break up the company. The agency would have to submit an amended complaint because a judge dismissed the agency’s first attempt, which was filed by the FTC during the last weeks of the Trump administration.

Today’s Facebook petition was sent to the FTC and Khan, asking them “to recuse Chair Khan from participating in any decisions concerning whether and how to continue the FTC’s antitrust case against the company.” Facebook’s petition comes two weeks after Amazon filed one asking Khan to remove herself “from any antitrust investigation, adjudication, litigation, or other proceeding in which Amazon is a subject, target, or defendant.”

“Due process entitles any targeted individual or company to fair consideration of its factual and legal defenses by unbiased Commissioners who, before joining the Commission, have not already made up their minds about the target’s legal culpability,” Facebook wrote in its petition. “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 from related matters when acting in the capacity of an FTC Commissioner.”

Facebook and Amazon haven’t identified a conflict of interest in the usual sense that would require Khan to recuse herself. They don’t like the conclusions she has previously made about the state of competition in the US—and Facebook today pointed to a legal precedent that it believes supports its petition for recusal. In that 1960s case decided by the US Court of Appeals for the District of Columbia Circuit, “the DC Circuit deemed it an ‘appalling’ violation of due process when a prior FTC Chair participated in a matter against a specific defendant because he ‘had investigated and developed many of the[] same facts’ regarding that defendant as a congressional staffer,” Facebook wrote. Amazon cited the same case in its petition.

“That precedent, as well as the federal ethics rules, compel Chair Khan’s recusal from any decisions regarding the pending antitrust case against Facebook,” the petition said.

Commissioners have opinions

Commissioners on agencies including the FTC and Federal Communications Commission are expected to be partisan. US law lets three of the five FTC commissioners “be members of the same political party” and gives the president the right to nominate commissioners and choose the chair. There’s a similar US law specific to the FCC that lets the president’s party have a majority on that commission as well.

It was Khan’s antitrust research and approach to competition policy that led to President Joe Biden nominating her to the commission and then appointing her chair. Laws such as the Administrative Procedure Act dictate the processes that agencies must follow to prevent decisions that are arbitrary, capricious, an abuse of discretion, or otherwise illegal.

But given the partisan basis of these commissions, it would be unusual for a commissioner not to have an opinion on the industries and companies they regulate. For example, FCC Chairman Ajit Pai vowed to overturn net neutrality rules before he was named chairman, and the repeal he led ultimately held up in court.

In a 1995 case involving an FCC waiver decision that was heard by the US Court of Appeals for the District of Columbia Circuit, judges rejected an argument that certain FCC commissioners should have recused themselves. A high bar has to be met for a nonrecusal decision to be overturned by a court, the judges wrote in a paragraph that cited three cases, including the same FTC case that Facebook and Amazon cited in their petitions.

“In an adjudicatory proceeding, recusal is required only where ‘a disinterested observer may conclude that [the decision-maker] has in some measure adjudged the facts as well as the law of a particular case in advance of hearing it,'” the ruling said. “In other words, we will set aside a commission member’s decision not to recuse himself from his duties only where he has ‘demonstrably made up [his] mind about important and specific factual questions and [is] impervious to contrary evidence.'”

The DC Circuit court also clarified its position in a 1980 case in which it sided with FTC Chairman Michael Pertschuk when he was accused of prejudging issues of fact in a rulemaking proceeding. Recusal requirements can’t be too strict because that “would necessarily limit the ability of administrators to discuss policy questions,” the court wrote. “The legitimate functions of a policymaker, unlike an adjudicator, demand interchange and discussion about important issues. We must not impose judicial roles upon administrators when they perform functions very different from those of judges.”

Facebook cites Khan’s earlier work and statements

Assuming Khan doesn’t recuse herself, the full commission could vote on whether she has to sit out the Amazon and Facebook cases. “After Amazon filed its petition for recusal, the FTC pointed to a rule that says it’s first up to a commissioner to recuse himself or herself,” Bloomberg wrote today. “If he or she declines to do so, the full commission votes on the matter without the participation of the commissioner who’s subject to the recusal request.”

Facebook’s petition cited Khan’s work for the Open Markets Institute, an advocacy group, between 2011 and 2018; academic articles; her work as counsel in a congressional investigation into digital markets in 2019 and 2020; and statements she made in public appearances and posts on Twitter.

“Chair Khan published academic articles discussing her belief that Facebook violated the antitrust laws,” Facebook wrote. “She has already concluded that Facebook ‘has both foreclosed competitors from its platform and appropriated their business information and functionality’ and that, ‘[d]espite facing public backlash for both its apparent deception and its pervasive surveillance, Facebook did not change course—perhaps because it no longer faced serious competition in the social network market.'”

When Khan was legal director for Open Markets, the group urged the FTC to reverse its approvals of Facebook’s purchases of Instagram and Facebook, the petition said. The House Judiciary Committee Antitrust Subcommittee’s report Khan worked on “concluded that Facebook ‘acquired Instagram to neutralize a nascent competitive threat,'” Facebook noted.

Facebook summarized Khan’s statements to the media as follows:

In interviews and media appearances, Chair Khan has discussed her beliefs on Facebook’s culpability under the antitrust laws, including in the context of discussing the Subcommittee’s Report. Last year, she told the New York Times that Facebook had engaged in “killer acquisition[s]… in several cases” and that “Facebook’s acquisition strategy was basically a land grab to… lock up the market.” In particular, she concluded that Facebook’s “purchase of Instagram was an effort to really neutralize… competitive threats,” and the FTC’s decision to “allow[] [the Instagram acquisition] to go through” in 2012 was an “institutional failure” that demands “a moment of reckoning.”

Facebook also pointed to a Twitter thread in which Khan applauded the FTC’s lawsuit against Facebook.

“Chair Khan’s statements—which are unsupported and contrary to law—convey to any disinterested observer that she has already decided the material facts relevant to the Commission’s pending antitrust lawsuit against Facebook, well before becoming a Commissioner,” Facebook wrote in its conclusion. “Chair Khan has also already concluded that Facebook was liable under the antitrust laws. Thus, Chair Khan’s recusal is necessary in order to protect the fairness and impartiality of the proceedings.”

Facebook cited ethics rules that require any federal official to “avoid an appearance of loss of impartiality in the performance of [her] official duties.” The company added that the “Office of Government Ethics has specifically noted that an official’s ‘political… association[s]… may raise an appearance question’ requiring recusal even if they do not give rise to a ‘covered relationship.'” Facebook claimed that “Chair Khan’s leadership of the Subcommittee’s investigation and Majority Staff Report illustrates exactly the type of ‘political association’ that warrants recusal.”

FTC and 46 states sued Facebook

The FTC and a coalition of 46 states and the District of Columbia sued Facebook in December, asking for a permanent injunction that would force it to divest Instagram and WhatsApp and “seek prior notice and approval for future mergers and acquisitions.” The antitrust fight against Facebook has been bipartisan, as the suit was filed when there was still a 3-2 Republican majority on the FTC—though two of the three Republicans voted against filing the lawsuit.

Then-Chair Joseph Simons, a Republican, joined two Democrats in voting to sue Facebook. The two Republicans who voted against filing the lawsuit, Noah Phillips and Christine Wilson, are both still on the FTC and could thus vote on Khan’s potential recusal and on whether to continue the lawsuit against Facebook.

On June 28, US District Judge James Boasberg in the District of Columbia dismissed the FTC’s complaint against Facebook, saying it is “legally insufficient” because the “FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims—namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services.” The judge was skeptical of the FTC’s challenge “to Facebook’s policy of refusing interoperability permissions with competing apps” because “there is nothing unlawful about having such a policy in general.”

The judge also dismissed the states’ entire case against Facebook. This doesn’t necessarily mean the FTC’s case is over, because Boasberg dismissed the FTC’s complaint without prejudice and did not dismiss the federal agency’s entire case. He also wrote that the FTC can file an amended complaint within 30 days and that “the agency is on firmer ground in scrutinizing the acquisitions of Instagram and WhatsApp, as the Court rejects Facebook’s argument that the FTC lacks authority to seek injunctive relief against those purchases.” While the states waited too long to challenge Facebook’s 2012 purchase of Instagram and its 2014 purchase of WhatsApp, the FTC can still challenge the acquisitions because “federal antitrust laws grant unique authority as sovereign law enforcer,” he wrote.

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