Facebook Is Big But Maybe Not a Monopoly

Yesterday a U.S. federal judge dismissed two antitrust lawsuits against Facebook Inc., brought by the U.S. Federal Trade Commission and a group of state attorneys general, claiming that it has a monopoly on social networking. Facebook investors celebrated by buying its stock and pushing its market capitalization above $1 trillion, which is maybe a little on the nose? “What, little old us, a monopoly? No, alas, we’re just a scrappy little startup doing our best to survive in this crazy world,” Mark Zuckerberg could say, nervously trying to stand between you and the ticker showing that his company is now worth a trillion dollars. I dunno, doesn’t a trillion dollars sound like a monopoly?

Here’s the basic problem with the Facebook case. To win an antitrust lawsuit, the government has to show that Facebook has “monopoly power” in some relevant market. Monopoly power means, specifically, the ability to raise prices above a competitive level. Here’s how the judge’s opinion puts the question1: