On Tuesday, January 20, the FTC gave formal notice that it would appeal its failure to undo the acquisition of Instagram (and WhatsApp) by Meta (Facebook).
Its timing was terrible. Just two days later brought additional news that severely undercuts the FTC’s hopes for their appeal.
On Thursday, January 22, Tik Tok announced it had found a consortium of buyers to satisfy the US law that it no longer be owned by the Chinese firm, ByteDance.
The financial resources of the consortium cannot be questioned. It includes Oracle, Michael Dell, and a United Arab Emirates investor, among others—with ByteDance holding on to a one fifth share. Nor can the effectiveness of the new TikTok USA management be doubted. The new company will be directed by the old TikTok’s head of operations, who presided over its phenomenal growth rate in recent years.
Thursday’s announcement substantially diminishes the FTC’s chances of winning a reversal of its loss because of the importance of TikTok in the decision by Chief Judge Boasberg last November, which tossed out the FTC’s challenge to the Meta acquisitions made 12 and 14 years ago. TikTok, Judge Boasberg held, “holds center stage as Meta’s fiercest rival.” That rival, it is now clear, is here to stay.
Had TikTok been banned from the United States, as the Congress had required in a law passed in 2024, the federal appeals court would have been urged to exclude it from calculations of market share, causing the calculated share controlled by Meta to skyrocket. The federal court ruled “In assessing Meta’s monopoly power, the Court considers a market that comprises Facebook, Instagram, Snapchat, MeWe, TikTok, and YouTube.”
The FTC had argued that the market should exclude TikTok and YouTube. Excluding those competitors would goose the market share supposedly controlled by Meta (Facebook) to above the level that courts have considered to constitute a monopoly. Keeping out TikTok was essential to the FTC’s case.
Even if the FTC were right that YouTube should be excluded from the market, the inclusion of TikTok was enough to bring Meta’s share below presumptive monopoly levels.
The FTC claimed there was a separate market for apps to communicate with family and friends (like Facebook) from a market for internet entertainment (like TikTok). What consumers actually do, however, not what antitrust law enforcers theorize, controls the definition of a market in economics and in law.
Judge Boasberg’s opinion drew on actual history. When Meta (Facebook) became unavailable for a few hours in October, 2021, users bolted to TikTok. The Indian government banned TikTok in 2020; users flew to Facebook. Last January, TikTok was blocked in the US for a few hours before President Trump issued an executive order postponing the effect of the new law banning TikTok. Users flocked to Facebook. In each case, the most frequently accessed alternative to TikTok was Facebook, and the most frequently accessed alternative to Facebook was TikTok.
The trial record also included an ingenious experiment, supplied by an expert witness for Meta. A random sample of 6000 consumers was divided into a control group and a test group. Each group received a weekly cash payment for four weeks: a fixed amount for the control group, but a higher amount for the test group the less they used Meta’s apps (Facebook or Instagram). The test group of Facebook users jumped over to using YouTube, then TikTok. The test group of Instagram users moved to TikTok, then YouTube. The court concluded: “This experiment, which in the Court’s judgment offers the single best evidence of what consumers consider alternatives to Meta’s apps, tells a clear and consistent story: when using Facebook and Instagram becomes more costly, users turn to TikTok, YouTube, and Snapchat, with no other app notably standing out.”
Ever since 1981, antitrust law courts and enforcement in the US (and around the world), have used the “hypothetical monopolist test” to determine what companies are in a market. If the company resulting from a merger increases its price, this test asks, would consumers jump to another product in large enough numbers to prevent that price increase from being successful. Only when the market is expanded to such a degree that consumers could not move away in response to a price increase would the market definition process be complete.
Last year, the Trump Administration announced it would continue to apply the “hypothetical monopolist” test. However, the FTC did not do so in trying to exclude TikTok from Meta’s market. TikTok is a powerful competitor of Meta. The FTC’s attempt to suggest otherwise would have been immeasurably helped if TikTok had disappeared from the US market, as Congress had ordered in 2024. Instead, TikTok USA will continue as a vibrant competitor. The FTC’s appeal has become the victim of exceptionally unfortunate timing.
Tom Campbell was the Director of the Bureau of Competition, the antitrust arm of the Federal Trade Commission, during the Reagan Administration. He taught antitrust law for many years at Stanford Law School, where he was a tenured professor, and at the Fowler School of Law at Chapman University, where he also served as Dean and Professor of Economics. He was also Dean of UC Berkeley’s business school. He served five terms as a US Congressman from Silicon Valley, including being a member of the antitrust subcommittee of the House Judiciary Committee. Mr. Campbell is an antitrust advisor to NetChoice, a trade association focused on promoting free expression and free enterprise, that includes Meta. These views are his own.
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