App developers sue Facebook alleging an 'anticompetitive scheme'

The proposed federal class-action lawsuit is based entirely on previously secret documents that NBC News and international journalistic partners obtained last year.
Image: Facebook
Attendees at the F8 Developers Conference in San Jose, California, on April 30, 2019.David Paul Morris / Bloomberg via Getty Images

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By Cyrus Farivar

SAN FRANCISCO — A group of companies behind defunct Facebook apps is suing the social media giant, claiming illegal monopolistic behavior.

The proposed class-action lawsuit filed Thursday in federal court is based entirely on previously secret documents that NBC News and international journalistic partners obtained last year.

The trove of more than 7,000 pages was leaked from an ongoing lawsuit brought by another defunct startup known as Six4Three, which made a short-lived app known as Pikinis. The documents showed that Chief Executive Mark Zuckerberg and other top officials used their market position to squeeze potential rivals and competitors from 2011 through 2015.

"This action seeks to halt the most brazen, willful anticompetitive scheme in a generation — a scheme that verges on final, irreparable completion as of the date of this Complaint," the complaint alleges. "Facebook stands today as a paragon of unbridled market power."

Facebook said Thursday that the suit had no legal basis.

"We operate in a competitive environment where people and advertisers have many choices. In the current environment, where plaintiffs' attorneys see financial opportunities, claims like this aren't unexpected but they are without merit," a spokesman said in a statement.

However, in a statement in April, Paul Grewal, Facebook's vice president and deputy general counsel, said the documents had been "cherry-picked."

"The set of documents, by design, tells only one side of the story and omits important context," he said. "We still stand by the platform changes we made in 2014/2015 to prevent people from sharing their friends' information with developers like the creators of Pikinis."

The new case was brought by a handful of startups that claim that Facebook's dominance has created a "social data barrier to entry," precluding them from competing with Facebook today.

The named plaintiffs include Reveal Chat, a messaging app; Lenddo, a lending service; Cir.cl, an online marketplace; Beehive, an identity verification service; and LikeBright, a matchmaking app.

"Facebook faced an existential threat from mobile apps. It could have responded by competing on the merits, but it instead chose to use its might to intentionally eliminate its competition," Yavar Bathaee, an attorney for the defunct apps, said in a statement. "Facebook deliberately leveraged its developer platform, an infrastructure of spyware and surveillance, and its economic power to crush or acquire anyone that competed with them."

Nick Soman, the former chief executive of LikeBright and current chief executive of the health care startup Decent, said the lawsuit had been in the works for "a long time."

"I'm one of many app developers that feels like Facebook over the years has been less than just," he said in an interview. "So we're looking for justice."

If the lawsuit is certified as a class action, a process that could take months, it could expand to tens of thousands of similarly aggrieved companies.

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The case builds upon the lawsuit brought nearly five years ago by Six4Three, whose Pikinis app sought images of women in bikinis. It has argued that it was harmed when Facebook restricted its promise of access to user data under a system known as the "Graph API."

State and federal authorities are closely scrutinizing Facebook's business practices. In October, New York Attorney General Letitia James announced that 47 attorneys general from states and U.S. territories plan to take part in a New York-led antitrust inquiry into Facebook. The House Judiciary Committee held hearings last summer about antitrust concerns in Silicon Valley, and the Federal Trade Commission continues to examine the company's practices.

Thursday's lawsuit brings into focus an argument that many Facebook watchers have been pushing for some time.

"It lays out, very clearly, the critical intersection of privacy and antitrust," said Ashkan Soltani, a former technologist at the Federal Trade Commission, who now works as an independent privacy researcher. "The plaintiffs argue, I think reasonably, that Facebook used access to user data as both a predatory and exclusionary tool — relying on data collected from users to identify what apps/markets to move into and simultaneously shutting out competitors by restricting their access to the Facebook API."