Facebook Allegedly Used Anticompetitive Practices to Destroy Potential Rival, Phhhoto

Last month, Facebook—now known as “Meta”—was sued by the makers of a rival social media app called Phhhoto, alleging that Facebook used anticompetitive practices to push Phhhoto out of the market.  The antitrust complaint, filed in the Eastern District of New York, states that “[t]he Phhhoto app captured five frames in a single point-and-shoot burst and linked them together into a looping video, animating a still picture and making the subject come alive.  The burst created a short video called a “phhhoto.”  Users could [then] post their phhhotos on Phhhoto’s internal social network or share phhhotos on Instagram [a Facebook product].”  

The Phhhoto app was launched in 2014.  In August of that same year, no less than the creator of Facebook, Mark Zuckerberg, downloaded the app and created a profile.  The complaint alleges that several other Facebook executives did as well.  The Phhhoto app grew quickly, having fewer than 500,000 Monthly Average Users (“MAUs”) in early 2015, but approximately 3.7 million MAUs at its peak.  

The complaint alleges that Facebook offered to incorporate Phhhoto’s technology into its Messenger service, but Phhhoto declined.   Facebook then offered to incorporate Phhhoto’s content into Facebook’s users’ Newsfeeds, and Phhhoto invested heavily in the project.  However, Facebook ultimately chose not to move forward with the deal.  

Instead, the complaint says, Facebook decided to use anticompetitive maneuvers to “crush” Phhhoto.  “Among other anticompetitive acts directed against Phhhoto, Instagram withdrew interoperability previously provided to Phhhoto, changed Instagram’s longstanding third party content attribution rules to Phhhoto’s detriment, and introduced . . . a market clone that copied feature-by-feature the Phhhoto product.”  Phhhoto was eventually shut down in June 2017.  

The lawsuit alleges unlawful monopolization under Section 2 of the Sherman Act, fraud, the common law tort of unfair competition, and violations of New York business law.  The case is Phhhoto Inc. v. Meta Platforms, Inc., No. 1:21-cv-6159 (E.D.N.Y.).  

The lawsuit should come as no surprise to long-time readers of this blog.  Last year Congress concluded that Facebook, along with other tech giants like Google and Apple, engage in a range of anticompetitive conduct to obtain and keep monopoly power in their respective markets.  Targeted regulations may be coming.