FTC – Memphis Flyer

Photo by Brett Jordan on Unsplash

On Wednesday, December 9th, Attorney General Herbert H. Slatery III brought Tennessee into a bipartisan national coalition of 48 attorneys general filing a lawsuit against Facebook Inc. The lawsuit alleges that Facebook Inc. stifles competition to protect its business interests, classifying the multi-billion-dollar company as a monopoly. Specifically, the coalition argues that Facebook Inc. has violated Section 2 of the Sherman Act, in addition to multiple violations of Section 7 in the Clayton Act.

Throughout the lawsuit, the bipartisan coalition alleges that Facebook illegally acquired competitors in a predatory manner, while cutting services to smaller rival platforms in an attempt to deprive their competitions users of benefits. The lawsuit also alleges that the tech giant reduced privacy protection and services during its rapid rise as a way of creating barriers for newer tech companies attempting to enter the market.

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“This vast coalition of Democrats and Republicans agree — Facebook’s unlawful behavior is reducing choice, stifling innovation, and degrading privacy protections,” said General Slatery. “This lawsuit stands up for millions of Americans and small businesses that have been harmed by Facebook.”

Facebook Inc.’s business strategies have been criticized by others in the past. Though Facebook has operated as a “free” personal social networking service since 2004, they have been known to use a variety of methods to forge what their founder, Chairman, Chief Executive Officer, and controlling shareholder Mark Zuckerberg calls a “competitive moat” around the company. Methods have included outright buying smaller rivals and tucking them under the Facebook name or the suppression of third-party developers from utilizing the Facebook platform.

One of the key problems pointed to in the lawsuit is the alleged overarching reach that the tech giant has over its competition’s advertising opportunities and its users’ personal data. The bipartisan coalition argues that, through Facebook’s rapid acquisition of smaller rivals and dominance over advertising, the site is able to make decisions about what content users see and what users don’t see while also using users’ personal data to further their business interests. They also argue that the elimination of potential rivals has created a system in which no group can compete with Facebook.

Through the lawsuit, the coalition plans to halt Facebook Inc.’s expansion by restraining the company from making further acquisitions valued at or in excess of $10 million without first notifying the states included in the lawsuit and to divestiture or restructure what the coalition of state attorney generals are calling “illegally acquired companies” and current Facebook assets or business lines.

The Federal Trade Commission (FTC) also filed a lawsuit in coordination with the bi-partisan coalition levying their own set of charges. The full coalition lawsuit can be read here.

The Federal Trade Commission has filed an administrative complaint and authorized a suit in federal court to block the proposed $350 million acquisition by Memphis-based Methodist Le Bonheur Healthcare of the two Memphis-area Saint Francis hospitals owned by Dallas-based healthcare system Tenet Healthcare Corporation.

The complaint alleges that the proposed acquisition would substantially lessen competition in the Memphis area for a broad range of inpatient medical and surgical diagnostic and treatment services that require an overnight hospital stay. According to the complaint, if the proposed acquisition is consummated, healthcare costs will rise, and the incentive to expand service offerings, invest in technology, improve access to care, and focus on quality of health care provided in the Memphis area will diminish. The FTC says only four hospital systems currently provide general acute care services in the Memphis area.

The complaint alleges that the proposed acquisition would reduce that number to three, giving the combined health system control of approximately 60 percent of the Memphis-area market for general acute care services. Only one other major hospital system, Baptist Memorial Health Care, would meaningfully constrain the combined health system; the fourth system in the area, Regional One, is smaller and focuses on a different patient population, the FTC complaint says.

“Competition between hospitals helps keep prices down and quality high, and that’s as true in Memphis as it is elsewhere,” said Daniel Francis, Deputy Director of the FTC’s Bureau of Competition. “It’s clear that patients in the Memphis area have benefitted from the competitive pressure that Saint Francis brings to bear on Methodist, through lower rates, more options for insurers and patients, and quality improvements. This transaction would take that competition away, and patients will pay the price.”

In response to the FTC’s action, a joint statement was issued by Sally Hurt-Deitch, CEO of Saint Francis Healthcare, and Michael Ugwueke, president and CEO of Methodist Le Bonheur:

“Our joint commitment has always been to improve healthcare delivery for the residents of Memphis, Bartlett and the surrounding communities, including enhancing access to care, cutting-edge medical technology and the highest quality physicians and staff. Our two organizations promote a culture of compassion backed by strong core values, which together, we believe will have an even greater impact on care delivered in these communities. We are reviewing this recent action by the FTC and actively considering next steps. We are surprised by the FTC action given the strong support for the transaction by local stakeholders, including leading local health plans, physicians, employers, and community leaders and the evidence that the transaction will lead to lower prices, improved quality, and enhanced access to care for Memphis-area patients.”