Northern District Of California Dismisses Class Action Suit Against Social Networking Company Without Prejudice, Rejecting An Argument That Failing To Share Data Constitutes Anticompetitive Conduct
03/28/2023On March 8, 2023, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted a motion to dismiss a proposed antitrust class action lawsuit alleging that social networking company (the “Company”) has a monopoly in the professional social networking market, which it protects through a barrier to entry comprising the Company’s “data centralization and aggregation, its machine learning and AI infrastructure, and the inferred data it produce[s].” Crowder et al. v. LinkedIn Corporation, No. 22-cv-00237-HSG (N.D. Cal., Mar. 8, 2023). Plaintiffs alleged the Company violated Sections 1 and 2 of the Sherman Act by engaging in a “monopoly broth” of anticompetitive conduct, ranging from exclusive data sharing agreements to an alleged agreement with Facebook to divide markets. Granting the motion to dismiss, the Court ruled that none of the alleged activities amounted to anticompetitive conduct, either individually or on aggregate.
Plaintiffs are subscribers to the Company’s Premium Career, which provides paying users with additional features on top of the Company’s core services. Plaintiffs asserted that by maintaining a monopoly in the professional social networking market, the Company was able to overcharge premium users for additional service. Plaintiffs brought Sherman Act Section 1 and Section 2 claims against the Company, claiming they engaged in various forms of anticompetitive conduct.
The Section 1 claim alleged that sometime between 2013 and 2016, Facebook agreed not to enter the professional social networking market after it unexpectedly pivoted away from developing a product called “Facebook at Work.” Plaintiffs alleged that the most plausible inference for the pivot was a non-compete agreement between the two companies. The court ruled, however, that the claim was time-barred, rejecting an argument of a “continuing violation,” and dismissing with leave to amend.
The court more thoroughly discussed the merits of the Section 2 monopolization claim concluding that none of the alleged anticompetitive conduct amounted to a “willful acquisition or maintenance” of monopoly power, a necessary element of a Section 2 claim. Specifically, plaintiffs pushed forward a “course of conduct” or “monopoly broth” theory, whereby they sought to state a claim by alleging a series of practices that are anticompetitive even if some of the conduct might be lawful if viewed in isolation. Plaintiffs alleged the Company’s anticompetitive conduct consisted of (1) entering into agreements with hand-selected partners to purchase the Company’s APIs, which were described as interfaces that allowed developers to request and receive information from the Company so they could build apps that interact with the Company’s network; (2) deploying data access countermeasures to prevent “data scraping” from bots or other suspicious sources; (3) product integration into Microsoft’s Azure cloud service; and (4) the alleged market division agreement with Facebook.
The court reasoned that none of these four alleged actions individually or in the aggregate amounted to anticompetitive conduct and dismissed the claim with leave to amend. The court held that (1) plaintiffs did not plausibly allege why or how data sharing through API access was anticompetitive, noting contradictory arguments about data security risks and rejecting that “hand-selecting” partners was exclusionary, because the Company had no “duty to deal” with rivals; (2) plaintiffs did not plausibly plead that anti-scraping data measures were anticompetitive as the Company had no obligation to share its data at all, and further rejected an argument that restriction of access to public data undermined user choice; (3) plaintiffs failed to allege Microsoft Azure did not improve the Company’s services or provide a benefit to its users; and (4) as alleged, the claims based on the alleged agreement with Facebook were time-barred.