Court Reinstates Phhhoto’s Antitrust Case Against Meta, Accusing Algorithm Manipulation

A U.S. appeals court has reinstated an antitrust lawsuit accusing Meta Platforms, the parent company of Facebook, of attempting to drive an animated photography app out of business. The 2nd U.S. Circuit Court of Appeals in New York ruled in a 2-1 decision on Tuesday that Phhhoto, the company behind the app, could proceed with its legal claim.

In 2021, Phhhoto filed a lawsuit in Brooklyn federal court, accusing Meta of manipulating its Instagram platform’s algorithm to suppress the visibility of its animated photo feature. The lawsuit claimed that this manipulation significantly hindered Phhhoto’s ability to compete, leading to the eventual shutdown of the app in 2017.

The court’s ruling reversed a decision from a lower court that had dismissed the case, arguing that Phhhoto had missed the four-year window to file an antitrust lawsuit. The appellate court found that Phhhoto had sufficiently demonstrated that Meta “concealed” changes to the Instagram algorithm, which delayed the app’s discovery of the alleged anti-competitive actions. Chief Circuit Judge Debra Ann Livingston, who authored the majority opinion, was joined by Circuit Judge Richard Wesley in supporting Phhhoto’s claim that the statute of limitations should be extended due to the concealed nature of the alleged manipulation.

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However, Circuit Judge Denny Chin dissented, arguing that Phhhoto had access to the necessary information to bring its lawsuit earlier and should have done so within the established time frame.

Meta has strongly denied the accusations, calling the lawsuit “baseless” and reiterating its intention to vigorously defend itself in court. A spokesperson for the company stated that the changes made to Instagram’s feed were driven by user interest and other relevant factors, rather than an effort to harm Phhhoto or any competitors.

The 2nd Circuit’s decision does not weigh in on the merits of the antitrust claims against Meta, which are yet to be fully examined in court. Phhhoto, which launched in 2014 and reached 10 million registered users within two years, argues that Meta’s actions led to the app’s downfall and deprived it of “hundreds of millions of dollars of capital.”

This legal battle is part of a broader wave of antitrust scrutiny facing Meta, which is also involved in multiple lawsuits from government and consumer groups. Notably, the company is set to go to trial in April for a case brought by the Federal Trade Commission, alleging that Meta acquired Instagram and WhatsApp with the intent to eliminate potential competition.

Source: Bloomberg