A U.S. appeals court has overturned a decision in an antitrust lawsuit against Meta, which was filed in in late 2021 by the long-shuttered social app Phhhoto. In court, the startup alleged that Meta violated U.S. antitrust law by copying its core features and suppressing competition. U.S. District Judge Kiyo Matsumoto in 2023 granted Meta’s motion to dismiss the complaint due to time limits imposed by the relevant statutes of limitations. However, upon appeal, the court found that the case should have been heard because these time limits should not have applied.
The decision means that Phhhoto will get another shot at arguing that Meta behaved in an anti-competitive fashion, ultimately putting its company out of business after copying its features and restricting its growth.
The case calls into question if and how Meta used the introduction of an algorithm feed on Instagram to suppress Phhhoto’s content, which led to a decline in Phhhoto’s user registrations and engagement while Meta’s own app gained traction.
Phhhoto claims that it discovered the algorithmic manipulation when it used a different account to post a video on Instagram. The same post never gained traction when shared on Phhhoto’s own account, but the other account’s video received more likes and views, even though Phhhoto’s account had 500 times more followers, the lawsuit states.
The district court never ruled on these claims because the judge determined the antitrust law known as the Sherman Act’s four-year statute of limitations had run out.
Phhhoto also argues that Meta used other anticompetitive tactics to hurt its business.
For instance, ahead of Instagram’s launch of an algorithmic feed in March 2016, Phhhoto alleged that Meta withdrew its access to the “Find Friends” API, which allows third-party apps such as itself to tap into Meta’s social graph. In addition, Meta terminated its plans to integrate Phhhoto’s content into the Facebook News Feed, as planned, the lawsuit states. Meta came after Phhhoto with its own competitive product, too: the looping video app Instagram Boomerang, which copied Phhhoto’s technology, the startup said.
Phhhoto’s appeal suggested that its case should have been heard by the court because the relevant part of its antitrust claim should have been subject to “equitable tolling based on fraudulent concealment.” Or, in other words, the court should have paused the statute of limitations because Phhhoto hadn’t discovered the issues with Meta’s algorithmic feed until later. The company found out in December 2018, when documents filed in a federal lawsuit in California were made public, that Meta had run a program called Project Amplify, which manipulated and reordered posts and content in consumers’ feeds for Meta’s benefit.
While the appeals court isn’t making a final decision on the case itself (as it never got to the point of a ruling), it did conclude that the lower court erred at “each step of the fraudulent concealment analysis,” which means the court’s earlier decision against Phhhoto’s antitrust claim was untimely and the case should be heard.
The case will be sent back to the district court to be tried.
