Styleform IT v. Facebook

This matter concerns a series of fraudulent and anti-competitive schemes designed and effectuated by Defendant Facebook, Inc.'s ("Facebook") Chief Executive Officer Mark Zuckerberg ("Zuckerberg"), with the intention of deliberately misleading tens of thousands of software companies, including Styleform, (collectively, "Developers") into developing applications that generated substantial user growth and revenues for Facebook in order to help it grow from 20 million active users in 2007 to approximately 2.23 billion by the second quarter of 2018.11 2.From May 2007 until at least May 2015, Facebook executed a series of malicious anti-competitive bait-and-switch schemes in which it engaged in a campaign of misrepresentations, misleading partial disclosures, and false inducements to Developers, including Styleform, to induce them to invest capital and resources in building applications on Facebook's operating system, Facebook Platform ("Facebook Platform Extortion Scheme").These misrepresentations and misleading partial disclosures were made in the form of official statements, announcements, videos and policies announced by Zuckerberg and other Facebook executives and were posted by Facebook on its official website, as well as training sessions, conferences, hackathons and other events.In sum and substance, it was thereby represented that Developers would have the opportunity, inter alia, to build a business and distribute their 21 applications organically, to compete on a level and fair playing field, and to access the APis offered in Facebook Platform on terms equal to all other Developers and to Facebook itself.23 These representations and misleading partial disclosures around equal access and a level playing field were made repeatedly over seven years in private and public settings, such as official press 25 releases and announcements on Facebook's website, Developer training sessions managed by Facebook employees, and conferences, such as Facebook's annual Developer conference, F8. 27 3.These misrepresentations and misleading partial disclosures were directed at 28 Developers, including Styleform, were widely known in the Developer community, and were c 0 intended by Defendants to be relied on by Developers, including Styleform.Styleform relied upon these misrepresentations and misleading partial disclosures when deciding whether to build its business on Facebook Platform. 4.These misrepresentations and misleading partial disclosures fraudulently induced tens of thousands ofDevelopers, including Styleform, to enter into identical adhesion contracts with Facebook that placed a host of costly obligations and conditions on Developers in exchange for access to Facebook Platform's software APis (known as the "Graph API," "Open Graph," or "Social Graph").Access to the Graph API enabled Developers to build more useful applications that generated increased user engagement and revenues for both Developers and Facebook while giving consumers a choice as to which companies would meet their needs for various products 11 and services.They also offered the opportunity for Developers to grow their applications organically due to features Facebook offered that made Facebook users prospective customers of 13 Developer applications without requiring that the Developer purchase advertisements.This organic growth Facebook promised Developers on its Platform could be described as the Intemetequivalent ofword-of-mouth business.5.However, Facebook at no time provided access to the Graph API on an equal basis, but rather offered large Developers unfair competitive advantages and special access to data in repeated violation of user privacy and its public commitment to a level competitive playing field, in exchange for unrelated advertising purchases or other in-kind consideration at the expense of small or new Developers, like Styleform, that were attempting to compete in 21 Facebook Platform.Further, from 2007 through 2015, Facebook intentionally made it more 22 difficult for small Developers to continue to maintain their products in a manner that was not 23 cost-prohibitive, while giving larger Developers who made unrelated advertising purchases from Facebook special access to APis that made it less costly for them to release and maintain the very 25 same products and features.26 6.At Zuckerberg's personal direction, as early as 2009, Facebook used Facebook 27 Platform as a weapon to gain leverage against competitors in the Developer community in a host 28 of ways by threatening any company that crossed Facebook's radar that it would shut down its c 0 A .. access to publicly available APis unless: (1) the Developer, itself, was sold to Facebook for a purchase price below its fair market value; (2) the Developer purchased large amounts of unrelated advertising from Facebook; (3) the Developer transferred intellectual property over to Facebook; and/or (4) the Developer fed all of its data back to Facebook, where it would then be available to the Developer's competitors, placing the Developer's business at great risk.7.At the personal direction ofZuckerberg, by 2009, Facebook took full advantage of its perverse incentives in serving as both the referee of, and largest participant in, one of the world's largest software economies.By making a series of misleading partial disclosures and misrepresentations, Facebook irreparably damaged tens of thousands of Developers in order to unjustly enrich Defendants.Further, in 2009, Facebook executives discussed backing down 11 publicly on their promise of a level competitive playing field.They decided internally to back down on these promises, but concealed this decision from Developers, including Styleform, and 13 continued to misrepresent Facebook Platform as a level competitive playing field.8.In 2011 and 2012, Zuckerberg extended this concealment campaign and decided it 15 would be in Facebook's best interest to no longer compete with many Developers and to, instead, shut down their businesses by restricting their access to dozens of the most popular Platform APis, including the full friends list, friends permissions, newsfeed APis, and other endpoints 18 ("Graph API endpoints").Styleform's business and the business of many Developers depended on these APis.Working in concert with other Facebook executives and employees and other large 20 Developers that were close partners, Zuckerberg implemented a plan to deny access to many 21 applications on Facebook Platform on the primary or exclusive basis that these applications were 22 competitive with current or future products offered by Facebook or Facebook's close partners.23 Defendants' anti-competitive conduct was undertaken in concert with other large Developers to 24 oligopolize various software markets that Defendants continued to represent would operate on 25 fair and equal terms and a level competitive playing field.26 9. Specifically, in 2011 and 2012, Zuckerberg held discussions with Facebook

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