A federal court in the United States has allowed a antitrust lawsuit against Meta Platforms to move forward, reviving claims brought by the now-defunct photo-sharing startup Phhhoto. In a decision issued on Monday, U.S. District Judge Kiyo Matsumoto in Brooklyn ruled that the company had plausibly alleged anticompetitive conduct by the social media giant, enabling key elements of the case to proceed.(Reuters)
Phhhoto accuses Meta of abusing its dominance in the market for personal social networking services in violation of federal antitrust law. According to the complaint, Meta used its control over the Facebook and Instagram ecosystems to disadvantage the startup, allegedly suppressing the visibility of Phhhoto’s animated photo content through algorithmic changes in the platforms’ newsfeeds. The company claims that these actions reduced the reach of its content and undermined the performance of its application, contributing to its eventual collapse.
The court found that Phhhoto had sufficiently articulated allegations that Meta intentionally limited the distribution of the startup’s content on its platforms. Judge Matsumoto also allowed the company to pursue claims that Meta misused confidential information obtained during discussions about a potential partnership. According to the lawsuit, information shared during those discussions was later used to develop a competing product.
Phhhoto further argues that Meta launched its own rival application, Boomerang, in 2015 at a strategically important moment. The startup alleges that the launch coincided with Phhhoto’s planned announcement that its service would become available on Android devices, thereby undermining the company’s expansion efforts.
While the judge allowed several core claims to proceed, the ruling also narrowed the scope of the litigation by dismissing other aspects of the case originally filed in 2021. Meta had sought a full dismissal, maintaining that the allegations lacked legal merit. In response to the court’s decision, the company reiterated its position, stating that the lawsuit is unfounded and that it intends to defend itself vigorously.
Phhhoto, which debuted in July 2014 as an iPhone-based platform centered on looping animated photographs, experienced rapid early growth. Court filings indicate that by 2016 the app had attracted roughly ten million users, including approximately 1.3 million daily active users. Despite this early momentum, the company ceased operations in June 2017. The startup attributes its downfall to Meta’s alleged conduct, claiming that the suppression of its content led to declining user engagement, loss of investor support, and ultimately the collapse of its business.
The litigation has already followed a complex procedural path. Judge Matsumoto initially dismissed the lawsuit, but an appeals court in 2024 instructed the district court to reconsider Phhhoto’s claims. The recent decision reflects that renewed evaluation and allows the case to proceed into further stages of litigation.
The Phhhoto case, formally titled Phhhoto Inc. v. Meta Platforms, is being heard in the U.S. District Court for the Eastern District of New York. Phhhoto is represented by Scott Martin of Hausfeld, while Meta’s legal team includes Aaron Panner of Kellogg Hansen Todd Figel & Frederick. The proceedings will now continue as the court examines whether the startup can substantiate its allegations that Meta leveraged its platform power to eliminate a potential competitor.
