WASHINGTON — A federal judge refused to stop Meta Platforms Inc.’s 2.79% acquisition of META in virtual reality startup Within Unlimited, handing back a blow to the Federal Trade Commission antitrust authorities who wanted to block the deal , a person familiar with the ruling said.
In a sealed court order issued overnight, US District Judge Edward Davila in San Jose, Calif., denied the FTC’s request for an injunction blocking the proposed merger, the person said.
The judge’s not-yet-released opinion is a boost to Meta’s virtual reality ambitions and, for the time being, appears to vindicate Facebook parent company’s claims that the FTC went too far with a flawed antitrust case.
The FTC could continue to seek to block the deal through a separate lawsuit filed in its internal administrative court, where a trial is scheduled to begin February 13. But antitrust authorities have often in the past abandoned such administrative procedures once they were at the federal level. The judge denied the request for an injunction.
The lawsuit has been closely watched because it is based on an unusual competitive harm theory that focuses on potential future competition in an emerging industry. The case is also widely seen as symbolic of FTC Chairwoman Lina Khan’s opposition to the expansion of big tech companies.
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Bloomberg News previously reported on the judge’s decision.
Meta, which has staked its future on the growth of virtual reality products, has asked Ms Khan to withdraw from the administrative process. While an administrative judge would initially decide the case, that decision could be appealed to Ms Khan and other commissioners, who would sit as a sort of appeals court. Meta has argued in a court filing that Ms Khan’s previous criticism of Meta shows she has already made up her mind whether the deal should be allowed.
Meta announced its intention to purchase Within Unlimited in 2021. The transaction is part of Meta’s big bet on immersive virtual worlds, or Metaverse. This strategic shift led to the renaming of Facebook to Meta in 2021.
In July, the FTC sued to block the deal, saying it would reduce competition in the virtual reality industry. The antitrust lawsuit was Ms Khan’s first against one of the “Big Four” tech giants.
Led by Ms Khan, the commission is questioning mergers that would likely have gone unchallenged in years past – a change Ms Khan says is needed to prevent companies from amassing too much power and stifling competition.
The FTC’s original complaint on the Meta Within deal argued that an existing meta product, a game called Beat Saber, competed directly against Within’s popular Supernatural app.
Meta criticized this argument, saying Beat Saber and Supernatural have different uses and are different products.
In October, the FTC refiled its lawsuit, dropping all references to Meta and Within as direct competitors.
In its amended complaint, the FTC focused on a more unusual theory that the meta-within deal poses a threat to potential competition in the future. The agency said blocking the deal would increase competition as Meta would be forced to develop an app to compete with Within’s product.
The mere prospect of Meta’s potential entry into the virtual reality fitness app market spurs Within and others to compete harder to retain customers and improve their products, the agency added.
The FTC is separately in dispute with Meta’s Facebook unit over claims that the company abused a monopoly on social media. The agency’s lawsuit in this case seeks to reverse its acquisition of messaging platform WhatsApp and image-sharing app Instagram.
Write to Dave Michaels at [email protected] and Jan Wolfe at [email protected]
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Appeared in the February 2, 2023 print edition as “FTC Can’t Block Meta’s VR Startup Deal.”