FTC drops Meta antitrust case and hands Lina Khan a big defeat

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The Federal Trade Commission voted to withdraw an antitrust complaint challenging Meta Platforms Inc.’s purchase of virtual-reality startup Within Unlimited, officially closing the agency’s case.

The FTC sued to block the deal last year, filing twin complaints in federal court and its in-house court. Following a December trial in a San Jose federal court, US District Judge Edward Davila found in favor of Meta, ruling the FTC didn’t offer enough evidence to prove that the acquisition would harm competition in the nascent virtual-reality industry.

The FTC opted this month against appealing Davila’s decision and paused the administrative case while it considered next steps. Although the judge’s ruling allowed Meta to close the deal on Feb. 10, the FTC could have continued its case in administrative court and sought to unwind the transaction. But on Friday, the FTC voted to withdraw the complaint and end the case.

“We’re excited that the Within team has joined Meta, and we’re eager to partner with this talented group in bringing the future of VR fitness to life,” a Meta spokesperson said in a statement. 

The decision represents the first major loss for FTC Chair Lina Khan, who was appointed by President Joe Biden to reinvigorate antitrust enforcement. 

Khan has taken a more aggressive approach to mergers than her predecessors and stepped up the agency’s focus on technology giants because of their potential to quickly dominate budding markets. The FTC has also challenged Microsoft Corp.’s proposed acquisition of Activision Blizzard Inc. on similar grounds — that allowing the acquisition would give the dominant platform a leg up in the emerging cloud-gaming market.

The FTC maintains that losing the case wasn’t all bad: Davila’s decision recognized the agency’s theory that mergers that don’t immediately hurt competition but have the potential to do so in the future should be blocked. 

“The judge sided with the FTC on basically every question of law and laid out a very clear opinion that said the way we were interpreting the law was correct,” Rebecca Kelly Slaughter, a Democratic member of the commission, said of Davila’s decision at a conference in Arlington, Virginia, on Friday.

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