No Pain, No Gain: FTC Loses Bid To Block Facebook’s Acquisition of Within

By: Charlotte Slaiman (Public Knowledge)

On Monday the U.S. District Court for the Northern District of California denied the Federal Trade Commission lawsuit to block the merger between social media giant Meta and Within, a virtual reality app maker known for its fitness app, Supernatural. Meta is poised to be a dominant player in VR platforms, since it already has an unimaginably large network in Facebook. Fitness apps are seen as a “killer app,” to help users see the value in VR, so Within may have been a rare source of power that Meta didn’t control. So it’s unfortunate that the federal district court didn’t side with the FTC to block the merger. But we shouldn’t view the case as a failure. Instead, we should view this short-term loss as a step toward a long-term gain: building better case law and enhancing the FTC’s ability to block future anticompetitive mergers in tech.

If we want to increase competition in the technology sector to put people back in the driver’s seat instead of dominant digital platforms, then we need to be comfortable losing cases sometimes. Historically, this is exactly how antitrust law has changed slowly over time. Part of the responsibility of the antitrust enforcement agencies (the Federal Trade Commission and Department of Justice) is to bring cases like this one that are a bit riskier as an opportunity to explain new market dynamics and improve the law. It takes a long time and it’s very expensive, but we have to do this important work to get our economy functioning competitively. Unfortunately, Congress has so far abdicated its authority to solve this problem quickly and comprehensively, so the FTC must take up the work. And I’m glad to see it has.

Of course, it would have been better to win. But the Meta/Within decision represents a step forward, even though the court didn’t grant the TRO (temporary restraining order to block the merger). I don’t expect the FTC to continue to have the win record it has had in the past, because the agency is strategically trying to improve the law by bringing edge cases, and that’s exactly what it needs to do. While the court ultimately declined to block the merger, Judge Davila’s decision credited many of the FTC’s arguments. The court understood that “VR dedicated fitness apps” is a relevant market and that it is highly concentrated. And though he found that this particular case didn’t meet the criteria for actual potential competition, Davila did not reject the doctrine of actual potential competition, noting the many times it has been applied and stating the mere passage of time has not invalidated those precedents. This means the doctrine of actual potential competition is now on stronger footing for the FTC to use in future cases than it was before this decision. There was also a benefit to laying out the doctrine of perceived potential competition, even though this, too, was rejected as not applicable here. Potential competition is an important area of the law for dominant digital platforms, so it’s valuable to build up the recent case law around it…

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