WASHINGTON—Federal judge refuses to stop meta-platforms Inc.
META 2.79%
acquisition of virtual reality startup Within Unlimited, offering a setback to antitrust authorities at the Federal Trade Commission seeking to block the deal, a person familiar with the decision said.
In a sealed court ruling issued overnight, U.S. 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 opinion, which is not yet public, is a boost for Meta’s VR ambitions and appears to vindicate for now the Facebook parent’s claims that the FTC went too far in bringing a flawed antitrust case.
The FTC may continue to try to block the deal through a separate lawsuit filed in its domestic administrative court, where a trial is due to begin Feb. 13. judge rejects the request for an injunction.
The lawsuit has been closely watched because it is based on an unusual theory of competitive harm focused on potential future competition in a fledgling industry. The case is also widely seen as emblematic of FTC Chair Lina Khan’s opposition to the expansion of big tech companies.
Bloomberg News earlier reported the judge’s decision.
Meta, which has staked its future on growing virtual reality products, asked Ms Khan to recuse herself from the administrative trial process. While an administrative law judge would initially rule on this case, that decision could be appealed to Ms Khan and other commissioners, who would sit as a sort of court of appeal. Meta argued in a court filing that Ms Khan’s past criticism of Meta shows she’s already made up her mind on whether the deal should go through.
Meta has announced plans to buy Within Unlimited in 2021. The deal is part of Meta’s big bet on immersive virtual worlds, or metaverses. This strategic shift led to Facebook’s 2021 rebranding as Meta.
In July, the FTC filed a lawsuit to block the deal, saying it would reduce competition in the virtual reality industry. The antitrust lawsuit was the first under Ms Khan against one of the ‘big four’ tech giants.
Under Ms Khan’s leadership, the commission is challenging mergers that would likely have gone unchallenged in years past – a change that Ms Khan says is needed to prevent companies from accumulating too much power and stifling competition. competition.
The FTC’s initial complaint about the Meta-Within deal claimed that an existing Meta product, a game called Beat Saber, was in direct competition with Within’s popular Supernatural app.
Meta criticized this argument, saying that Beat Saber and Supernatural have different uses and are different products.
In October, the FTC refiled its lawsuit and dropped 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 is a threat to potential competition in the future. The agency said blocking the deal would increase competition because Meta would be forced to develop an app that competes with Within’s product.
The mere prospect of Meta’s potential entry into the VR fitness app market is driving Within and others to compete more to retain customers and improve their products, the agency added.
The FTC is in separate litigation with Meta’s Facebook unit over allegations that the company abused a monopoly position in social media. The agency’s lawsuit in this case seeks to unravel its acquisition of messaging platform WhatsApp and image-sharing app Instagram.
Write to Dave Michaels at dave.michaels@wsj.com and Jan Wolfe at jan.wolfe@wsj.com
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Appeared in the February 2, 2023 print edition as “FTC Can’t Block Meta’s VR Startup Deal”.