Editor’s note: This article has been updated to note that the FTC declined to comment on the ruling.
The Biden administration’s Federal Trade Commission (FTC) lost a court challenge to prevent Facebook-parent Meta’s acquisition of virtual reality startup Within Unlimited, according to multiple reports Wednesday.
The decision — which has not yet been made public —is the first significant antitrust setback for FTC Chair Lina Khan, who was appointed by President Joe Biden specifically to beef up the agency’s antitrust enforcement, according to Bloomberg. While U.S. District Judge Edward Davila denied the FTC’s challenge, he also ordered Meta wait one week before closing the acquisition to give the FTC time to appeal. (RELATED: ‘Radical And Partisan’: Republican Concern Is Growing Over Lina Khan’s FTC Overhaul)
The FTC argued during a December hearing that purchasing Within — developer of the popular exercise app Supernatural — would help Meta acquire dominance in the nascent virtual reality industry, according to Bloomberg. It is unusual for regulatory agencies to attempt to block acquisitions on the basis that they might impede future competition, according to The Wall Street Journal.
Khan has drawn criticism from Republicans, who allege that she has kept Republican FTC commissioners out of the loop on certain merger cases and overreached in her efforts to establish data privacy regulations absent federal laws. Khan initially rose to prominence in 2017 as a law student at Yale, when she published a research paper arguing that current interpretations of antitrust laws did not adequately consider the dominance of Amazon, according to NPR.
Lina Khan, then a nominee for Commissioner of the Federal Trade Commission (FTC), arrives to testify during a Senate Committee on Commerce, Science, and Transportation confirmation hearing on Capitol Hill in Washington, DC, April 21, 2021. (Photo by SAUL LOEB/POOL/AFP via Getty Images)
Beyond appealing its lawsuit in federal court, the FTC also has the opportunity to challenge the deal via a lawsuit filed with its own administrative court, which currently is set to go to trial on Feb. 13, the WSJ reported. Meta has asked Khan to recuse herself from this process, alleging that her past criticism of the company clearly demonstrates that she has already made a decision on whether the merger ought to be approved.
The FTC has an outstanding lawsuit against personal computing titan Microsoft to halt its $69 billion acquisition of video gaming giant Activision, while the Department of Justice filed a lawsuit against Google alongside eight states last week alleging that the company’s advertising practices were anticompetitive. Additionally, the FTC has filed a lawsuit against Meta alleging that its purchase of apps like popular messaging app WhatsApp and image and video-sharing app Instagram were unlawful attempts to monopolize the social media space, according to the WSJ.
Meta struggled significantly in 2022, with its stock falling roughly 65% amid declining ad revenue and competition from TikTok, with many investors doubting that its virtual reality programs were worth the expense. The company’s Reality Labs division lost $3.9 billion in the third quarter of last year, according to Business Insider.
The FTC declined to comment for this story. Meta did not immediately respond to a Daily Caller News Foundation request for comment.
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