Federal Trade Commission Chairwoman Lina Khan pushed to sue Meta over a recent acquisition despite the agency’s staff discouraging the lawsuit.
The Khan-led FTC filed a lawsuit against Meta on Wednesday, challenging the company’s acquisition of Within Unlimited, a virtual reality app developer. While the case was approved 3-2 by the agency’s commissioners, FTC staff had recommended against filing such a suit, according to Bloomberg.
The lawsuit is the first leveled by the Khan-led agency at a Big Tech company and is viewed by some experts as setting the stage for future suits. “I think if we gave the leadership team at the FTC truth serum, they would say this is unmistakably an experimental case,” former FTC Chairman William Kovacic told the Financial Times. “It’s using a relatively novel theory of harm, or at least a theory of harm that the agencies have not tried out in the past.”
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Khan’s decision to ignore the staff’s recommendation against the lawsuit is a shift away from typical FTC conduct. Agency leadership is typically reluctant to overrule recommendations provided by staff since it is typically their job to provide a technical assessment of whether a deal being scrutinized is anti-competitive.
Khan has been pushing for more aggressive antitrust regulating of Big Tech companies and reining in their market control for several years. Khan rose to prominence as a key figure in the “Hipster antitrust” movement critical of big business. She also served as legal director at the anti-monopoly-focused Open Markets Institute.
It is unclear if the Khan-led FTC’s new approach to antitrust will work, but it could offer insight into Khan’s future moves. “This is the case she has been waiting for. It shows they’re willing to use new theories of harm to deal with structural conditions that have been ignored,” Kovacic added. “To bring a level of courage to the process. They may be willing to lose cases for the sake of a much greater game. They promised this, nobody should be surprised. Here we go.”
The FTC alleged in its Wednesday lawsuit that Meta and its founder, Mark Zuckerberg, are attempting to expand their control of the VR marketplace by acquiring a company that produces fitness software for the Oculus Quest rather than creating their own fitness product. It also alleges that Meta’s decision to acquire Within has negatively affected the “virtual reality dedicated fitness app market” and diminished the odds of others competing with Meta in that particular marketplace.
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Meta quickly pushed back on the FTC’s decision. “The FTC’s case is based on ideology and speculation, not evidence,” a Meta spokesperson said in a statement. “The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible. By attacking this deal in a 3-2 vote, the FTC is sending a chilling message to anyone who wishes to innovate in VR. We are confident that our acquisition of Within will be good for people, developers, and the VR space.”
Meta announced in October 2021 that it was acquiring Within with the hope of expanding its virtual reality experiences. The acquisition occurred less than a day after the Big Tech company announced that it was changing its name from Facebook to Meta to reflect its focus on the metaverse.
