[Asia Economy Reporter Yujin Cho] A court has ruled in favor of Meta in a lawsuit filed by the U.S. Federal Trade Commission (FTC) seeking to block Meta's acquisition of the virtual reality (VR) startup Within. This court decision, which deemed it unfair to block Meta's attempt to acquire Within, is expected to put a brake on the Biden administration's efforts to regulate big tech expansion.
According to reports from the Wall Street Journal (WSJ) and others on the 1st (local time), Judge Edward Davila of the U.S. District Court for the Northern District of California in San Jose dismissed the FTC's request for a preliminary injunction to halt Meta's merger and acquisition (M&A) of Within. The court will begin trial proceedings on the 13th as requested by the FTC, but WSJ noted that typically, when a judge denies a preliminary injunction, the plaintiff often abandons the lawsuit. The FTC must decide by the 7th whether to appeal the dismissal of the injunction request.
This outcome is being regarded as the first defeat in an antitrust lawsuit led by the FTC, a major pillar of the Biden administration's big tech regulation efforts. Since taking office, the Biden administration has been working on legislation to regulate the overall business practices of big tech companies and to block mergers and acquisitions aimed at eliminating competitors. Bloomberg News reported, "This result, where Lina Khan, a strong regulatory advocate and FTC chair, lost her first lawsuit aimed at blocking big tech mergers, represents a significant setback (Loss) for the FTC's big tech regulation."
The New York Times (NYT) also described this as a major defeat for the FTC, which has sought to prove the monopolistic harms of big tech and expand the boundaries of antitrust law. In the case of Meta, unlike the already oversized and entrenched markets such as social media, search engines, and e-commerce, the VR market is still underdeveloped and immature, leading to arguments that the FTC's antitrust rationale is weak.
Rebecca Allensworth, a professor at Vanderbilt University Law School, pointed out, "This court ruling will be a significant blow to the recent efforts of the Biden administration and the FTC to block big tech mergers aimed at eliminating competitors."
Within is a startup that developed the app ‘Supernatural,’ which helps users perform full-body workouts through the VR device Oculus. Meta has been pursuing the acquisition since 2021. However, the FTC filed the lawsuit arguing that Meta’s acquisition is an attempt to build market dominance in the VR sector, similar to how it strengthened its monopoly in the social media market by acquiring Instagram and WhatsApp.
Industry insiders predict that this outcome could also bring a new phase to Microsoft’s (MS) acquisition of Activision Blizzard, which has been at risk of falling through.
Earlier, in January last year, the FTC filed a lawsuit opposing Microsoft’s $68.7 billion (approximately 85 trillion KRW) acquisition of Activision Blizzard, North America’s largest game developer. This record-breaking mega deal in the IT industry has faced ongoing difficulties due to the FTC’s intervention. Although the lawsuit will take months to conclude, the industry has largely viewed the deal as effectively blocked due to increased regulatory pressure on big tech by competition authorities.
Bloomberg stated, "The rejection of Meta’s preliminary injunction request to block the Within acquisition sends a message regarding the FTC’s future actions as it intensifies regulatory scrutiny on big tech, including its efforts to block Microsoft’s Activision Blizzard acquisition."
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