FTC drops Meta antitrust case and hands Lina Khan a big defeat

The FTC sued to block the deal last year, filing twin complaints in federal court and domestic courts. After a December trial in San Jose federal court, U.S. District Judge Edward Davila sided with Meta, ruling that the FTC did not provide enough evidence to prove that the acquisition would harm competition in the virtual reality industry.

The FTC voted this month against Davila’s appeal of the decision and put the administrative case on hold while it considers its next steps. Although the judge’s ruling allowed Meta to close the deal on February 10, the FTC could continue the case in administrative court and seek to void the transaction. But on Friday, the FTC voted to withdraw the complaint and end the case.

“We are excited that the Within team has joined Meta, and we’re excited to partner with this talented group to bring the future of VR fitness to life,” a Meta spokesperson said in a statement.

The decision is the first major loss for FTC Chairman Lina Khan, who was appointed by President Joe Biden to strengthen antitrust enforcement.

Khan has taken a more aggressive approach to mergers than his predecessors and has increased the agency’s focus on tech giants because of their potential to dominate new markets. The FTC also challenged Microsoft Corp.’s proposed acquisition of Activision Blizzard Inc. for the same reason – which allows the acquisition to give it a dominant platform in the growing cloud gaming market.

The FTC maintains that losing the case is not all bad: Davila’s decision acknowledges the agency’s theory that mergers that do not directly harm competition but have the potential to do so in the future should be blocked.

“The judge sided with the FTC in basically every question of the law and laid out a very clear opinion that said the way we interpret the law is correct,” Rebecca Kelly Slaughter, Democratic member of the commission, said of Davila’s decision at a conference in Arlington, Virginia, on Friday.