A federal judge denied the Federal Trade Commission’s request stop metaFacebook’s parent company, has steered clear of buying a small virtual reality startup, two people with knowledge of the matter said, signaling efforts to rein in the tech giants could face difficulties in court.
In a sealed order issued late Tuesday, Judge Edward J. Davila of the US District Court for the Northern District of California denied the FTC’s request for an injunction to prevent Meta from purchasing Within, which a Virtual reality fitness game called Supernatural, said the people, who spoke on condition of anonymity because the orders are sealed.
Judge Davila also issued an injunction blocking completion of the $400 million deal until Feb. 7, giving the FTC time to decide whether to appeal the ruling, one of the people said.
The FTC sued Meta in federal court in July to temporarily block the deal, then filed in its internal court in August to block the acquisition outright. The FTC will have to decide whether to proceed with its internal challenge despite the ruling.
The loss is a blow to FTC Chairwoman Lina Khan and her broader effort to push the boundaries of antitrust law to better regulate the tech giants. The case aimed to test this line with a rarely used legal argument that Meta’s deal would impede future competition in an underdeveloped market, as opposed to a more traditional case that would focus on a mature economy.
Ms Khan has argued that the FTC should file more new cases if it is to adequately encourage competition in the modern economy. She acknowledged thatThe agency must be willing to lose in some of them.
The decision also provided justification for Meta, which had argued in court that it was trying to create a platform that was welcoming to all virtual reality apps, including independently developed ones. The company has invested billions of dollars to become a powerhouse of what it calls the metaverse, where users work, play, and consume content using virtual and augmented reality. It has acquired several virtual reality content studios and Oculus, a company that makes the headsets people use to view that content.
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Meta, which declined to comment, is scheduled to report quarterly results later Wednesday. A spokesman for the FTC said it was “not in a position to comment at this time” in order to respect the court’s seal order.
Bloomberg reported earlier Judge Davila’s decision.
The FTC’s lawsuit to block the deal was the first of the cases developed entirely under Ms Khan, a legal scholar who rose to prominence thereafter She wrote an Amazon review that went viral to be filed in court. The FTC also wants to prevent further “vertical” deals in which the two companies do not compete directly with each other challenged Microsoft’s $69 billion purchase by video game publisher Activision Blizzard in December. This month the Ministry of Justice accused Google of abusing a monopoly about the technology that places ads on websites.
The case was heard in federal court in San Jose, California, in December. Testifying during the seven-day hearing were Meta’s chief executive Mark Zuckerberg and chief technology officer Andrew Bosworth. The FTC argued that if Meta didn’t buy Supernatural, it would develop its own virtual reality fitness game.
Meta’s case rested on proving that developing or acquiring a fitness app was only a small part of a strategy that would eventually propel virtual reality, and with it the Metaverse, to widespread popularity.
During the December hearing, an FTC attorney asked Mr. Zuckerberg if it was true that acquiring or developing a fitness app kept him up at night. Fitness apps, Mr. Zuckerberg said, are just one type of app the company is interested in.
“Fitness was probably the fourth or fifth use case that I felt was important,” he said, ranking apps focused on gaming, productivity, and social interactions as higher priorities. Developing a fitness app, he told the attorney, didn’t cost him any sleep.
Mr Zuckerberg also told Judge Davila that it “would have a chilling effect” if he blocked the deal.
“Maybe Meta will be shut out of anything that’s going on in the future,” Mr. Zuckerberg said. “That would make investors less enthusiastic about investing in this space.”
