Shulou(Shulou.com)11/24 Report--

Internet giant vs antitrust agency, a focus antitrust lawsuit, social giant Meta won the first small battle, but the tougher battle is yet to come.

(Zuckerberg personally attended the antitrust trial in December last year.) Meta won its first battle in Silicon Valley, where Meta is headquartered. Federal District Judge Edward Davila of Northern California yesterday rejected an injunction application from the Federal Trade Commission (FTC), the US antitrust regulator, refusing to block Meta's bid for Within, a virtual reality startup. At the trial last December, Judge Davila heard the respective claims of FTC and Meta.

It also means that Meta won the first battle in the legal battle between FTC and Meta over the deal. Because the temporary restraining order applied by FTC last year expired on Tuesday, FTC filed an urgent motion to ask Judge Davila to continue to extend the restraining order until the outcome of the lawsuit between the two sides, but Judge Davila refused.

It should be added that Judge Davila, who heard the case, has served as a judge in Silicon Valley for more than 20 years and has heard a number of well-known lawsuits from technology companies. In 2010, he was nominated as a federal district judge by former President Obama. At the end of last year, he tried the fraud case of Elizabeth Holmes, founder of blood test startup Theranos, and sentenced Holmes to 135 months in prison.

Judge Davila's decision is undoubtedly a blow to FTC's efforts to curb the expansion of tech giants. However, this does not mean that Meta is ready to complete the acquisition of Within. Because FTC can also file another lawsuit in the administrative court to veto the deal. According to FTC's regulatory process, after the administrative court makes a preliminary decision, the FTC's five-member committee will play a role similar to that of the appellate court and vote.

Meta has formally applied for Lina Khan, the chairman of FTC, to withdraw from the administrative court on the grounds that the antitrust hawk has long publicly criticised Meta and therefore has a clear preconceived attitude.

Generally speaking, antitrust regulators rarely continue to struggle in administrative courts after the federal court vetoes the injunction. But this time, FTC seems determined to fight Meta to the end. In addition to preventing Meta from acquiring Within,FTC, there are more crucial antitrust lawsuits, with the ultimate goal of forcing Meta to spin off Instagram and WhatsApp.

The lawsuit surrounding the Within merger has become the focus of US antitrust litigation not because the deal itself is huge. Within is valued at only $400m, nor is it because the deal has changed the industry landscape. Within only focuses on virtual reality fitness, an extremely niche area.

(virtual reality fitness app Supernatural) Why FTC set its sights on the small acquisition Within was founded in 2014, headquartered in Los Angeles, USA, with founding members from Google, investors including well-known venture capitalists such as Horowitz Fund and Temasek Fund, as well as media giants such as Disney and Fox. They raised tens of millions of dollars to create a highly acclaimed virtual reality fitness app, Supernatural, which was once the highest-rated VR app in Google Cardboard and was named one of the best apps of the year by US technology media Apple Insider and Fast Company.

In October 2021, Meta announced the acquisition of Within for an undisclosed amount, estimated to be about $400 million. This acquisition is a landmark acquisition of Facebook's transformation into Meta. Zuckerberg announced an ambitious transformation of meta-universe, changing the name of Facebook Group to Meta and focusing on building an ecological platform for virtual reality. The acquisition of a popular virtual reality fitness app is undoubtedly an important attraction to attract more users to try Meta metamosmos during the epidemic, and is also in line with Zuckerberg's acquisition strategy.

However, this seemingly inconspicuous "small acquisition" has become a thorn in the side of antitrust regulator FTC. In July 2022, FTC formally filed a lawsuit in the Federal District Court of Northern California for a temporary injunction asking the court to veto the Meta deal. The lawsuit was heard in December last year, and Zuckerberg himself attended the hearing.

Why is FTC making a big fuss about this small acquisition of Meta? FTC said in the lawsuit that virtual reality is an emerging industry with a total revenue of $5 billion in 2020 and is expected to grow sharply to $12 billion in 2024, while Meta's acquisition of Within is intended to gain a monopoly in fitness applications in the virtual reality industry.

FTC said in the lawsuit that Meta itself developed a virtual reality fitness app, Beat Saber, which could have competed with Within's Supernatural app, but they chose to buy competitors directly, in an acquisition that violated (antitrust) law.

FTC even calls Meta a "global technology behemoth" (Behemoth), pointing out that Facebook has always been accustomed to acquiring competitors to gain market dominance. They have acquired popular social apps such as Instagram and WhatsApp, and have been trying to conquer virtual reality since acquiring Oculus in 2014.

Meta immediately responded to the lawsuit. They said in a statement that they could not agree with FTC's allegation that Beat Saber and Within's Supernatural were different products and aimed at different users. The argument that "Meta bought Within to gain a monopoly position" is untenable. (it is worth mentioning that the lawsuit document updated by FTC last October deleted the content about Beat Saber. )

"FTC's judgment is based on speculation and speculation, not on facts. There are many market entry and growth opportunities in the Internet-connected fitness sector, and the idea that this acquisition will dampen a dynamic market is not credible." We believe that the acquisition of Within will benefit consumers, developers and the virtual reality market. "

(Lena Khan, chairman of FTC) antitrust hawks are fully in power. It needs to be emphasized that in the lawsuit whether to sue Meta to block the acquisition of Within, the FTC committee of five did not agree, but decided to sue by the 3:2 vote. Lena Khan, chairman of FTC, played a key leading role in the lawsuit.

In 2017, Lena Khan, still a student at Yale University, published an antitrust paper, Amazon's antitrust Theory (Amazon's Antitrust Paradox), citing Amazon's business model as an example, directly challenging the antitrust concept that has dominated US regulation for decades, arguing that the antitrust standards of the traditional Chicago School are no longer suited to current Internet giants. Lena Khan, then only 27, became famous for this paper and became a representative of the "Neo-Brandez School" in the antitrust field.

She herself attracted the attention of progressive leftist politicians such as Senator Elizabeth Warren, Democrat of Massachusetts, paving the way for a later career in politics. Warren and other Democratic progressive leftists also advocate curbing the expansion of Internet giants, openly demanding a break-up of Meta, and Lena Khan directly provides a theoretical basis for Warren's claim.

Biden, who came to power in 2021, surprisingly nominated Lena Khan for the post of president of FTC, handing the most important antitrust position to the radical scholar who shot to fame by advocating a crackdown on Amazon. He then handed over the position of head of the antitrust division of the Justice Department to Jonanthan Kanter, a well-known antitrust hawk lawyer.

It is worth noting that Lena Khan and Cantor's confirmation was not boycotted by Senate Republicans, and their Senate confirmation votes were both 69:28. Obviously, strengthening the regulation of Internet giants and curbing their growing economic and social influence has become a bipartisan consensus in US politics over the past few years.

After Lina Khan came to power, she actively led FTC to prevent the M & An expansion of tech giants through antitrust lawsuits. In addition to suing Meta for its acquisition of Within, FTC also faces attacks from other tech giants. They have forced Nvidia to abandon the Arm deal through antitrust lawsuits and are suing to block Microsoft's acquisition of Activision Blizzard.

In September 2021, Lena Khan made it clear in the FTC internal memo that US antitrust agencies should have a forward-looking perspective in the process of law enforcement, pay attention to those new generation of technological innovation and future emerging areas, and prepare for antitrust in advance. Obviously, Meta's acquisition of Within for meta-universe strategy is in line with Lina Khan's antitrust strategy.

Forcing antitrust legislation through litigation FTC's lawsuit against Meta's acquisition of Within is actually a challenge to US antitrust laws by Lena Khan and the Biden administration. Even if the lawsuit fails and Meta successfully completes the acquisition of Within, it does not mean that FTC has failed in its strategy to contain the tech giants, but that the Biden government used lawsuits to force the legislature to amend and update antitrust laws.

After the Biden administration came to power, the two major antitrust agencies, FTC and the US Department of Justice, have repeatedly filed antitrust lawsuits to prevent corporate giants from expanding and even take risks to sue in cases that may not have a sound legal basis. Meta's acquisition of Within is one of them. Since the Biden administration took office in 2021, the Justice Department and FTC have filed 16 antitrust lawsuits aimed at blocking mergers and acquisitions, compared with six under the Trump administration.

In past antitrust lawsuits in the United States, the focus was on whether the giants would gain a dominant position in the existing market, endangering market competition and affecting the interests of consumers, while the argument of FTC's lawsuit is based on the assumption of potential dominance in a new market, because the virtual reality fitness field is a very subdivided brand-new market. At the same time, FTC's lawsuit to block genetic company Illumina from buying cancer testing company Grail is also worth mentioning, because the two companies are not competitors and are not in the same market, which is also very rare in previous antitrust lawsuits.

Lina Khan clearly stated her idea of "opposing legislation by litigation" in April last year. "if FTC believes that (a transaction) is suspected of antitrust and the existing antitrust law may not apply, then it should be promoted through litigation, because it will be of great help." Even if it loses the lawsuit, it will send a clear signal to the legislature to update its antitrust laws in line with the current state of the Internet economy. I'm obviously not the kind of person who thinks winning a lawsuit is a success. "

Lena Khan and Kanter, antitrust director of the Ministry of Justice, even said, "the current high success rate of federal antitrust lawsuits shows that we have not sued enough." we will continue to file more (antitrust) lawsuits. "

Just today, US President Joe Biden publicly denounced the unreasonable division of Apple's and Google's app stores and called on Congress to introduce antitrust legislation to curb the pricing power of technology giants. Just a week ago, the US Justice Department filed another antitrust lawsuit against Google, this time with a clear demand for a "break-up of Google".

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