A federal judge last week rejected the Federal Trade Commission’s (FTC) attempt to block Meta’s acquisition of virtual reality (VR) company Within Unlimited. According to Reutersan FTC official said the agency has not decided whether to bring the case before an internal administrative law judge.
Although the FTC was stymied in its efforts, it is worth examining the legal theory the FTC applied to stop the acquisition. The FTC argued that if Meta doesn’t buy Within Unlimited, the tech giant could one day create its own VR product to compete with the startup. The government argued that it had a legitimate interest in encouraging future competition by blocking the deal.
This tortured reasoning reflects the commitment of the FTC in the Biden era expanding its power beyond what the antitrust statutes intend. The agency distilled its radical theory of antitrust enforcement into policy statement issued in November. The agency’s new standard for identifying and combating “unfair methods of competition” relies on vague categories of unfair conduct, such as “abuse,” “exploitation” and “collusion.” As Trustee Christine Wilson claimed to the contrary, “The Policy Statement provides that only labeling conduct with an appropriate adjective can establish liability.”
Mergers and acquisitions are fundamental and frequent pro-competitive business activities, especially in tech. However, the FTC does not have to prove that a particular business practice causes actual harm in order to take action against it—just that the practice “shows[s] tendency to interfere with the conditions of competition.” The FTC is authorized to suppress conduct it finds objectionable individually, or, when “examined in the aggregate together with the conduct of others engaged in the same or similar conduct, or when the conduct is examined as part of the cumulative effect of a number of disparate practices by the respondent “, the policy statement states.
Prior to President Lina Khan’s tenure, accepted antitrust theory linked antitrust actions to consumer welfare. “[T]The policy statement rejects the consumer welfare standard and ignores the Supreme Court’s warning that antitrust ‘protects competition, not competitors,'” Wilson wrote. “The Commission will now seek to advance the welfare of inefficient competitors, ‘workers,’ and other unnamed but politically favored groups—on harming consumers.” Protecting inefficient competitors almost always raises consumer prices, which would further burden an inflation-ridden citizenry.
The policy statement’s guidelines are miles wide and infinitely plastic, allowing anti-competitive behavior to be defined however Khan thinks it should be. Its deliberate vagaries keep companies guessing about what practices might or might not be banned. However, as in the Met case, the courts are likely to continue to strike down the FTC’s dubious legal theories like so many Chinese scout balloons.