FTC’s Meta lawsuit ignores economic reality.
You’d think for all the money Mark Zuckerberg has poured into getting Democrats elected, they’d leave him alone. You’d be wrong.
The Federal Trade Commission (FTC), under the misguided leadership of Commissioner Lina Khan, is once again suing Meta Platforms, Inc. The FTC’s latest lawsuit seeks to stop Meta from purchasing the virtual reality company Within Unlimited. The parent company of Facebook and Instagram, Meta wants to acquire Within Unlimited’s virtual reality fitness app, Supernatural.
Meta is investing billions in building a virtual reality platform, so adding an already popular virtual reality app like Supernatural to its platform will help “the Metaverse” attract new users, and hopefully keep them fit at the same time.
The merger is a win for everyone. Within Unlimited would gain millions of new followers, who would then get easier access to their offerings, which will then increase Meta’s ability to create new virtual reality apps and other innovations.
However, the FTC does not seem to recognize the potential benefits of Meta’s acquisition, instead arguing that the only way Meta could benefit consumers is to use its own resources to develop its own fitness app. Lina Khan and the other FTC board members and staffers who support this lawsuit think that they know more about how Meta should invest its resources than Meta’s management. But Meta’s management has situational awareness that cannot be found in a taxpayer-funded DC office. Meta’s management is also accountable to Meta’s shareholders for their decision, so they have an incentive to carefully evaluate each course of action that the taxpayer-funded bureaucrats lack.
The FTC rationale assumes that if Meta acquired Within Unlimited no virtual reality fitness app could ever compete with Supernatural, thus helping Meta gain monopoly control of virtual reality industry. But history is full of examples of seemingly untouchable monopolies falling to upstart competitors. Facebook itself started in Marc Zuckerberg’s dorm room and grew to displace MySpace as the number one social media site. Now Facebook and other Meta properties are losing consumers to new sites like TikTok.
Since September 2021, Meta’s stock value has been slashed by more than half. One reason for this is that Facebook has lost over 1 million users since the last quarter of 2021. Mark Zuckerberg has warned Meta employees to expect layoffs in the near future, and the company his already cut back its plans to hire new engineers. Yet, the FTC proceeds as if Meta still enjoyed the same market dominance it had before the emergence of Tik-Tok, and Gen Z has considered Facebook “a site for old people” for years.
Lina Khan, and her allies at the FTC, believe that antirust should be used to punish businesses for the “crime” of being “too big.” The agency’s disdain for successful businesses was shown by John Newman, deputy director of the Bureau of Competition, when he said that Meta is “trying to buy market sharer then earn it” as if Meta did nothing to earn its current market share and the capital it will use to purchase Within Unlimited.
Further proof of Khan, Newman, and their allies’ fanaticism is that in their lawsuit they identify the relevant market as only applying to virtual reality fitness apps. This will get them laughed at out court, but it won’t stop them from wasting tax money on more frivolous lawsuits against big tech companies that are not running their businesses the way the FTC thinks they should.
If Republicans take one or both Houses of Congress, they should make reining in Khan and her acolytes a priority. They should start by holding high profiled hearings exposing Khan’s dangerous agenda and by cutting the FTC’s budget.
If there aren’t the votes to neutralize Khan’s agenda, it will be hard to feel bad for Zuckerberg, who has gotten away with paying “indulgences" in the form of Democrat campaign donations while assuming Republicans will “do the right thing” and leave him alone. Let’s hope whichever company comes after Meta will be a little smarter about how they spend his money.
