Before the virtually nonexistent virtual reality (VR) fitness market gets off the ground, the Federal Trade Commission (FTC) seems intent on making VR’s upward trajectory as difficult as possible. The FTC is in the midst of proceedings suing VR pioneer Meta for their acquisition of Within – and along with it, Within’s VR fitness app Supernatural. This acquisition could be a great step towards expanding and innovating in this relatively new space. The FTC’s narrow legal arguments threaten this progress in a clear sign of politicized overreach.
It is important to note that Meta’s move to acquire Within was given approval by agency staff inside the FTC. However, despite the objections of a majority of staff, FTC Chair Lina Khan overruled that decision and decided to move forward with the lawsuit.
However, it seems lately that even Khan has resigned herself to defeat and is now trying to shift the goalposts for this ongoing trial. Khan told reporters she hoped a loss in the courtroom might signal to her allies in Congress to update current laws surrounding antitrust. Just last week, she opined, “I’m certainly not somebody who thinks success is marked by a 100 percent court record.”
The FTC’s lawsuit is not doomed to fail because today’s antitrust laws are out-of-step with an increasingly modern economy. No, rather, the FTC’s lawsuit against Meta is doomed to fail because the legal arguments the Commission are pursuing in open court are deeply flawed at best – intentionally disingenuous and political at worst.
The Commission is arguing that there is “perceived potential competition” between the two companies. This stretch of a legal argument claims a broad company, Meta, which offers a whole host of different types of apps is somehow a competitor to a narrowly-focused fitness app like Supernatural and its parent company, Within.
This argument has since been undercut by testimony given by FTC witnesses at the trial. Economist Hal Singer claimed apps like Within would stop innovating because they could become part of Meta instead of competing with them. He testified, “All of these benefits that come from the perception that Meta would enter the space are things that kept Within pushing harder than it otherwise would. As soon as these two parties [merged] that threat was reduced.”
First, there is a tacit acknowledgment in this testimony that Meta was not already in the VR fitness space. Therefore, the notion that Meta is acquiring a competitor is utter nonsense. Current antitrust laws that are in place would work to stop truly anticompetitive mergers, not investment. This is not a matter of current law failing to meet the moment. This is a matter of the FTC throwing a bunch of legal jargon at the wall, hoping something will stick in court.
Secondly, the notion that it would have been better for Meta to simply develop its own VR fitness app is incredibly ironic. One of the pieces of legislation that antitrust warriors like Khan have been pushing to allegedly modernize antitrust law is the American Innovation and Choice Online (AICO) Act. AICO would make it presumptively illegal for a tech company to pursue in-house products or services beyond their core business, thus barring competition against smaller firms like Within, as Singer suggests.
On one hand, Khan and her allies on and off the Hill are pushing to punish companies like Meta for acquiring products and services to fill in the areas it’s currently lacking. On the other, they are pressing to bring legal penalties to companies who create, use, and promote their own such products and services. This is quintessentially a “heads I win, tails you lose” policymaking strategy being employed in real time, all indicative of nothing more than a vendetta against a company that is big and has fallen out of political favor.
Again, current law is sufficient to safeguard consumers and antitrust should be enforced to safeguard consumer welfare. However, this is not what is happening here. Thankfully, existing law also safeguards American companies against legal harassment from government agencies for trying to run their companies in a maximally efficient manner. This does not mean in any way that they fall short of protecting consumers. In fact, quite the opposite is true.
It is encouraging to note that figures at the FTC are increasingly recognizing their legal pursuits in this case should fall short. The lesson that political observers and members of Congress should take away from this is not that America needs more antitrust bullying from bureaucrats. Rather, they should conclude that the market is working as intended in an area that has potential to revolutionize the economy for years to come. The FTC can help by letting it do so unfettered by regulatory red tape or frivolous litigation.
