Home BusinessSmall Business F.T.C. Chair Lina Khan Upends Antitrust Standards by Suing Meta

F.T.C. Chair Lina Khan Upends Antitrust Standards by Suing Meta

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WASHINGTON — Early in her tenure as chairman of the Federal Trade Commission, Lina Khan announced a dramatic new way to curb the power of the biggest tech companies.

“We are looking to the future, anticipating problems and trying to act quickly,” Khan said in an interview last month. She promised to focus on “next-generation technology” and not just on areas where the tech giants are already well-established.

This week, Khan took the first step toward ending a monopoly on future technology. Meta (formerly known as Facebook) sued to block its small acquisition of virtual reality fitness startup Within. This contract was important for the development of the so-called Metaverse of Metaverses. The metaverse is a nascent technology and far from mainstream.

In doing so, Mr. Khan could overturn decades of antitrust standards and bring about sweeping changes in the way Washington enforces competition across American corporations. At the heart of the FTC’s case is the idea that regulators can apply antitrust laws without waiting until the market is mature and it’s clear who has the most power. The FTC said such early action is justified because Meta’s deal would likely eliminate competition in the young virtual reality market.

Since the late 1970s, most of the federal government’s merger challenges have been in large, established markets aimed at preventing already defined monopolies. Regulators have mostly rubber-stamped acquisitions of startups by tech giants, including his 2006 acquisition of YouTube by Google and his 2012 acquisition of Instagram by Facebook.

As a result, Mr. Khan faces uphill. Regulators have been reluctant to try to block corporate mergers, relying on the theory that competition and consumers would be harmed in the future. Lost two lawsuits. block a $1.9 billion merger Among X-ray sterilization providers that predicted in 2015 that the FTC would harm future competition in the local market

The FTC’s lawsuit against Meta in the virtual reality market is “a deliberately experimental lawsuit that seeks to push the boundaries of merger enforcement,” said former FTC chairman William Kovacic. “Such cases are certainly hard to win.”

The FTC’s action immediately caused an uproar within antitrust circles and across the tech industry. A Silicon Valley tech executive said moves to block deals in nascent areas of technology could stifle innovation and scare technologists from making bold leaps in new areas.

Aaron Levie, CEO of cloud storage company Box, said: He warned that if regulators cut off the ability of companies like Meta to acquire startups, venture capitalists and entrepreneurs would be wary of entering new markets.

Adam Kovacevich, chairman of the Chamber of Progress, a trade group representing Meta, Amazon and Alphabet, also said the lawsuit would hurt innovation.

“This is an extreme and baseless reaction to a small deal, and many tech industry leaders are already worried about what an FTC win would mean for startups,” he said.

For Khan, winning the lawsuit may take precedence over showing that he may still stand against the technical deal early on. She says regulators in the past have been too cautious about intervening in mergers for fear of undermining innovation, allowing a wave of deals between tech giants and startups that ultimately cemented their dominance. said.

In interviews with The New York Times and CNBC in January, she said: “And that’s what we’re really trying to reverse.”

Khan declined an interview request for this article, and the FTC declined comment on Thursday.

Meta said the FTC misapplied its antitrust laws. The lawsuit focuses on how a merger with Within would eliminate competition, but Meta said the agency ignored a number of companies with health and fitness apps. .

“The FTC doesn’t have answers to its most basic questions. In a dynamic space with many existing and future players, Meta’s acquisition of one fitness app could hurt competition. Are there any?” Nikhil Shanbhag, Vice President and Deputy General Counsel of Meta, writes: blog Position.

The company added that it has not yet decided whether to contest the lawsuit filed in the United States District Court for the Northern District of California on Wednesday.

The FTC has accused Meta of building a virtual reality “empire” following its 2014 acquisition of Oculus, maker of the Quest virtual reality headset. Since then, Meta has acquired about ten virtual reality app makers. For example, the makers of Viking combat games, Asgard’s Wrath, and several first-person shooters and sports games.

By acquiring Withing and its Supernatural virtual reality fitness app, the FTC said it would not create its own app for Meta to compete with, rather than scare potential rivals trying to create alternatives. It will hurt competition and consumers, the agency said.

According to the lawsuit, “This acquisition provides a reasonable chance of eliminating current and future competition.”

Rebecca Ho Allensworth, a professor of antitrust law at Vanderbilt University, said the FTC’s claims face intense scrutiny because Meta and Within are not in competition with each other and the virtual reality market is still in its infancy. said he would.

“The way merger analysis has been going on for at least 40 years is how this merger removes direct competition from the big picture,” she said.

Agencies now have the onus to convince judges that their predictions about buying the Metaverse and Meta will be detrimental to competition.

Diana Moss, president of the American Antitrust Association, said, “Among other things, the onus is on the FTC to demonstrate that Meta could reasonably have entered the VR-only fitness app market had it not been for the Within acquisition. There is.”

If the court dismisses the lawsuit, Khan could set a precedent that makes it difficult to pursue the fledgling competition lawsuit, antitrust experts warn. This could inspire tech giants to pave the way for new areas of business.

“This is a precedent system that signals the market in both directions, whether you win or lose,” Allensworth said.

The FTC is considering other tech deals, including Microsoft’s $70 billion acquisition of gaming company Activision and Amazon’s $3.9 billion merger with One Medical, a national chain of primary care clinics. In addition, the agency is investigating Amazon for allegations of market exclusivity abuse of third-party sellers.

Khan appears prepared for a lengthy legal battle with the tech giant, even if the case doesn’t go the way the FTC wants.

In previous interviews with The Times and CNBC, she said:

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