A federal judge last week rejected the Federal Trade Commission's (FTC) attempt to block Meta's acquisition of virtual reality (V.R.) company Within Unlimited. According to Reuters, an FTC official said the agency had not decided if it would take the case before an in-house administrative law judge.
While the FTC was stymied in its efforts, it's worth examining the legal theory the FTC deployed to stop the acquisition. The FTC argued that if Meta did not purchase Within Unlimited, the tech giant might one day create its own VR product to compete with the startup. The government argued that it had a legitimate interest in fostering future competition by blocking the deal.
This tortured reasoning reflects the FTC's commitment in the Biden era to expanding its power beyond what antitrust statutes intended. The agency distilled its radical theory of antitrust enforcement in a policy statement issued in November. The agency's new standard for identifying and combating "unfair methods of competition" relies on vague categories of unfair behavior, such as "abusive," "exploitative," and "collusive." As Commissioner Christine Wilson argued in dissent, "the Policy Statement provides that merely labeling conduct with an appropriate adjective can establish liability."
Mergers and acquisitions are a fundamental and often pro-competitive business activity, particularly in tech. Yet the FTC need not prove that a given business practice causes actual harm to take action against it—only that the practice "demonstrate[s] a tendency to interfere with competitive conditions." The FTC empowered itself to crack down on conduct it finds objectionable in isolation, or, when "examined in the aggregate along with the conduct of others engaging in the same or similar conduct, or when the conduct is examined as part of the cumulative effect of a variety of different practices by the respondent," according to the policy statement.
Before Chairwoman Lina Khan's tenure, the accepted theory of antitrust tied antitrust actions to the welfare of consumers. "[T]he Policy Statement repudiates the consumer welfare standard and ignores the Supreme Court's admonition 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 – at the expense of consumers." Protecting inefficient competitors almost always raises consumer prices, which would further weigh on inflation-saddled citizenry.
The policy statement's guidelines are miles-wide and infinitely plastic, and it allows anti-competitive conduct to be defined however Khan thinks it ought to be. Its deliberate vagaries force businesses to guess what practices might or might not be prohibited. As in the Meta case, however, courts will likely continue to shoot down the FTC's dubious legal theories like so many Chinese reconnaissance balloons.
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