FTC Seeks to Block Meta/Within to Allow Agency Administrative Trial

A federal court should block Meta’s acquisition of Within Unlimited to allow the FTC to adjudicate whether the deal is unlawful in an administrative trial, the agency said Monday in a filing before the U.S. District Court for the Northern District of California (docket 5:22-cv-04325). Meta said in its own filing that it opposes any FTC motion for preliminary injunction, arguing the agency’s competition claim is “fatally speculative,” and the two sides shouldn’t be subject to an administrative proceeding that could take years to resolve and jeopardize the deal.

The Supreme Court is set to hear oral argument Monday in a case where the high court is expected to weigh in on jurisdictional issues involving administrative proceedings before the commission, like those sought in this case. Plaintiffs in Axon Enterprise v. FTC argue the agency’s administrative proceedings are a due process failure, a point Meta argued in a previous hearing during in 5:22-cv-04325 (see 2210210070).

The FTC said it will move for a preliminary injunction Dec. 8 and will ask the court for a decision by Dec. 31. The administrative trial would begin Jan. 19. Without a preliminary injunction, Meta and Within have said they’re free to consummate the deal Jan. 1, the FTC said. The agency is likely to succeed in its Section 7 challenge, and the deal poses a “reasonable probability of substantially lessening competition” in the virtual reality fitness app market, the FTC said. It’s “reasonably probable” Meta would enter the market through other means if it didn’t pursue the deal, resulting in procompetitive benefits, the agency said. Meta’s presence on the edge of the market would likely benefit competition, the agency said.

If the court grants the FTC’s injunction, there’s “no possibility that the parties will wait for the years it will necessarily take -- through an administrative trial, Commission review, and appeal -- to find out whether they can” consummate the deal, Meta said. The controlling statute authorizes a preliminary injunction only after the agency has “established that it is likely to succeed on the merits and that the balance of the equities favors injunction,” Meta said.

In the past 40 years, no court has “granted an injunction in a potential competition case based on the FTC’s proposed standard,” the company said. “On the contrary, courts have recognized their obligation to assess the merits and the equities. The same should happen here.” The agency’s amended complaint fails to state a claim “in light of the Supreme Court’s warning that any actual potential competition claim (if there ever can be one) requires as an element ‘proof’ that ‘an acquiring firm actually would have entered de novo’ but for the acquisition,” the company said. It argued the agency failed to allege oligopolistic structure or behavior.

U.S. Magistrate Judge Susan van Keulen for Northern California in San Jose scheduled a Nov. 9 in-person hearing at 1:30 p.m. PST to address two unresolved discovery disputes in the case, said an order she signed Monday. Van Keulen said she is “dubious” that the two sides “have thoroughly and robustly met and conferred” to resolve the disputes, and she ordered them to begin doing so immediately after receiving her order. They will advise the court “of any resolutions or further compromises reached” by Nov. 7, said the order. Should the two sides fail to resolve their disputes, they should be prepared “to explain their respective positions” to the court at the Nov. 9 hearing, it said.