Federal Judge Strikes Down Meta’s Attempt to Disqualify FTC's Khan

U.S. District Judge Edward Davila for Northern California in San Jose on Tuesday struck down Meta’s attempt to disqualify FTC Chair Lina Khan from the agency’s lawsuit against the company’s plans to buy Within Unlimited (docket 5:22-cv-04325) (see 2211010045).

Davila didn’t strike down all of Meta’s defenses in the case, allowing the company to amend its arguments on certain points. Khan’s alleged bias isn’t “pertinent to its consideration of the FTC’s success on the merits or the balancing of equities,” Davila wrote. “Because these issues with Meta’s bias-related defenses are legal and foundational in nature, amendment would be futile.”

Meta argued the FTC isn’t entitled to relief because Khan is “disqualified” after making statements demonstrating “her bias against Meta,” particularly its acquisitions, and “demonstrating her lack of impartiality with respect to Meta’s proposed acquisition.” Meta said the FTC can’t proceed because it can’t “demonstrate likelihood of success on the merits or that the balance of equities favor an injunction, as Chair Khan is disqualified.”

Meta argued the complaint “reflects improper selective enforcement of antitrust laws.” The FTC sought to strike that argument for Meta’s failure to plead any factual basis and/or failure to meet the “heightened pleading standard for a de facto ‘selective prosecution’ defense,” the judge said. He agreed Meta’s argument doesn’t allege any underlying factual basis. Meta provided an example of the FTC approving a similar acquisition. Davila said company’s “proffered facts” suggest an amendment to its defense “would not be futile.”

Meta and Within made identical arguments that the FTC’s exercise of executive authority violates Article II of the Constitution, saying the case against the defendants is barred by the due process clause. These constitutional arguments overlap “significantly” with Meta’s arguments against Khan’s biases, Davila wrote. If the constitutional defenses are “predicated” on Khan’s alleged bias or procedural deficiencies, “these defenses would likewise be stricken without leave to amend,” Davila wrote. However, the court found Meta’s constitutional defenses to be inadequately pled “as each consists of a single sentence asserting relief” on constitutional grounds. The court is unable to determine whether further factual amendments “would be futile,” Davila wrote, allowing Meta to amend that portion.

Apple in a separate filing on Tuesday asked the court to seal certain documents related to Apple’s virtual reality plans, citing competitive concerns with Meta and others. Apple noted that neither the FTC nor Meta plans to oppose the request to seal the materials. Apple said potential VR competitors have been “keenly interested” in details about Apple’s VR plans. The filing cited comments from Meta CEO Mark Zuckerberg saying it would be “interesting” to see Apple’s plans and it’s been “very hard” to have any sense of what Apple is doing. “Disclosure of the information Apple seeks to seal thus would dampen the effect of any potential announcement by Apple related to a VR device, empower Apple’s potential competitors (including Meta) to adjust their own strategies, and significantly harm Apple’s competitive standing that it has zealously protected by keeping its VR plans top-secret,” Apple argued.