Experts See FTC Waging ‘Pretty Uphill Fight’ to Block Meta/Within: Fenwick

What’s “unique” to the Biden administration and the FTC and DOJ Antitrust Division leadership “is this laser focus” on allegedly anticompetitive behavior in the tech industry, Fenwick associate Kaylynn Moss told a Fenwick webinar Wednesday on antitrust litigation trends in 2022 and expectations for 2023. DOJ Antitrust Division Chief Jonathan Kanter and FTC Chair Lina Khan made no secret of their intentions to “target” the tech industry, “and have actually carried this out through litigation,” she said.

Though DOJ and FTC leaders “always have priorities that they seek to implement, forming antitrust policy in cases around specific industries, or really specific companies, is quite novel,” said Moss. The FTC’s court challenges of Meta’s proposed Within Unlimited buy and Microsoft’s Activision Blizzard acquisition “are cases that we likely would not have seen any other administration bring,” she said. To the extent that the agencies are successful in their court challenges, “we will see large impacts on our existing antitrust law,” she said.

The agencies’ “theme” for 2022, moving into 2023, was “litigate, don’t negotiate,” said Moss. “We’ve seen this play out already” in key court challenges over the past year, “where the agencies have clearly brought cases” that are meant to develop case law “more favorable” to their agendas, she said.

The FTC’s ongoing court challenges of Meta/Within and Microsoft/Activision are “outside of typical enforcement norms,” said Moss. In Meta/Within, the FTC has been willing “to take a risk of losing in court in order to make incremental advances in precedent,” said Fenwick partner Steve Albertson. Its strategy involves “a theory of potential competition, and that’s what’s being advanced” in the FTC’s suit to block Meta’s Within buy, he said.

The theory “goes to competition that doesn’t exist yet between the parties,” said Albertson. The case involves the virtual-reality dedicated fitness app market in which Within competes, but Meta doesn't, he said. “Though this isn’t an entirely novel theory, its application here under a different set of facts that we see presented is pretty aggressive, when compared to historical norms. It’s probably not a case that would have been brought by prior administrations.”

The FTC’s secondary argument involves the theory of “perceived potential competition,” said Albertson. It argues other participants in the VR dedicated fitness app market “are already competing harder because they perceive a threat that Meta might enter the space, and so therefore Meta should not be allowed to enter the space,” he said. “That’s pretty novel. A lot of observers see this as a pretty uphill fight for the FTC.”

In the vertical Microsoft/Activison transaction the FTC is also trying to block, “the main issue is whether Microsoft would deny access of popular Activision game titles to its Xbox rival platforms,” said Albertson. What’s “pretty notable” about the case is Khan’s willingness to take “risks to try and make incremental advances,” he said. The government lost its challenge to block AT&T’s Time Warner buy, and its theory there about “vertical foreclosure” was “pretty similar” to that of the Microsoft/Activision challenge, he said. So it seems Khan is “undeterred by that loss, and appears pretty eager to take another bite at the apple, and perhaps improve on the prior administration’s approach,” he said.