The U.S. Federal Trade Commission's (FTC) bid to prevent big tech companies from buying potential competition suffered a setback after a federal judge approved Meta Platforms' purchase of Within Unlimited. The decision could hamper antitrust regulators' enforcement against start-up acquisitions, which can prevent competition before it begins, according to analysts.
The Biden administration has pledged to enforce antitrust laws more rigorously, but the ruling by Judge Edward Davila of the U.S. District Court for the Northern District of California is likely to be scrutinized by other companies facing antitrust reviews. While the ruling is a blow to the FTC, it could be a boon to companies, giving them confidence that judges may listen more carefully to their arguments.
The FTC's lawsuit had been seen as a long shot by legal scholars. The agency alleged that the merger wouldn't impede current competition, but would allow Meta to roll up a future competitor, relying on a rarely used "potential competition" theory. Big tech firms often acquire start-ups to control a developing sector before they face serious competition, as Facebook did when it purchased Instagram. A win for the FTC could have served as a template for future challenges to more consequential mergers, legal analysts have said.
The FTC is not going away quietly in the matter, however. A separate case is proceeding in its in-house court, and it has a week to decide whether to appeal Davila's decision, before Meta can close the deal. The FTC has a long history of not being deterred by major litigation losses, according to Bruce Hoffman, a former FTC official.
The lawsuit itself sends a message from the FTC that it will no longer accept the "risks of under-enforcement" to avoid over-enforcement, said Eleanor Tyler, a Bloomberg Law legal analyst. The FTC suffered a string of losses against hospital mergers in the 1990s, but managed to reverse its losing record after studying the market, Tyler noted.