## Facts

- Meta Platforms, Inc. operated a virtual reality (VR) hardware-and-platform ecosystem and distributed third-party VR apps while also developing some VR software.
- Within Unlimited, Inc. developed Supernatural, a subscription-based VR dedicated fitness application available on Meta’s VR platform.
- Meta agreed to acquire Within.
- The Federal Trade Commission (FTC) alleged the acquisition violated § 7 of the Clayton Act because Meta was a likely potential entrant into a proposed market for “VR dedicated fitness apps,” and the deal would eliminate that future competition.
- The FTC filed an administrative complaint and sought a preliminary injunction in federal court under § 13(b) of the FTC Act to stop closing pending the administrative proceeding.
- After a seven-day evidentiary hearing, the court denied Meta’s motion to dismiss, denied Meta’s motion to strike the FTC expert on market definition, and denied the FTC’s motion for a preliminary injunction.

## Issues

1. Whether the FTC showed a likelihood of success on the merits that the acquisition “may be substantially to lessen competition” in a properly defined relevant market, as required for a preliminary injunction under § 13(b).
2. Whether the FTC proved Meta was a “likely potential entrant” into the alleged market for VR dedicated fitness apps absent the acquisition (actual potential competition).
3. Whether the FTC proved Meta’s presence as a perceived likely entrant currently disciplined incumbents such that the acquisition would lessen competition (perceived potential competition).

## Decision

- The court denied the FTC’s motion for a preliminary injunction.
- The court concluded the FTC failed to show Meta was reasonably likely to enter the VR dedicated fitness app market independently within a reasonably foreseeable time absent the acquisition.
- The court found the evidence did not show incumbents materially adjusted behavior based on an expectation of imminent Meta entry.
- Because the FTC did not establish likely entry or current disciplining effects, it did not show a probable substantial lessening of competition.
- The court declined to bar the transaction based on equities and public interest given the weak showing on merits.

## Legal Principles

- Under § 13(b) of the FTC Act, the FTC must show a likelihood of success on the merits of its Clayton Act § 7 claim and that equitable factors favor preliminary relief.
- Clayton Act § 7 is forward-looking and probabilistic, but requires evidence making anticompetitive effects reasonably probable, not merely possible.
- Actual potential competition requires proof that, absent the acquisition, the acquiring firm had both capability and realistic intent to enter and that independent entry was reasonably probable in the near term.
- Perceived potential competition requires proof that market participants viewed the acquirer as a likely entrant and that this perception materially constrained incumbents’ competitive conduct.
- Generalized capability and exploratory internal interest, without credible evidence of reasonably probable entry, are insufficient to establish likely harm under potential-competition theories.

## Conclusion

The court refused to preliminarily enjoin Meta’s acquisition of Within because the FTC did not prove Meta was reasonably likely to enter the alleged VR dedicated fitness app market on its own, nor that Meta’s perceived threat of entry meaningfully constrained current competition, leaving the asserted § 7 harm too speculative for preliminary relief.


Fed. Trade Comm'n v. Meta Platforms, Inc., 654 F. Supp. 3d 892 (N.D. Cal. 2023)