Washington — Early in his term as Commissioner of the Federal Trade Commission, Lina Khan declared that she would seize power of the largest tech company in a dramatically new way.
“We are positive, anticipate problems and strive to take immediate action,” Khan said in an interview last month. She promised to focus on “next generation technology” as well as areas where technology giants are already well established.
This week, Kahn was the first to prevent future technology monopolies when he appealed to prevent a small acquisition by virtual reality fitness startup Meta (formerly known as Facebook). I took a step. This transaction was important for Metaverse to develop the so-called Metaverse. This was an early technology and far from mainstream.
Doing so could overturn decades of antitrust standards and revolutionize the way Washington competes across American companies. At the heart of FTC’s proceedings is the idea that antitrust laws can be applied without the need for regulators to wait for the market to mature and it becomes clear which company has the most power. The FTC said meta-trading could justify such early action as it could eliminate competition in the young virtual reality market.
Since the late 1970s, most of the federal government’s challenges to mergers have been in large, established markets, already aimed at preventing a clear monopoly. Regulators have mostly rubberized startup purchases by tech giants, such as Google’s 2006 deal to buy YouTube and Instagram’s 2012 acquisition of Facebook. Because these markets are still emerging.
As a result, Kahn is facing an uphill. Regulators have been reluctant to try to stop mergers by relying on competition and the theory that consumers will be harmed in the future. The federal government has lost at least two cases of using this strategy in the last decade. For this Stop the $ 1.9 billion merger In 2015, FTC predicted that X-ray sterilization providers would have a negative impact on future competition in the regional market.
The FTC proceedings against Meta in the emerging virtual reality market are “intentionally experimental proceedings to widen the boundaries of merger execution,” said William Kovacic, a former chairman of the agency. “Such cases are certainly hard to win.”
FTC’s actions quickly caused a fuss within antitrust circles and throughout the tech industry. Silicon Valley tech executives said movements to block transactions in early areas of technology could curb innovation and prevent engineers from making bold leap in new areas.
“The regulators that predict the future market are a very dangerous precedent and position,” said Aaron Levie, CEO of cloud storage company Box. He warned that if regulators cut off the ability of companies like Meta to buy start-ups, venture capitalists and entrepreneurs would be wary of entering new markets.
Adam Kovacevich, president of the Chamber of Progress, an industry group that represents Meta, Amazon and Alphabet, also said the proceedings would have a chilling effect on innovation.
What is the Metaverse and why is it important?
origin. The word “Metaverse” refers to a fully realized digital world that extends beyond the world in which we live. Created by Neil Stephenson in the 1992 novel “Snow Crash”, the concept was further explored by Ernest Cline in his novel “Ready Player One”.
“Many tech industry leaders are already worried about what the FTC win means for start-ups, as this is an extreme and unfounded reaction to small transactions,” he said. ..
For Mr. Kahn, winning the proceedings may be a lower priority than showing that it is possible to oppose the tech trade early on. She said regulators were too cautious about intervening in mergers in the past for fear of harming innovation, allowing a wave of transactions between tech giants and start-ups that eventually solidified their dominance. Stated.
“What we can see is that omissions after omissions can come at a serious cost,” she said in an interview with The New York Times and CNBC in January. “And that’s what we’re really trying to reverse.”
Kahn declined to request an interview for the article, and FTC declined to comment on Thursday.
Meta said the FTC misapplied antitrust law. The proceedings focus on how the merger with Within eliminates competition, but Meta said the agency is ignoring a number of companies that also have health and fitness apps.
“FTC doesn’t have the answer to the most basic question. Can Meta get a single fitness app in a dynamic space with many existing and future players, which could have a negative impact on competition? ? ”Nikhil Shanbhag, Vice President and Deputy Legal Advisor of Meta, wrote: blog Position.
The company added that it has not decided whether to challenge the proceedings filed in the US District Court in Northern California on Wednesday.
FTC has accused Meta of building a virtual reality “empire” after purchasing Oculus, the maker of Quest virtual reality headsets, in 2014. Since then, Meta has acquired about 10 virtual reality app makers, including Viking fighting games, Asgard’s Wrath, and several first-person shooter and sports game makers.
By purchasing Within and its supernatural virtual reality fitness app, Meta will not create its own app to compete and will scare potential rivals to create alternative apps, FTC said. Stated. That would hinder competition and consumers, the agency said.
According to the proceedings, “this acquisition offers reasonable potential to eliminate current and future competition.” “And Meta will be one step closer to the ultimate goal of owning the entire” Metaverse “. “
Rebecca Ho Allensworth, a professor of antitrust law at Vanderbilt University, said the FTC debate faces rigorous scrutiny as Meta and Within do not compete with each other and the virtual reality market is still in its infancy. rice field.
“The way merger analysis has been going on for at least 40 years is what the direct competition is for this merger,” she said.
It is now the responsibility of the agency to convince the judge that the predictions about the Metaverse and the purchase of the Metaverse will hurt the competition.
Diana Moss, President of the American Antitrust Institute, said:
Antitrust experts warned that if the court dismissed the proceedings, Mr. Khan could have set a precedent that would make it difficult to pursue the initial proceedings. That will allow tech giants to pave the way for new business areas.
“This is a precedent system that goes in both directions, winning and losing, and signals the market,” Allensworth said.
FTC is considering other technology deals, including Microsoft’s $ 70 billion acquisition of game company Activision and Amazon’s $ 3.9 billion merger with One Medical, a national chain of primary care clinics. In addition, agencies are investigating Amazon for claims of exclusive abuse in the market of third-party sellers.
Kahn seems to be preparing for a long court battle with the tech giant, even if the case doesn’t go on the FTC path.
In a previous interview with Times and CNBC, she said, “Even if it’s not the case of Slam Dunk, even if there is a risk that you might lose, you can make a lot of money by taking that risk.” Said.
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