February 06, 2023
Weil’s client Meta Platforms, Inc., has defeated a request by the U.S. Federal Trade Commission to preliminarily enjoin Meta’s acquisition of Within Unlimited, Inc., the developer of the popular virtual reality fitness app Supernatural. The decision was issued following a seven-day bench trial before Judge Edward J. Davila in the Northern District of California. Weil acted as antitrust counsel in the merger review and served as co-lead counsel with Kellogg Hansen for Meta in the trial.
The FTC sued to enjoin the merger in late July 2022, following a regulatory investigation into the merger. The FTC sought a preliminary injunction to prevent the consummation of the merger, pending the FTC’s administrative challenge to the transaction before an FTC Administrative Law Judge and the Commission. The parties engaged in expedited fact and expert discovery involving numerous party and third-party depositions, and expert reports and depositions before the December 2022 bench trial.
The FTC merger challenge is novel because, following discovery motion to compel practice on the relevant market, the government abandoned its claim that the merger would allegedly harm present competition on the theory that Meta (through its acquired Beat Saber virtual reality rhythm app) competed with Within (through its Supernatural fitness app). That left the FTC with a challenge to the merger based only on alleged harm to potential competition. According to the FTC’s amended complaint, Meta would have entered its alleged “virtual reality dedicated fitness market” in competition with Within. The FTC also alleged that the threat of Meta’s potential entry has influenced competition among current VR dedicated fitness app providers. Judge Davila concluded in a 65-page decision that the FTC had not shown a “likelihood of success” on the merits based on the contemporaneous business documents and witness testimony, including testimony from Mark Zuckerberg and other senior Meta and Within executives.
This merger challenge has been watched closely for its impact on technology platforms and acquisitions in developing spaces. The defeat of the FTC’s preliminary injunction affirms that courts will put the government to its proof when it seeks to challenge a transaction in court.
The victory for Meta is the result of a collaborative, cross-practice/cross-office effort by Weil lawyers from the Firm’s Antitrust/Competition and Complex Commercial Litigation teams in Washington, D.C., New York, Dallas and Silicon Valley. The Weil team advising Meta is led by U.S. Antitrust/Competition practice Co-Head Michael Moiseyev, and Co-Managing Partner of the Washington, D.C. office Chantale Fiebig, as well as Complex Commercial Litigation partners Bambo Obaro and Liz Ryan and Antitrust partners Megan Granger and Eric Hochstadt. The team also included counsel Jeremy Cain and Robert Dahnke, and associates Morgan MacBride, Dan Nadratowski, Josh Halpern, Mark Pinkert, Luke Sullivan, Sydney Hargrove, Rachel Williams, Angelo Labate, Sebastian Laguna, Geneva Hardesty, Liz Klinger, Christina Swiatowy, Brendan McGuire, Artem Khrapko, Chris Lee, Rebecca Jaeger, Veronica Craig, and Caroline Elvig.