Two big tech companies, Meta and Microsoft, continue to defend their acquisitions against challenges from antitrust regulators. The FTC has dropped one of two claims underlying its challenge to Meta’s acquisition of Within (Meta/Within), and Meta is continuing its efforts to make FTC Chairman Khan’s alleged bias an issue in the case. Investigations into Microsoft’s acquisition of Activision appear to be intensifying: the FTC is reportedly seeking signed statements from industry players, and the UK’s Competition and Markets Authority (CMA) and the European Commission ( EC) opened phase II investigations.
Update on the proposed acquisition of Within by Meta
The FTC filed a lawsuit in July seeking to block Meta’s acquisition of Within, the maker of virtual reality (VR) apps.1 Meta makes Quest, the first VR device. It also operates the Quest app store and sells several other top-selling VR apps. Within’s flagship product is a VR fitness app called Supernatural, which offers users virtual fitness classes for a monthly fee.2
The FTC complaint rested on two horizontal theories of harm. The first was a theory of potential competition. The FTC alleged that Meta is a potential entrant into the dedicated fitness market (which consists of apps such as Supernatural that are specifically used for fitness) because Meta has the size, resources, and capabilities to create its own dedicated fitness app.3
The FTC’s second theory of harm was based on the current competition between Meta and Within in an alleged broader fitness app market that includes both dedicated fitness apps and ancillary fitness apps. The latter are apps that encourage users to engage in activities like dancing and exercise on the side. The FTC alleged that Meta’s Beat Saber and Supernatural were both part of the broader market for fitness apps and that the transaction would eliminate competition between the two products.
There have been two notable developments since the FTC filed its lawsuit in July. First, on October 7, the FTC filed an amended complaint that abandoned the second theory of harm.4 The FTC has not explained why it dropped this request. The move came shortly after a Sept. 20 Senate hearing in which Sen. Mike Lee (R-Utah) challenged the FTC’s market definition in Meta/In as inconsistent with the FTC’s market definition in its complaint challenging Meta’s acquisitions of Instagram and WhatsApp:
“The FTC explains in its complaint that “other types of Internet services in the United States that facilitate the sharing or consumption of content are not adequate substitutes for personal social networking services”. In other words, it seems to say that even if other services have accidental overlaps [sic] with Facebook, that does not mean that they are in the same market. And yet, in the FTC’s complaint to stop Meta’s acquisition of Within. . . this complaint is based in part on what they call a definition of the “VR fitness app market”, and the complaint states that “the broader market includes both VR-dedicated fitness apps and fitness apps accessories”. So here, the FTC seems to be saying that products with overlapping accidental uses are actually competitors. Are these two theories of market definition compatible, as it seems to me that they are quite inconsistent and in fact mutually exclusive. 5
Another development in the case is Meta’s ongoing effort to label FTC Chair Lina Khan as biased. Shortly before the FTC filed a lawsuit to stop the Meta/In deal in July, Meta asked the FTC to recuse Chairwoman Khan from the case because her “public statements and writings reflect her belief that the government should block future acquisitions by Meta, regardless of the merits of the transaction.” .6 Meta’s allegations of bias will be investigated by four members of the Commission. According to an Oct. 17 joint filing in the court case, the FTC has decided to consider Meta’s motion to disqualify President Khan, a process in which President Khan will not participate.seven The outcome of the Commission’s decision on this issue could have major implications for a number of merger challenges, including challenges to Meta’s proposed acquisition of Within and the long-running acquisitions of Instagram and of WhatsApp, as well as other acquisitions by other big tech companies. Meta’s efforts to leverage this issue in ongoing preliminary injunction litigation in the Northern District of California appear to have failed. In its response, Meta alleged in its defenses that:
“Chairman Khan has made numerous public statements that demonstrate her bias against Meta, and in particular its acquisitions, demonstrating her lack of impartiality with respect to Meta’s proposed acquisition. She is not an unbiased and unbiased commissioner, but rather has prejudged Meta’s conduct, as Meta explained in her recusal petition filed with the FTC on July 25, 2022. Chairman Khan’s participation irrevocably taints the request from the FTC. 8
The FTC pushed back against these allegations and decided to rescind the defenses in Meta’s response, arguing that Meta had failed to provide a factual basis for these defenses and they were nonetheless not relevant to the injunction decision. court preliminary.9 The court agreed with the FTC on this latter reasoning and granted the motion to strike out the bias defenses.ten
These charges are similar to those raised by Meta in its motion to dismiss the FTC’s case regarding its acquisition of Instagram and WhatsApp, which is currently in DC District Court.11 In that case, the court denied Meta’s petition, finding that President Kahn was acting in a prosecutorial role, not a judicial role, by voting to file a lawsuit against Meta.12
Update on Microsoft’s proposed acquisition of Activision
Microsoft’s acquisition of Activision, which was announced in January, cleared a hurdle in early October when Brazil’s competition authority cleared the deal without conditions. But the deal would face resistance from the FTC, CMA and EC. The deal is also under review by authorities in Australia, New Zealand, Japan and South Korea.
According to information from early October,13 FTC staff investigating the transaction are collecting signed statements from third-party industry participants. This step suggests that staff may be preparing to recommend that the Commission challenge the agreement after the ongoing investigation into the second request.
In the UK, the CMA is conducting a Phase II investigation into the deal. The CMA released its Phase I decision on September 1, concluding that the deal could significantly reduce competition in games consoles, multi-game subscription services and cloud gaming services.14 According to the CMA, the evidence it has collected suggests that Activision’s video games, particularly Call of Duty, have a significant influence on the success of competing gaming platforms.15 The combined company could therefore harm rivals by denying or degrading rivals’ access to Activision games. According to the CMA, Microsoft has taken such an approach following previous acquisitions of video game publishers.16
The EC also decided to open an in-depth investigation with similar concerns.17 Reportedly, Microsoft had an October 28 deadline to propose remedies to the EC to address the competition concerns, but Microsoft offered none.18
Although it does not officially offer CMA or CE recourse, Microsoft has publicly committed to making Call of Duty available to its biggest rival, PlayStation, at the same time as the game launches on Microsoft platforms. Behavioral fixes like this have always been acceptable to antitrust regulators around the world. But in recent years, the views of regulators, including those in the US, UK and EU, have shifted towards greater skepticism about vertical transactions and the ability of remedies. behaviors to allay concerns.
 Complaint for Temporary Restraining Order and Preliminary Injunction, FTC v. Meta Platforms, Inc., Mark Zuckerberg, and Within Unlimited, Case #3: 22-cv-04325 (ND Cal. July 27, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/221%200040%20Meta%20Within%20TRO%20Complaint.pdf. (hereinafter “Meta/Within Complaint”)
 to the P. 11, 18.
 stipulation and [Proposed] Complaint Variation Order, FTC vs. Meta Platforms, Inc.Case No. 5:22-cv-04325-EJD (ND Cal. 7 Oct. 2022).
 Subcommittee on Competition Policy, Antitrust and Consumer Rights, Federal Antitrust Enforcement Oversight, Q&A starting at 1:09:17 (September 20, 2022) available at https://www.judiciary.senate.gov/meetings/oversight-of-federal-enforcement-of-the-antitrust-laws
 Petition for Recusal, In re Petition for Recusal of Chair Lina M. Khan from Involvement in the Pending Antitrust Case Against Facebook, Inc., at 2 (July 25, 2022).
 Recent Joint Decision Statement, , FTC vs. Meta Platforms Inc.Case No. 5:22-cv-04325-EJD (ND Cal. 17 Oct. 2022).
 Meta Answer at 16-17.
 Plaintiff’s Federal Trade Commission Motion to Strike Defendants’ Affirmative Defenses, FTC vs. Meta Platforms Inc.Case No. 5:22-cv-04325-EJD (ND Cal. September 9, 2022).
 Order granting in part the motion to strike, FTC vs. Meta Platforms Inc.Case No. 5:22-cv-04325-EJD (ND Cal. November 2, 2022).
 Memorandum in Support of Facebook, Inc.’s Motion to Dismiss Amended FTC Complaint, Case No. 1:20-cv-03590-JEB (DDC October 4, 2021);
 Brief, Case No. 1:20-cv-03590-JEB (SDC January 11, 2022).
 The Capitol Forum, Microsoft/Activision Blizzard: FTC Staff Urges Third Parties to Sign Statements by End of Month (October 5, 2022)
 Ruling on Relevant Merger Status and Substantial Lessening of Competition, Microsoft Corporation’s Anticipated Acquisition of Activision Blizzard, Inc. (September 1, 2022) available at https://assets.publishing.service.gov.uk/media/634536048fa8f5153767e533/MSFT.ABK_phase_1_decision_-_1.09.2022.pdf.
 Press Release: Commission Opens In-Depth Investigation into Microsoft’s Proposed Acquisition of Activision Blizzard (November 8, 2022) available at https://ec.europa.eu/commission/presscorner/detail/en/ip_22_6578
 Mlex and Microsoft Ignore EU Appeals Over Activision Blizzard Deal, Making Full Investigation Likely (October 31, 2022) available at https://content.mlex.com/#/content/1420759?referrer=search_linkclick
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