Court Strikes Meta’s Affirmative Defenses in FTC’s Suit to Halt Acquisition of VR App Developer Within Unlimited

In an opinion issued Wednesday by Judge Edward J. Davila of the Northern District of California, the Federal Trade Commission (FTC) largely won its motion to strike six of Meta Platform Inc.’s twenty affirmative defenses.

The agency’s case seeks to enjoin Meta, described by the opinion as one of largest providers of virtual reality (VR) devices and applications, from closing its acquisition of co-defendant Within Unlimited Inc., a software company that develops VR applications, including its popular VR fitness application “Supernatural.” 

As previously reported, the FTC’s motion to strike came after both defendants answered the complaint in August. Of pivotal importance is Meta’s bid, in this case and in the FTC’s against it for monopolization of the personal social networking services market, to either disqualify FTC Chair Lina Khan or maintain an affirmative defense declaring her alleged bias against the company.

As relevant to this case, Meta pleaded two defenses relating to how it believes that Khan is both disqualified and how she 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.’”

Judge Davila’s 15-page opinion dedicated most of its page space to the two bias-based defenses though also considered ones related to constitutionality, selective enforcement, and equity, striking all and granting leave to amend some.

As to the bias defenses, the opinion found them adequately pleaded but ultimately struck them with prejudice. The court focused on the issue of whether Chair Khan’s alleged bias is relevant to the court’s consideration of the FTC’s request for injunctive relief halting the acquisition under Section 13(b) of the FTC Act.

The standard for injunctive relief asks both what the chances are of the FTC succeeding on the merits of its claim and what the “balance of the equities” favors. After weighing case law-based arguments, Judge Davila found the bias defenses irrelevant to both considerations.

“Because these issues with Meta’s bias-related defenses are legal and foundational in nature, amendment would be futile,” the opinion concluded. In addition, Judge Davila ruled that allowing them to stand would prejudice the FTC by threatening to shift the focus of the litigation and discovery towards the FTC’s actions rather than the defendants’ actions.

Meta is represented by Weil, Gotshal & Manges LLP and Kellogg, Hansen, Todd, Figel & Frederick P.L.L.C., and Within by Hogan Lovells US LLP.