A federal court has reportedly rejected a request from regulators to block Meta Platform Inc.’s proposed acquisition of Within Unlimited Inc. for $400 million. 

Bloomberg and the Wall Street Journal reported the development today.

In October 2021, Meta inked a deal to acquire Within Unlimited, a Los Angeles-based developer of virtual reality software. The deal reportedly valued the startup at about $400 million. It had previously raised $52.6 million in funding from Andreessen Horowitz and other investors.

Last July, the U.S. Federal Trade Commission sued to block the acquisition. At the center of the lawsuit is a VR fitness app called Supernatural that Within Unlimited released in 2020. The FTC argued that allowing Meta to buy Supernatural would reduce competition in the VR software market.

Meta offers several VR apps including a video game called Beat Saber. In the original version of its lawsuit, the FTC argued that Beat Saber competes with Supernatural. According to the Journal, the agency later removed references to the competition between the two apps and refocused its lawsuit on the deal’s broader market impact. 

In particular, the FTC argued that Meta could theoretically develop an in-house product similar to Within Unlimited’s Supernatural app. The proposed acquisition, the agency continued, would remove Meta’s incentive to develop such an in-house product. The FTC charged that this scenario would decrease future innovation in the VR software market. 

The FTC submitted its lawsuit to the U.S. District Court for the Northern District of California. Though the FTC’s legal challenge was dismissed this week, the agency can continue the effort to block the deal in its in-house administrative court.

A trial is scheduled to begin later this month. However, it’s unclear whether the FTC will opt to continue the case. The agency reportedly often ends litigation at its in-house administrative court in cases when a federal judge dismisses the case.

Several of Meta’s other acquisitions have also come under regulatory scrutiny recently. Last October, the company began unwinding its acquisition of GIF sharing platform Giphy after the U.K.’s antitrust regulator found the deal to be anticompetitive. In particular, antitrust officials determined that the deal made the social media and display advertising markets less competitive.

Separately, the FTC is currently suing Meta over its earlier acquisitions of Instagram and WhatsApp. The agency argues that the deals were part of an anticompetitive effort by Meta to strengthen its position in the social media market. The FTC is seeking an injunction that would require the company to spin off Instagram and WhatsApp. 

Image: Meta