callaci1_Kent Nishimura  Los Angeles Times via Getty Images_department of justice Kent Nishimura / Los Angeles Times via Getty Images

Curbing Merger Mania

The United States is in the midst of a historic wave of corporate mergers that threatens to stifle innovation. US competition agencies would do well to remember the spirit of 1968 and put corporations on the path to investing in new products, processes, and marketing techniques.

WASHINGTON, DC – In late February, the US Federal Trade Commission dropped its attempt to block Meta’s acquisition of the virtual-reality company Within. The decision followed a US federal district court decision rejecting the FTC’s claim that, by depriving the market for VR fitness-apps of a potential entrant, the merger would be likely to reduce competition substantially.

In a mixed outcome for the FTC, the court accepted Meta’s argument that it would not have developed its own fitness app had it not acquired Within. But the court also upheld the viability of the theory of harm underlying the FTC suit, thus opening the door for the agency to base future cases on the potential-entrant doctrine.

In applying this doctrine, the courts assess whether a particular merger is likely to harm consumers or suppliers. While such inquiries are fact-intensive and quite narrow, they have broader implications for US policy. By upholding the validity of the inquiries, the court handed the FTC a victory and potentially ushered in a wave of future antitrust lawsuits against acquisitions by dominant firms.