In December 2022, the Federal Trade Commission sued to block Meta Platforms from acquiring Within Unlimited, the maker of a virtual reality fitness app called Supernatural. It was a relatively small deal — reportedly around $400 million — but Lina Khan’s FTC treated it as a defining battle. The agency argued that Meta, already dominant in VR hardware through its Quest headsets, would use the acquisition to crush competition in a nascent market for VR fitness apps. A federal judge disagreed. The case collapsed. And the aftermath has become a case study in how ambitious antitrust theory can outrun the facts.
A detailed investigation by The Verge draws on newly obtained internal FTC documents, court filings, and interviews to reconstruct the agency’s pursuit of the Meta-Within case — and the internal dysfunction that plagued it from the start. The picture that emerges isn’t flattering to Khan’s FTC. Career staff harbored serious doubts about the case’s viability. Key economic analyses were either incomplete or contradicted the agency’s own theory. And the decision to press forward anyway reflected a leadership culture that prioritized ideological ambition over prosecutorial discipline.
The story matters now more than ever. Khan is gone from the FTC, replaced by Andrew Ferguson under the Trump administration. But the questions her tenure raised — about how far antitrust enforcers can stretch existing law to police Big Tech, and what happens when they overreach — remain unresolved. Meta, meanwhile, has integrated Supernatural into its VR platform and moved on. The competitive harms the FTC predicted have not materialized in any obvious way, though defenders of the case argue it’s still too early to judge.
How the FTC Built a Case on Shaky Ground
The core of the FTC’s argument rested on a theory called potential competition. Meta wasn’t already competing with Within in VR fitness. But the FTC contended that Meta had been planning to build its own rival fitness app — and that by acquiring Within instead, it eliminated the competitive pressure its potential entry would have created. In antitrust law, this is known as a “potential competition” or “killer acquisition” theory. It’s notoriously difficult to prove.
According to The Verge‘s reporting, internal FTC staff recognized the difficulty early. Career attorneys in the Bureau of Competition flagged that the evidence of Meta’s independent plans to build a competing fitness app was thin. Some internal documents suggested Meta had explored the idea but never committed resources or set a timeline. That’s a critical distinction. Under established precedent, a potential competition case requires showing that the acquirer was not just theoretically capable of entering the market but was reasonably probable to do so absent the deal.
The FTC’s economists had their own problems. Economic modeling couldn’t clearly demonstrate that consumers would be harmed. VR fitness was — and still is — a tiny market. Supernatural had a modest user base. Competitors like FitXR and Les Mills Body Combat existed. The notion that Meta’s acquisition of one app among several would substantially lessen competition strained credulity, at least in the eyes of the judge who ultimately heard the case.
Judge Edward Davila of the Northern District of California ruled against the FTC in February 2023, finding that the agency had failed to prove its case. He wasn’t hostile to the theory in principle. But the evidence simply didn’t support it. Meta had not made concrete plans to build a Supernatural competitor. The market definition was fuzzy. And the FTC’s predictions about competitive harm were speculative.
The ruling was a stinging defeat. Not just because the FTC lost, but because of how it lost — on facts, not law.
So why did the agency push forward despite internal reservations? The Verge’s reporting suggests that Khan and her senior leadership team viewed the case as part of a broader strategy to establish new precedent around acquisitions by dominant tech platforms. The goal wasn’t just to block one deal. It was to send a message: that the FTC would challenge acquisitions in emerging technology markets before those markets matured, even if the legal theories were untested.
That’s a defensible policy instinct. Many antitrust scholars have argued for years that enforcers act too late — that by the time a market is clearly defined and dominance is clearly established, the competitive damage is already done. Khan’s FTC wanted to get ahead of the curve. The problem was execution.
Internal dissent was reportedly sidelined. Career staff who raised concerns about evidentiary gaps found their objections overridden by political appointees eager to bring the case. This dynamic — political leadership overruling career expertise — isn’t unique to Khan’s FTC. It happens across administrations and agencies. But in a high-profile antitrust case against one of the world’s most powerful companies, the margin for error is razor-thin. The FTC didn’t have that margin, and it pressed ahead anyway.
The consequences extended beyond the courtroom. The loss emboldened critics who argued that Khan’s FTC was more interested in making political statements than winning cases. It gave ammunition to those in Congress who questioned whether the agency was being responsible with its enforcement resources. And it may have weakened the legal foundation for future potential competition cases by producing an unfavorable judicial opinion.
Meta, for its part, closed the Within acquisition shortly after the ruling and folded Supernatural into its Meta Quest platform. The app continues to operate. The VR fitness market remains small but growing, with multiple competitors still active. There’s no counterfactual to test — we can’t know what would have happened if Meta had been forced to build its own app instead. But the competitive apocalypse the FTC warned about hasn’t arrived.
The broader context matters too. The Meta-Within case was one of several aggressive enforcement actions Khan’s FTC pursued against Big Tech. The agency also filed a major monopoly maintenance case against Meta over its acquisitions of Instagram and WhatsApp — a case that is still ongoing and carries far greater stakes. It challenged Microsoft’s acquisition of Activision Blizzard, another loss. And it took on Amazon in a sweeping antitrust complaint.
The pattern that emerged was of an agency swinging for the fences on every pitch. Sometimes that’s what enforcement requires. Markets don’t wait for regulators to build perfect cases. But the Meta-Within case stands out because the gap between ambition and evidence was so wide — and because the internal warnings were so clear.
There’s a deeper tension here that transcends any one FTC chair. American antitrust law was built for a different era. The consumer welfare standard that has dominated enforcement since the 1980s asks whether a deal will raise prices or reduce output. In digital markets where products are often free and competition is measured in attention, data, and platform control, that framework feels inadequate. Khan and the neo-Brandeisian movement she represents argued for a more structural approach — one that considers market power itself as a harm, regardless of short-term price effects.
That argument has intellectual merit. But courts apply existing law. And existing law demanded evidence that the FTC couldn’t produce in the Within case.
Andrew Ferguson’s FTC has signaled a different approach. Less focused on Big Tech specifically, more aligned with traditional consumer protection enforcement. Whether that means fewer cases against tech acquisitions or simply better-chosen ones remains to be seen. The Meta-Within episode will likely serve as a cautionary tale either way — a reminder that the decision to bring a case is itself a strategic choice with lasting consequences.
For the tech industry, the lesson is more ambiguous. Meta won this fight. But the scrutiny isn’t going away. The Instagram and WhatsApp case still looms. The European Union continues to pursue its own aggressive enforcement under the Digital Markets Act. And the basic question — whether a company that controls the dominant VR hardware platform should also be allowed to acquire the most popular apps on that platform — hasn’t been answered definitively.
The FTC tried to answer it in FTC v. Meta Platforms, Inc. and came up short. Not because the question was wrong. Because the case was.
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