Facebook parent Meta’s purchase of a VR startup is being challenged by the FTC

Facebook parent Meta’s purchase of a VR startup is being challenged by the FTC

Facebook: It is the first time the Federal Trade Commission has taken a tougher approach to Silicon Valley deals involving newer technologies. It has blocked Meta, the parent company of Facebook, from acquiring virtual reality company Within.

Originally filed in federal court Wednesday, the FTC claims Meta has the resources to build virtual reality apps like Within’s Supernatural, a virtual fitness program. According to the FTC, Meta (FB) wants to buy the upstart company, which “disappears” future innovation and competition.

As part of its enforcement of US antitrust laws, the agency charged the company with illegally expanding its virtual reality empires.

As Meta begins to build out use cases for its VR headsets, the lawsuit comes at a time when the company has been betting heavily on virtual and augmented reality technologies. On Meta’s headset, Supernatural is one of the most popular apps, sometimes introducing users to virtual reality exercises.

According to John Newman, Meta is buying its way to the top instead of competing on merit. The acquisition is illegal, and all appropriate measures will be taken.”

It was just speculation and ideology that led the FTC to pursue this case, said Meta spokesperson Stephen Peters in a statement.

In a dynamic market with as many entries and growth as online and connected fitness, Peters said this acquisition will not lead to anticompetitive effects. Our acquisition of Within will be good for people, developers, and the virtual reality market. The FTC’s 3-2 vote sends a chilling message to anyone seeking to innovate in VR.”

In its complaint, the FTC claimed the deal would reduce Meta’s incentive to compete with Supernatural or improve Beat Saber, a Meta-owned VR app that occupied a similar space to a fitness app. The deal does not pose competitive harm, Meta wrote in a blog post addressing the complaint.

According to Meta, Beat Saber and Supernatural are fundamentally different products with different users, uses, and competitive dynamics. The leadership team at Within strongly believes Beat Saber or other casual VR games are not Within being competitors – they are Pelotons and other established fitness brands.”

It has been years since Meta acquired Instagram and WhatsApp, but the FTC is now seeking to break up the tech giant. It is also at a time when lawmakers are considering legislation to limit the power of dominant giants such as Meta, which are becoming increasingly dominant in the technology sector.

The company acquired VR headset maker Oculus in 2014 when it was still known as Facebook. It has acquired VR-related companies, including Unit 2 Games and Beat Games, which developed Beat Saber, more recently. Meta announced in October 2021 that it would acquire Within for an undisclosed sum.

Supernatural was released in April 2020 by within, a six-year-old company developing VR apps. For users to continue working out in virtual space, they must pay $19 per month or $180 per year, instead of simply paying a one-time fee.

The FTC alleges that Meta controls one of the best-selling VR apps of all time, the top-selling device, and a leading app store. According to the agency, Zuckerberg told Meta executives in a publicly-reported email that he believes it is “crucial for Meta to be ubiquitous in killer apps,” meaning apps that demonstrate new technologies’ value.

Moreover, the Federal Trade Commission notes Meta’s Beat Saber app outpaces Supernatural in some areas, adding that “if the acquisition goes forward, these two companies will lose their competitive rivalry, which would enhance user engagement.”

Charlotte Slaiman, competition policy director at Public Knowledge and a former FTC antitrust official, says the FTC’s main argument – that the deal would reduce competition – reflects decades of antitrust thinking.

That is often the strongest legal argument offered under today’s law, according to Slaiman. However, I believe that they are also taking these games seriously in terms of their role as ‘killer apps’ that will sweep the metaverse.

Meta’s potential for dominating the virtual reality market is recognized in the complaint, according to Slaiman. In this case, it is reassuring to see the FTC moving forward without waiting to see what happens.”

As a result of the FTC’s complaint, Slaiman said Congress might be pressured to pass antitrust legislation that might erect new barriers between the multiple lines of business managed by tech giants.

It has yet to be placed on the Senate floor agenda by Senate Majority Leader Chuck Schumer, but proponents face a tight time window before Congress breaks for summer vacation.