The US FTC said Meta snuffed out competition when it halted plans to create its own virtual reality fitness app and opted to buy Within Unlimited instead.
The US Federal Trade Commission says Meta Platforms Inc. stifled competition when it halted plans to create its own virtual reality fitness app and chose to buy Within Unlimited Inc. instead.
“Meta itself intended to enter — and was therefore a reasonably likely entrant — into the VR-dedicated fitness app market,” the agency said in a Monday court filing in its complaint to block the acquisition of Within by Meta.
The FTC is trying to persuade a federal judge to stop the deal because the agency believes it will lessen competition in the young virtual reality fitness market and violate antitrust laws. In the filing, the agency laid out the facts essential to its case: the acquisition will prevent the tech giant from entering the space via homegrown technology, depriving consumers of the benefit of adding another competitor in the market.
The FTC said that prior to the deal, the Within team expected Meta to try to enter the dedicated fitness app market. The tech giant had already hired Within’s product manager, so the startup developed competitive strategies for its app – called Supernatural – “with the specter of Meta’s potential entry in mind,” the company said. FTC.
Meta already had a VR rhythm game where users achieved goals to the beat of music, Beat Saber, and its founders were excited to expand their product into a dedicated fitness app, according to the filing. In early 2021, the Beat Saber team began planning and pitching the move internally.
“Meta already has engineers with the skills to both extend Beat Saber to fitness and to build a dedicated VR fitness app from scratch,” the filing said.
In March 2021, internal presentations focused on Beat Saber’s transition to a dedicated fitness app. In June, those efforts were put on hold when Meta decided to pursue a Within acquisition instead.
Meta revealed the acquisition in October, a day after announcing it would change its name from “Facebook” – a move that canonized a shift in the company’s focus from social media alone to building and marketing of a virtual world. The digital universe, or metaverse, built by Meta is its biggest new bet and what CEO Mark Zuckerberg touts as the future of how people connect online.
The FTC filed a lawsuit to block the deal in July, a move consistent with FTC Chair Lina Khan’s aggressive approach to antitrust enforcement. The FTC claims that Meta would eliminate future competition in a new market, often referred to as “nascent competition”. The agency rarely prosecutes using this legal theory given the difficulty of proving that a deal would reduce the potential of a young industry. The last time the FTC brought such a case, in 2015, involving sterilization technology, the agency lost.
From 2020 to September 2022, Meta spent $31 billion on the division working on the metaverse, Reality Labs. This includes the acquisitions of nine virtual reality application studios over the past three years. Meta already makes the most widely used virtual reality headset, Oculus, and its catalog of VR apps called Quest Store.
The FTC says the VR fitness market already has a high barrier to entry, which is made more difficult as Meta controls the App Store on the most popular headset.
“Buying Within wasn’t the only way Meta developed the production capabilities and expertise needed to create a premium VR fitness experience,” the agency said.
Meta must also submit an outline of his defense, ahead of a two-week hearing before U.S. District Judge Edward Davila in San Jose, Calif.
“As we approach next month’s hearing, we are confident that the evidence will show that our acquisition of Within will be good for people, developers and the VR space, which is experiencing stiff competition,” a doorman said. -word of Meta. “As we’ve said all along, the FTC’s case is based on ideology and speculation, not evidence. We are ready to plead our case in court.
Davila is expected to decide by the end of the year whether or not to block the deal while the FTC’s internal tribunal reviews the agency’s allegations that the merger is anticompetitive.
After the FTC withdrew some of its claims against the company, Meta asked the judge to dismiss the agency’s attempt to block the acquisition, saying it had failed to present the necessary evidence to show that the deal would harm competition in the nascent virtual reality industry. It is up to the judge to rule first on Meta’s motion for dismissal or on the agency’s request for an injunction blocking the takeover.
The FTC has filed a separate lawsuit against the merger in its domestic court, and an administrative judge has scheduled a trial for January.
The case is FTC v. Meta Platforms Inc., 22-cv-4325, US District Court, Northern District of California (San Jose).