SAN JOSE, Calif./WASHINGTON, Dec 8 (Reuters) – The Biden administration on Thursday accused Meta Platforms Inc. (META.O) to try to buy his way to dominance in the metaverselaunching a high-profile trial to try to stop parent Facebook from buying virtual reality app developer Within Inc.

The FTC filed a lawsuit in July to end the deal, saying Meta’s acquisition of Within would “tend to create a monopoly” in the market for virtual reality (VR) fitness apps. She asked the judge to order a preliminary injunction that would stop the proposed transaction.

In an opening statement, FTC attorney Abby Dennis said the acquisition of Within was part of Meta’s bid to acquire new, more diverse virtual reality users, including customers of the popular subscription-based virtual reality training app from Within, Supernatural.

This would complement Meta’s existing VR users, who tend to skew young and male, and focus more on games, Dennis added.

“Meta could have chosen to use all of its vast resources and capabilities to create its own dedicated VR fitness app, and it planned to do so before acquiring Within,” Dennis said, pointing to an early 2021 plan.

The plan, Operation Twinkie, involved expanding a rhythm game app called Beat Saber that the company acquired in 2019 into the fitness space through a proposed partnership with digital fitness company Peloton. (PTON.O)said Dennis.

She cited an email from chief executive Mark Zuckerberg saying he was “optimistic” about fitness and calling the proposed partnership with Peloton “awesome”.

Lawyers for Meta and Within argued that the FTC had mischaracterized the relevant market and said the companies competed with a range of fitness content, not just dedicated virtual reality fitness apps.

Meta’s attorneys also disputed that plans for a Meta-owned VR fitness app went beyond low-level “brainstorming” and argued that the FTC underestimated competition in the market it defined. , citing the potential of fellow tech giants Apple Inc. (AAPL.O)Alphabet Inc. (GOOGL.O) Google and Bytedance join the fray.

Rade Stojsavljevic, who manages Meta’s in-house VR app development studios, said he proposed the Beat Saber and Peloton tie-up but didn’t come up with a formal plan and never discussed it. the idea with one or other of the parties.

Internal documents from early 2021 that were displayed in court showed Stojsavljevic proposing acquisitions of VR developers before they could be ‘cannibalized’ by competitors and discussed Zuckerberg’s pressure to ‘get aggressive’ by response to reports of a future Apple headset.

The lawsuit, scheduled until Dec. 20, will serve as a test of the FTC’s bid to avoid what it sees as a repeat of the company’s acquisition of potential smaller rivals and effectively buying its way to dominance, this time in the nascent virtual and augmented reality markets.

The FTC is separately trying to force Meta to unwind two previous acquisitions, Instagram and WhatsApp, in a lawsuit filed in 2020. Both were in relatively new markets at the time the companies were purchased.

PRESSURE TO PRODUCE HIT APPS

A government victory could limit Meta’s ability to maneuver in an area of ​​emerging technology — virtual and augmented reality — that Zuckerberg has identified as the “next generation of computing.”

If prevented from making acquisitions in the space, Meta would face greater pressure to produce its own successful apps and forgo the gains – in revenue, talent, data and control – associated with the integration of in-house innovative developers.

Within developed Supernatural, which it bills as a “complete fitness service” with “expert trainers”, “beautiful destinations” and “workouts choreographed to the best music available”.

It’s only available on Meta’s Quest devices, which are headsets that deliver immersive digital visuals and audio that market research firm IDC estimates account for 90% of global reality hardware market shipments. Virtual.

The majority of the over 400 apps available in the Quest app store are produced by external developers. Meta owns the Quest app store’s most popular virtual reality app, Beat Saber, the app it was planning to expand with the Peloton partnership.

The social media company agreed to buy Within in October 2021, a day after changing its name from Facebook to Meta, signaling its ambition to create an immersive virtual environment known as the Metaverse.

Zuckerberg will be a witness at trial. Other potential witnesses are Within CEO Chris Milk and Meta CTO Andrew Bosworth, who heads the company’s metaverse-oriented Reality Labs unit.

The trial is being held in the U.S. District Court for the Northern District of California.

Reporting by Diane Bartz in Washington and Katie Paul in San Jose, California; Editing by Alexandra Alper, Matthew Lewis and Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.