Parent Facebook Meta is arguing with the United States Federal Trade Commission in federal court over its impending acquisition of virtual reality fitness company Within Unlimited
CEO Mark Zuckerberg is expected to testify as a witness at the trial in San Jose, California.
The question is whether Meta’s acquisition of the small company that makes a VR fitness app called Supernatural will hurt competition in the emerging virtual reality market. If the deal is allowed to go through, the FTC argues that doing so would violate antitrust laws and stifle innovation, hurting people who may face higher prices and fewer options outside of Meta-controlled platforms.
Meta, the FTC argued in court this week, scrapped its own plans to enter the nascent VR fitness market in the summer of 2021 when it decided to buy Within. But Meta says it had no concrete plans to create a competing app beyond the initial discussion phase, where it concluded it didn’t have the capacity to do so.
The agency and Meta are also at odds over how to define which market Within’s popular app belongs to. The FTC narrowly defines it as “dedicated VR fitness apps,” while Meta’s definition includes a wider range of competitors, many of which don’t require VR goggles to operate, such as Peloton, for example.
“Meta talked about how they want to make virtual reality as ubiquitous as your cellphone,” said Lee Hepner, legal counsel for the American Economic Liberties Project, an organization that advocates for government action against corporate consolidation. “It’s the next mainstream communications platform in Meta’s eyes.”
If the FTC can preserve and stimulate competition at this point, Hepner said, there are “different paths this market could take instead of Meta controlling the whole way, the whole forward trajectory of this market over the coming years”.
The FTC’s challenge to acquiring Meta reflects agency chair Lina Kahn’s aggressive stance on Big Tech and antitrust.
The case, which is expected to end on Tuesday, is being heard by U.S. District Judge Edward Davila, who also oversaw the trial of disgraced Theranos founder Elizabeth Holmes and her partner Ramesh “Sunny” Balwani. Both were sentenced to more than a decade in prison for their role in the company’s blood test hoax.
The FTC also sued this month to block Microsoft’s planned $69 billion takeover of video game company Activision Blizzard, saying it could suppress competition for Microsoft’s Xbox game console and its growing gaming business. subscription to games.
In 2020, the agency sued Meta, then called Facebook, for its acquisitions of instagram and WhatsApp which could force a spin-off from Instagram and WhatsApp. Unraveling these deals, which were made 10 and nine years ago, respectively — and previously approved by the FTC — may be more difficult than blocking the purchase of Within, which Meta and Within want to close by the end of the day. end of this year.
Under Zuckerberg, Meta aggressively dabbled in virtual reality in 2014 with its acquisition of headset maker Oculus VR. Since then, Meta’s VR headsets have become a cornerstone of its growth in the virtual reality space, the FTC noted in its lawsuit. Fueled by the popularity of its best-selling Quest headsets, Meta’s Quest Store has grown into a leading US app platform with more than 400 apps available for download, according to the agency.
Meta has purchased seven of the most successful virtual reality development studios and now has one of the largest catalogs of virtual reality content in the world, according to the FTC.