SAN JOSE, Calif. (AP) – Facebook parent company Meta is fighting in federal court with the U.S. Federal Trade Commission over its upcoming acquisition of virtual reality fitness company Within Unlimited
CEO Mark Zuckerberg is expected to testify 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 burgeoning virtual reality market. If the deal goes through, the FTC argues, it would violate antitrust laws and dampen 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 burgeoning VR fitness market in the summer of 2021 when it decided to buy Within. But Meta says it has no concrete plans to develop a competing app beyond the initial discussion stage, where it concluded it was unable to do so.
The agency and Meta also disagree on how to define the market into which Within’s popular app falls. The FTC narrowly defines it as “VR-dedicated fitness apps,” while Meta’s definition encompasses a broader constituency of competitors, many of which don’t require VR goggles to function — like Peloton, for example.
“Meta has been talking about how they plan to make virtual reality as ubiquitous as your cell phone,” said Lee Hepner, legal counsel for the American Economic Liberties Project, an organization that advocates for government action on corporate consolidation. “In Meta’s eyes, it’s the next platform for wide-ranging communication.”
If the FTC can sustain and encourage competition at this stage, Hepner said there are “different avenues this market could take rather than Meta controlling the entire path, the entire forward motion of this market for the next several years.”
The FTC’s challenge to the meta-acquisition reflects agency chairwoman Lina Kahn’s aggressive stance on big tech and antitrust law.
The case, which is expected to close Tuesday, will be heard by US 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 over a decade in prison for their role in the company’s blood test scam.
The FTC also sued this month to block Microsoft’s proposed $69 billion acquisition of video game company Activision Blizzard, saying it could stifle competition for Microsoft’s Xbox gaming console and growing gaming subscription business.
In 2020, the agency Meta, then called Facebook, sued over the Instagram and WhatsApp acquisitions that could force Instagram and WhatsApp to be spun off. Uncovering those deals, made 10 and nine years ago respectively — and previously approved by the FTC — could be more difficult than blocking the purchase of Within, which Meta and Within plan to close by the end of this year.
Under Zuckerberg, Meta aggressively moved into virtual reality in 2014 with the acquisition of headset maker Oculus VR. Since then, Meta’s VR headsets have become the cornerstone of its growth in the virtual reality space, the FTC found 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 downloadable apps, according to the agency.
Meta bought seven of the most successful virtual reality development studios and now has one of the largest virtual reality content catalogs in the world, according to the FTC.
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