Jul 27, 2022 - Technology

FTC sues Meta to stop it from acquiring VR fitness firm

Illustration of the facebook logo sitting on a scale
Illustration: Sarah Grillo/Axios

The Federal Trade Commission is suing Meta in an attempt to prevent the company from buying Within Unlimited, a virtual reality fitness company.

Driving the news: The FTC says Meta, Facebook's parent company, should not be allowed to acquire Within and its associated fitness app, Supernatural, because Meta is "already a key player at each level of the virtual reality sector," per a release.

Why it matters: The FTC under Lina Khan has made reeling in the power of tech giants a top priority, and a victory for the agency in this suit would cast a shadow over Meta's plan to pivot from social networking to metaverse-building.

Details: The FTC announced Wednesday it had voted 3-2 to file the complaint filed in California federal court seeking a temporary restraining order and preliminary injunction to halt the transaction, which Meta announced in October 2021 without terms disclosed.

  • The agency argues Meta already dominates the VR market, with "the top-selling device, a leading app store, seven of the most successful developers, and one of the best-selling apps of all time."
  • The complaint alleges CEO Mark Zuckerberg aimed to monopolize VR when it acquired Oculus VR, a headset maker, in 2014, followed by the purchase of seven VR development studios.
  • Meta could be a "potential entrant in the [VR] dedicated fitness app market," the agency argues, but instead it is buying Supernatural.

What they're saying: "Instead of competing on the merits, Meta is trying to buy its way to the top,” said FTC Bureau of Competition deputy director John Newman in a release.

  • "Meta already owns a best-selling virtual reality fitness app, and it had the capabilities to compete even more closely with Within’s popular Supernatural app. But Meta chose to buy market position instead of earning it on the merits.  This is an illegal acquisition, and we will pursue all appropriate relief."
  • If Meta entered the market in virtual reality fitness independently, it would increase consumer choice and innovation, the FTC argues.

The other side: "The FTC's case is based on ideology and speculation, not evidence. The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible," a Meta spokesperson said.

  • "The FTC is sending a chilling message to anyone who wishes to innovate in VR. We are confident that our acquisition of Within will be good for people, developers, and the VR space."

Between the lines: The FTC is still engaged in a lawsuit against Meta over its 2013 acquisitions of WhatsApp and Instagram, both which were approved by the agency at the time, arguing Meta sought to neutralize rivals by purchasing them.

  • Now the FTC appears to be trying a different approach: suing a tech company that's buying up smaller companies up for a new line of business it is trying to dominate — in this case, virtual reality — and arguing that the purchases squelch competition and harm consumers.
  • "The mere possibility of Meta’s entry has likely influenced competition in the virtual reality dedicated fitness app market," the FTC's release reads. "If Meta is allowed to buy Within, that competitive pressure will slacken. That lessening of competition violates the antitrust laws," according to the complaint.
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