FTC Accuses Meta of Trying to Further Dominate Virtual Reality Ecosystem via Acquisition.
The Federal Trade Commission (FTC) filed suit against Meta Platforms, Inc. (fka Facebook), Mark Zuckerberg, and major virtual reality app developer, Within Unlimited, Inc., in the Northern District of California in July for violating antitrust laws. The agency alleges Meta’s attempted acquisition of Within, if consummated, would reduce competition and further Meta’s domination of the VR ecosystem by controlling both the platform and the apps. The FTC seeks a temporary restraining order and a preliminary injunction to prevent the acquisition.
On Aug. 24 the FTC agreed to drop Zuckerberg as a defendant but the case continues against Meta and Within. Zuckerberg has promised to not acquire Within personally or through any subsidiaries that he controls while the case is pending.
Meta has been at the forefront of the VR industry, valued by analysts at Valuates Reports at nearly $15 billion with potential to exceed $450 billion in 2030. Meta purchased Oculus VR, the market leader, in 2014 for $2 billion, according to Forbes. The company recently acquired seven of the top virtual reality app development studios, furthering its capabilities. Its most recent step in their expansion was the now-contested attempt to acquire Within and its Supernatural app which offers consumers VR workouts to music. Meta became a competitor to Within after acquiring Beat Games, maker of the VR Beat Saber game app. According to CNBC, Meta placed the Beat Games operation under the Oculus Studio division, but said it would operate independently from Prague.
Meta’s acquisition of Within would decrease competition in the VR market and relieve Meta of using its abundant resources to develop their own product, FTC says. By choosing to purchase the app rather than build their own, Meta would absorb a market participant rather than becoming a new one, undermining the goal of market competition.
Even if Meta does not enter the VR fitness market – and that’s unlikely – the possibility that a giant in the industry could possibly enter it encourages existing players to step up their competitive game. By sitting on the edge of the market, the FTC maintains, Meta inspires competition. The acquisition of Within and Supernatural would eliminate this pro-competitive element and remove the incentive for market players to innovate or improve their apps.
Meta responded to the complaint via press release, claiming Meta’s Beat Saber and Within’s Supernatural app do not compete. Beat Saber is a music and rhythm app; Supernatural is a guided exercise app. Therefore owning both would not reduce the incentive to innovate, the company maintains. Meta says it explored building its own VR fitness app, but concluded Apple and Peloton were far better positioned to bring their existing apps to the VR space. Lastly, Meta says its position on the edge of the fitness app industry does not stimulate competition as the FTC claims. The existing participants do not see Meta as a future competitor; the existing players focus on existing competitors, the company says, not potential ones.