FTC Lawsuit To Block Meta Acquisition Of VR Developer Within

The US Federal Trade Commission (FTC) continues to adopt a tougher stance against tech giants snapping up smaller rivals.

The FTC on Wednesday is suing to stop Meta from purchasing Within Unlimited, which is responsible for the virtual reality fitness app Supernatural.

In complaint filed in federal court, the FTC said Meta has the resources to build its own VR apps similar to those made by Within. But Meta said the move was “based on ideology and speculation, not evidence.”

Buying to the top

The FTC announced the decision to block the deal, and alleged that Meta is “trying to buy its way to the top” rather than compete on the merits in the VR-dedicated fitness app market.”

The FTC said that Meta is already a key player at each level of the virtual reality sector and alleges that Meta and Mark Zuckerberg “are planning to expand Meta’s virtual reality empire with this attempt to illegally acquire a dedicated fitness app that proves the value of virtual reality to users.”

“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.

“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,” said Newman. “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.”

The FTC complaint alleges that under the leadership of Zuckerberg, the company began its campaign to conquer virtual reality with the acquisition of headset manufacturer Oculus VR.

And fuelled by the popularity of its top-selling Quest headsets, Meta’s Quest Store has become a leading US app platform with more than 400 apps available for download.

Meta is betting heavily on virtual and augmented reality technologies with its so called Metaverse launched in July 2021.

But the firm is struggling to deal with intense competition and a declining advertising spend, and on Wednesday it posted its first ever revenue decline.

Facebook response

Meta spokesperson Stephen Peters told CNN in a statement that 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,” Peters said in the statement.

“By attacking this deal in a 3-2 vote, the FTC is sending a chilling message to anyone who wishes to innovate in VR,” he added. “We are confident that our acquisition of Within will be good for people, developers and the VR space.”

Instagram, WhatsApp

Meta is already locked in a battle with the FTC over its $1bn purchase of Instagram back in 2012, and WhatsApp for $19 billion in 2014.

Both of those purchases were cleared of antitrust issues at the time by the FTC, but in December 2020 during the last days of the Donald Trump presidency, Facebook was hit with two separate antitrust lawsuits over the WhatsApp and Instagram purchases.

One lawsuit came from the FTC, and a second lawsuit came from a coalition of attorneys general from 48 states and territories.

The FTC alleged Meta acted illegally to maintain its social network monopoly.

At the time Facebook claimed the lawsuits were nothing other than ‘revisionist history’, and in March 2021 Meta asked US District Judge James Boasberg in the District of Columbia to dismiss the antitrust lawsuits.

In June 2021 Judge Boasberg dismissed the initial FTC complaint, when he ruled that the FTC had failed to define a plausible market that Facebook monopolised, and suggested too loose of a percentage of market share it owned.

However he gave the FTC the chance to amend its complaint.

In August 2021 the FTC doubled down and amended its original complaint that Facebook “resorted to illegal buy-or-bury scheme to crush competition after a string of failed attempts to innovate.”

Then in a setback for Mark Zuckerberg, Judge James Boasberg in January 2022 rejected Facebook’s motion to dismiss the amended FTC complaint.

This case is still ongoing.

Earlier this month Facebook asked a US court for eight documents created by the FTC as part of its review of the company’s purchases of Instagram and WhatsApp in 2012 and 2014 respectively, which the regulator allowed to proceed back then.

Giphy purchase

And the FTC decision to oppose the purchases of Within, Instagram and WhatsApp, are not the only regulator pushback it is facing.

Meta remains locked in a bitter battle with the UK’s competition regulator, the Competition and Markets Authority (CMA), over Facebook’s $400m acquisition of GIF provider Giphy.

After its investigation of the deal, the CMA ruled that Facebook’s merger with Giphy would harm competition between social media platforms and remove a potential challenger in the display advertising market.”

Facebook objected strongly and in September 2021 said the British competition regulator had no authority to intervene on the matter, as Giphy was “a US company with commercial activities strictly limited to the US.”

Following that, the CMA fined Facebook £50.5 million ($69.6 million) for ‘deliberately’ breaching a compliance disclosure order imposed during its investigation into its purchase of Giphy.

Then in November 2021 the CMA ordered Facebook to sell-off Giphy after it decided the remedies offered by the American company did not answer its concerns.

But in December 2021, Meta confirmed it was appealing against the CMA decision, saying the evidence does not support the CMA finding that the deal is a threat to its rivals or could impact competition in display advertising

A couple of weeks ago judges with the Competition Appeal Tribunal sided with the UK regulator over the CMA’s decision, in five out of the six grounds.

However Meta won one of the six grounds relating to disclosures, leading to the CMA saying it will review its decision within a three month period.