The US competition regulator is suing to block Meta from acquiring a virtual reality fitness start-up, accusing the social networking giant of “illegally” trying to “buy its way to the top” of the nascent metaverse sector.
The Federal Trade Commission’s case centres on a deal struck last year by Meta, formerly known as Facebook, to acquire Within, the creator of a popular virtual reality fitness game, Supernatural. The app is one of the most popular on Meta’s virtual reality system, Meta Quest. The value of the transaction was not disclosed.
The FTC, led by president Joe Biden appointee and prominent Big Tech critic Lina Khan, has moved to stop the takeover, accusing Meta of using its power to cement its dominant position in the growing market.
“Instead of competing on the merits, Meta is trying to buy its way to the top,” said John Newman, the competition regulator’s deputy director for competition.
“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.”
The FTC filed for an injunction in a California court on Wednesday, seeking a temporary halt to the deal while it is investigated further. The five-member commission voted 3-2 to authorise the case.
Meta said the FTC’s complaint was based on “ideology and speculation, not evidence”.
“The idea that this acquisition would lead to anti-competitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible,” a Meta spokesperson said, noting that the FTC board — made up of five politically appointed commissioners — was split on whether the action was appropriate.
“By attacking this deal in a 3-2 vote, 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.”
The move is the first major lawsuit against Big Tech to emerge from the FTC under Khan, who has promised to curtail the power of the tech giants. Under previous leadership the FTC sued Facebook in an effort to unwind past acquisitions of WhatsApp and Instagram.
In May, the FTC confirmed Alvaro Bedoya to the commission, filling a seat that had been vacant since October and giving it a Democratic majority on the board for the first time in Khan’s tenure.
The regulator has said it would focus on scrutinising smaller acquisitions — rather than just multibillion-dollar deals — that might be laying the groundwork for domination of a new sector, snuffing out competition early.
The FTC argued VR fitness apps may be one such area that could have massive potential within the metaverse, the virtual world on which Meta chief executive Mark Zuckerberg has banked the company’s future.
The FTC referenced an email sent by Zuckerberg to executives in which he said the company must be “completely ubiquitous in killer apps”.
The FTC noted that — as well as acquiring the virtual reality hardware itself in a $2bn deal in 2014 — the company had acquired seven studios that were in the business of creating virtual reality experiences.
Most notably, the company acquired Beat Games, the group behind Beat Saber, another hugely popular fitness game. In its filing, the FTC said allowing Meta to acquire Within Unlimited would mean a “competitive rivalry that would be lost” between that title and Supernatural.