The US Federal Trade Commission said that Meta Platforms Inc. disrupted competition in the market when it abandoned plans to create its own virtual reality fitness app and instead decided to buy Within Unlimited Inc.

“Meta herself had intentions of leaving [на рынок] — and thus become a likely entrant — in the niche VR fitness app market,” the FTC said Monday in court in its own lawsuit to block Meta’s acquisition of Within.

The commission is trying to convince a federal judge to block the deal, saying the acquisition would reduce competition in the fledgling virtual reality fitness market and violate antitrust laws. The lawsuit’s key argument is that the acquisition would prevent the tech giant from entering the market with its own technology and becoming another player, fueling competition.

The FTC said that before the operation, the Within team had been waiting for Meta to enter the specialty fitness app market. The tech giant has already hired a chief product officer from Within, so the startup has developed competitive strategies for its app, called Supernatural, “with the prospect of a potential entry into the Meta market,” the FTC said in a statement.

Meta already owned Beat Saber, a virtual reality rhythm game in which users hit targets to the beat of music, and its founders were excited to turn their product into a dedicated fitness app, the statement said. In early 2021, the Beat Saber team began to plan and outline this process within the company.

Course

Frontend development

Earn from $1,800 in two years and learn in your spare time

REGISTER!

“Meta already has engineers with the skills to both expand Beat Saber into fitness and build a dedicated virtual reality fitness app from the ground up,” the filing said.

As of March 2021, internal presentations focused on transforming Beat Saber into a dedicated fitness app. By June, that effort was shelved and Meta decided to acquire Within instead.

Meta announced the purchase in October, a day after announcing a name change from Facebook, a move that underscored the company’s shift in focus from social media to creating a commercialized virtual world. The digital universe, or metauniverse, that Meta is creating is its biggest new bet – Mark Zuckerberg is positioning it as the future of human communication on the Internet.

In July, the FTC sued to block the deal. The Commission finds that Meta is deliberately eliminating nascent competition in a new market. The agency rarely brings lawsuits using this legal language because it is difficult to prove that the deal will undermine the potential of the fledgling industry.

From 2020 to September 2022, Meta spent $31 billion on the Reality Labs division working on the metaverse. The amount includes the acquisition of nine virtual reality software studios over the past three years. Meta makes Oculus’ most popular and widely used virtual reality headsets, offering a catalog of VR apps called the Quest Store.

The FTC says the virtual reality fitness market already has a high barrier to entry, compounded by Meta’s control of the app store on the most popular headset.

“Acquiring Within was not the only way Meta could develop the manufacturing capabilities and expertise needed to create a world-class VR fitness experience,” the agency said in a statement.

Meta is scheduled to present its defense plan ahead of a two-week hearing before U.S. District Judge Edward Davill in San Jose, California. A judge is expected to decide whether to block the deal by the end of the year.

“As we approach next month’s hearing, we are confident that the evidence will show that our acquisition of Within will benefit people, developers and the highly competitive virtual reality space,” said a Meta spokesperson. “As we’ve said from the beginning, the FTC’s case is based on ideology and assumptions, not evidence. We are ready to present our position in court.”

After the FTC withdrew some of its claims against the company, Meta asked a judge to throw out the commission’s attempt to block the acquisition, saying it had not made a convincing showing of competitive harm to the nascent virtual reality industry from the deal. The judge must decide whether to rule first on Meta’s motion to dismiss the case or on the FTC’s request for a takeover injunction. The commission also launched an internal takeover process, and an administrative judge set a trial for January.

Judge gives green light to FTC lawsuit against Meta, which accuses the company of monopolizing the social media market

Source: Bloomberg