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FTC Sues Meta to Stop Its ‘Path Toward Dominance’

July 27, 2022 by Madeline Hughes
FTC Sues Meta to Stop Its ‘Path Toward Dominance’
Mark Zuckerberg (Photo by Dan McCue)

WASHINGTON — The Federal Trade Commission is attempting to block Meta, formerly known as Facebook, from purchasing a virtual reality fitness application in what the commission says is the company’s quest to buy its way to the top.

“Instead of competing on the merits, Meta is trying to buy its way to the top,” said John Newman, deputy director of the Bureau of Competition, in a statement. “Meta already owns a best-selling virtual reality fitness app, and it has the capabilities to compete even more closely with Within’s popular Supernatural app. … This is an illegal acquisition, and we will pursue all appropriate relief.”

Meta is attempting to purchase Within Unlimited and its fitness application, Supernatural. In a 3-2 vote the commission voted to stop the sale, saying Meta has no need to buy the company to grow. It just wants to crush the competition.

“If consummated, the acquisition would substantially lessen competition, or tend to create a monopoly, in the relevant market for [virtual reality] dedicated fitness apps and the broader relevant market for VR fitness apps,” according to the complaint filed with the U.S. District Court for the Northern District of California to stop the transaction. “That lessening of rivalry may yield multiple harmful outcomes, including less innovation, lower quality, higher prices, less incentive to attract and keep employees, and less consumer choice.”

Meta refutes 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. 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,” a company spokesperson said in an email statement.

Supernatural is a virtual reality fitness application that allows people to transport their workouts around the world to places like the Galapagos Islands, all while listening to music from artists including Katy Perry, Imagine Dragons, Lady Gaga and Coldplay. Meta already has a virtual reality fitness app called the Beat Saber app, which it purchased in 2019. Those two apps in competition help inspire better services, according to the commission.

The complaint also attempts to lay out how this potential acquisition is part of a larger strategy to buy and squash the competition.

“This is not by accident; Meta has an explicit strategy,” the complaint states with the continuation of the sentence blacked out. 

“Meta could have chosen to try to compete with Within on the merits; instead, Meta decided it preferred to simply buy … in a vitally important … category,” the complaint said, blacking out the words describing what Meta bought in what category.

Meta has a vast array of applications including two of the top social media companies: Facebook and Instagram. The company also owns WhatsApp, a popular messaging service. The company pivoted from just owning social media applications to also virtual reality in 2014 when it purchased Oculus, a company known for its virtual reality headsets.

“Indeed, Mr. Zuckerberg has made clear that his aspiration for the VR space is control of the entire ecosystem. As early as 2015, Mr. Zuckerberg instructed key Facebook executives that his vision for ‘the next wave of computing’ was control of apps and the platform on which those apps were distributed, making clear in an internal email to key Facebook executives that a key part of this strategy was for his company to be ‘completely ubiquitous in killer apps’ — significant VR apps that prove the value of the technology.

In that same email, Mr. Zuckerberg told his executives that Facebook should “us[e] acquisitions opportunistically,” according to the complaint.

Buying the virtual reality application “would be one more step along that path toward dominance,” according to the complaint.

This lawsuit comes at a time when the dominance of large tech companies, including Meta, is coming under increasing scrutiny.

Antitrust legislation aimed at tech companies has grown support on Capitol Hill. Sen. Amy Klobuchar, D-Minn., said Wednesday during the Commerce Committee’s hearing the bipartisan bill was “promised a floor vote.”

Madeline can be reached at maddie@thewellnews.com and @MadelineHughes

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