Meta Battles U.S. Antitrust Agency Over Future of Virtual Reality
The Biden administration on Thursday kicked off a high-profile trial to try to prevent Facebook parent’s company Meta from buying a virtual reality app developer, arguing that the acquisition would “create a monopoly.”
The Federal Trade Commission sued in July to stop the deal for the developer, Within, which makes a popular subscription-based virtual reality workout app called Supernatural. The agency has asked the judge to order a preliminary injunction that would halt the proposed transaction.
The trial will serve as a test of the agency’s bid to head off what it sees as a repeat of the company buying its way to dominance, this time in the nascent virtual and augmented reality markets. When Meta acquired the social media companies Instagram and WhatsApp in 2012 and 2014, both were also in relatively new markets.
“Meta could have chosen to use all its vast resources and capabilities to build its own dedicated V.R. fitness app, and it was planning on doing that before it acquired Within,” an F.T.C. lawyer, Abby Dennis, said in an opening statement.
Ms. Dennis said the Within acquisition was part of Meta’s bid to acquire new and more diverse virtual reality users, including customers of Supernatural who tend to be older females. That would complement Meta’s existing virtual reality users, who tend to skew young and male, Ms. Dennis added.
A government victory could crimp Meta’s ability to maneuver in an area of emerging technology that Mark Zuckerberg, its chief executive, has identified as the “next generation of computing.”
If the deal is blocked, Meta would face greater pressure to produce its own hit apps and would give up the gains — in terms of revenue, talent, data and control — associated with bringing innovative developers in-house.
Supernatural is advertised as a “complete fitness service” with “expert coaches,” “beautiful destinations” and “workouts choreographed to the best music available.” It is available only on Meta’s Quest virtual-reality devices.
The majority of the more than 400 apps available in the Quest app store are produced by external developers. Meta owns the most app in the Quest store, Beat Saber, which it acquired in 2019.
Meta argued that the F.T.C. did a poor job of defining the relevant market, and that it competes with a whole range of fitness content, not just virtual-reality fitness apps.
It also said that the agency underestimated the competition in the market for dedicated virtual-reality fitness apps.
The social media company agreed to buy Within in October 2021, a day after changing its name from Facebook to Meta, signaling its ambition to build an immersive virtual environment known as the metaverse.
Mr. Zuckerberg will be a witness in the trial. Other potential witnesses are include Chris Milk, Within’s chief executive, and Andrew Bosworth, Meta’s chief technology officer who runs the company’s Reality Labs unit.
The trial is at the U.S. District Court for the Northern District of California.