FTC vs Meta: A Real Battle Over Virtual Reality

In July 2022, The Federal Trade Commission (FTC) filed a lawsuit against Meta trying to acquire Within Unlimited, the company that made the popular virtual reality fitness application Supernatural. This is because they believe that it would offer Meta dominance in the consumer VR market, which is reportedly a field of interest for Meta. After all, Meta has poured in quite a few resources into the VR sector over the past few years! The FTC mentioned a merger made by Meta in 2019 of Beat Saber along with the inclusion of Within Unlimited would effectively reduce a “beneficial rivalry”.

Reportedly, the Lina Khan-led FTC initially had some internal disagreements on whether to intervene in the deal. This attempt though doesn’t match up with previous takeovers made by Meta (formerly Facebook) which went through relatively smoothly, for example the 2014 acquisition of VR startup Oculus.

However, based on orders that were posted on 31st January, 2023 (Wednesday) a California judge overruled the FTC’s request to block the deal and announced that Meta would be permitted to conclude the acquisition (in an unsealed ruling). Additionally, the judge said the FTC would have a week to appeal the decision. This would include a status hearing on 7th February 2023.

TechDogs-"An image of the Federal Trade Commission Building"

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At the time, when responding to The Verge on their request for a comment, Douglas Farrar, FTC Director of Public Affairs said, “Out of respect for the court’s orders, the FTC is not in a position to comment at this time.”

Excerpts from the ruling read as, “Though Meta boasts considerable financial and VR engineering resources, it did not possess the capabilities unique to VR dedicated fitness apps, specifically fitness content creation and studio production facilities,” and, “As a VR platform developer, Meta can enjoy many of the promising benefits of VR fitness growth without itself intervening in the VR fitness app market.”

On the other hand, of course Meta contested the court case in July. Ultimately in December they agreed to wait till 31st January to conclude the acquisition. Although during a hearing, Meta CTO Andrew Bosworth said the deal could be off if it “doesn’t close in a timely manner.”

TechDogs-"An image of Stephen Peters, Spokesperson for Meta"

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Post the January 31st ruling of the Californian judge in favor of Meta, Stephen Peters, spokesperson for the company said, “We are pleased that the Court has denied the FTC’s motion to block our acquisition of Within,” adding, ”This deal will bring pro-competitive benefits to the ecosystem and spur innovation that will benefit people, developers, and the VR space more broadly. We look forward to closing the transaction soon.”

As per the status hearing, which was scheduled for 7th February, the FTC decided not to appeal the decision. The unsuccessful attempt of the FTC to stop the merger becomes one of the first big losses of Chair Lina Khan as the agency head. Despite this, an FTC official reportedly highlighted that the ruling agreed that courts should make note of potential harm to competition in future merger cases. Regarding the FTC’s decision to not appeal, Meta refused to comment.

What do you think of the court’s decision on greenlighting Meta’s acquisition, and do you think it creates harm to competition in the VR industry? Let us know in the comments below!

First published on Wed, Feb 8, 2023

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