FTC sues to block meta-VR deal as it takes on big tech

WASHINGTON — The Federal Trade Commission on Wednesday filed an injunction to stop Meta, the company formerly known as Facebook, from buying a virtual reality company called Within, potentially limiting the company’s push into the so-called metaverse and signaling a change in the way the agency approaches technology transactions.

The antitrust lawsuit is the first to be filed under Lina Khan, chairman of the commission and leading progressive critic of corporate concentration, against one of the tech giants. Ms Khan argued that regulators must end breaches of competition and consumer protection laws when it comes to cutting-edge technology, including virtual and augmented reality, and not just in areas where companies have already become giants.

The FTC’s injunction request puts Ms. Khan on a collision course with Mark Zuckerberg, managing director of Meta, who is also named as a defendant in the petition. It has invested billions of dollars in creating products for virtual and augmented reality, betting that the immersive world of the metaverse is the next technological frontier. The trial could serve these ambitions.

“Meta could have chosen to try to compete with Within on substance,” the FTC said. in his trial, which was filed in the United States District Court for the Northern District of California. “Instead, he chose to buy” a leading company in what the government has called a “vitally important” category.

In a statement, Meta said the FTC case was “based on ideology and speculation, not evidence. The idea that this acquisition would lead to anti-competitive results in a dynamic space with so many entries and growth that online and connected fitness is simply not credible.The company added that the lawsuit was an attack on innovation, with the agency “sending a chilling message to anyone who wants to innovate in virtual reality “.

Meta said it would acquire Within, which produces the wildly popular fitness app called Supernatural, last year for an undisclosed amount. The company promoted its virtual reality headsets for fitness and health purposes.

The lawsuit is part of a wave of actions against Meta and other big tech companies like Google, Apple and Amazon, which have come under increasing scrutiny for their power and dominance. Under Ms. Khan’s predecessor, the FTC filed a lawsuit against facebook who argued that the company ended nascent competition through acquisitions. The Department of Justice also sued Google whether the company has abused a monopoly on online research.

Other cases could happen. The FTC is investigating whether Amazon violated antitrust laws, and the Justice Department is investigating Google’s dominance over ad technology and Apple’s App Store policies.

Mr Zuckerberg has steered Meta away from its social media roots as the company’s apps, like Facebook and Instagram, face growing competition and issues such as privacy and misinformation.

To support the push into the metaverse, Mr. Zuckerberg has reassigned employees and named a top lieutenant in charge of the effort. It has also licensed lieutenants to sue some of the most popular games in the VR space. In 2019, Facebook bought Beat Gamescreators of the hit title Beat Saber, one of the best VR games on the Oculus platform.

Meta is expected to release its quarterly results later on Wednesday. The company recently cut employee benefits and limited spending in an uncertain economic environment.

The FTC’s decision could be seen as an attempt to learn from history. The agency approved Facebook’s 2012 acquisition of instagram, the photo-sharing app with over 1 billion regular users. Instagram helped Meta dominate the social media photo-sharing market, although other start-ups have sprung up since.

John Newman, deputy director of the FTC’s Competition Bureau, said the agency acted on the Within deal because Meta was “trying to buy its way to the top.” The company already had a top-selling virtual reality fitness app, he said, but then opted to acquire Within’s Supernatural app “to buy market position”. He called the deal “an unlawful acquisition, and we will pursue all appropriate remedies.”

The FTC’s vote to allow the filing was split 3-2.

This is news in development and will be updated.

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