US Government Sues Meta Platform Inc Who Wants to Dominate Virtual Reality Business

Mark Zuckerberg tried to prevent the FTC from dominating the metaverse. (photo: Instagram @zuck)

JAKARTA - The Joe Biden administration on Thursday, December 8 accused Meta Platforms Inc of trying to capitalize on its dominance in the metaverse. They are trying to prevent Facebook's parent company from buying virtual reality application developer Within Inc.

The FTC sued in July to terminate the deal, saying Meta's acquisition of Within would "tend to create a monopoly" in the market for virtual reality (VR) fitness applications. It has asked a judge to order a preliminary ruling that will stop the proposed transaction.

In opening statements, FTC attorney Abby Dennis said the acquisition of Within was part of Meta's bid to acquire new and more diverse virtual reality users, including subscribers to the popular subscription-based virtual reality training app Supernatural.

According to Dennis, this will complement the existing Meta virtual reality users, who tend to be young and male, and are more focused on games.

"Meta could choose to use all of its vast resources and capabilities to build its own custom VR fitness app, and they planned to do that prior to acquiring Within," Dennis told Reuters, pointing to a plan from early 2021.

“The plan, called Operation Twinkie, involves expanding the rhythm game app the company acquired in 2019 into the fitness space through a proposed partnership with digital fitness company Peloton,” said Dennis.

He cited an email from Meta's Chief Executive, Mark Zuckerberg, who said he was "bullish" on fitness and called the proposed partnership with Peloton "amazing."

Lawyers for Meta argue that the FTC is doing a poor job defining relevant markets and say the company is competing with a wide variety of fitness content, not just VR-only fitness apps.

Lawyers for Meta also argue that plans for Meta's VR fitness app have gone beyond low-level "brainstorming" and argue that the FTC underestimated competition in the markets it has designated, citing the potential for fellow tech giants Apple Inc, Alphabet Inc's Google and Bytedance to join forces.

The trials will serve as a test of the FTC's bid to prevent what it sees as a repeat of the company's attempts to acquire up and coming minor rivals and effectively buy its way to dominance, this time in nascent virtual and augmented reality markets.

The FTC separately tried to force Meta to drop its two previous acquisitions, Instagram and WhatsApp, in a lawsuit filed in 2020. Both were in relatively new markets at the time the companies were purchased.

A government win could hinder Meta's ability to maneuver in the realm of new technologies - virtual and augmented reality - that Zuckerberg has identified as "the next generation of computers."

If blocked from making acquisitions in the space, Meta will face greater pressure to produce its own hit apps and will give up the advantages - in terms of revenue, talent, data and control - associated with bringing innovative developers in-house.

In developed Supernatural, which is advertised as a "full fitness service" with "expert trainers", "beautiful targets", and "choreographed workouts to the best music available".

It is only available on Meta's Quest devices, which are headsets that offer immersive digital visuals and audio that market research firm IDC estimates account for 90% of global shipments in the virtual reality hardware market.

Most of the more than 400 apps available on the Quest app store are produced by external developers. Meta has the most popular virtual reality app on the Quest app store, Beat Saber, an app that will allegedly be expanded with the Peloton partnership.

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 immersive virtual environments known as metaverse.

Zuckerberg will testify at trial. Other potential witnesses are Inside CEO Chris Milk and Meta Chief Technology Officer Andrew Bosworth, who run the company's metaverse-oriented Reality Labs unit. The trial is in US District Court for the Northern District of California.