Meta is battling the US antitrust agency over the future of virtual reality

SAN JOSE, Calif./ WASHINGTON, Dec 8 (Reuters) – The Biden administration on Thursday accused Meta Platforms Inc ( META.O ) of trying to buy its way to dominance in the metaverse. Within Inc., the virtual reality software developer of Facebook parent.

The FTC filed a lawsuit in July to block the deal, saying Meta’s acquisition of Within would “tend to create a monopoly” in the virtual reality (VR) fitness app market. He asked the judge to grant a preliminary injunction that would stop the proposed operation.

In an opening statement, FTC attorney Abby Dennis said the Within acquisition is part of Meta’s bid to acquire new and more diverse virtual reality users, including customers of Within’s popular subscription-based virtual reality app Supernatural.

Dennis added that this will complement Meta’s existing virtual reality users, who tend to skew younger and male and are more focused on gaming.

“Meta could choose to use all of its great resources and capabilities to create its own dedicated VR fitness app, and it planned to do so before it acquired Inside,” Dennis said, hinting at a plan from early 2021.

The plan, Operation Twinkie, included expanding Beat Saber, a rhythm game app the company acquired in 2019 through a proposed partnership with digital fitness company Peloton ( PTON.O ), into the fitness space, Dennis said.

He cited an email from CEO Mark Zuckerberg, who said he was “bullish” on fitness and called the proposed partnership with Peloton “awesome.”

Lawyers for Meta and Within argued that the FTC did a poor job of defining the relevant market, saying the companies were competing with a range of fitness content, not just VR-focused fitness apps.

Meta’s lawyers also argued that plans for Meta’s proprietary VR fitness app went beyond low-level “brainstorming” and argued that the FTC underestimated competition in the market it defined, citing the potential of other tech giants Apple Inc ( AAPL ) they did O), Alphabet Inc ( GOOGL.O ) Google and Bytedance are joining the fray.

Rade Stojsavljevic, who runs Meta’s in-house VR software developer studios, testified that he proposed a tie-up between Beat Saber and Peloton, but did not develop a formal plan or discuss the idea with either party.

Internal documents from early 2021 shown in court showed Stojsavljevic proposing to buy VR developers before they were “cannibalized” by rivals and discussing pressure from Zuckerberg to “be aggressive” in response to news of a promising Apple headset.

The trial, scheduled for Dec. 20, will serve as a test of the FTC’s bid to eliminate what it sees as a repeat of the upcoming acquisition of smaller competitors, this time effectively buying its way to emerging dominance. virtual and augmented reality markets.

The FTC is also trying to force Meta to reverse its two previous acquisitions, Instagram and WhatsApp, in a 2020 lawsuit. Both companies were in relatively new markets when they were acquired.


A government victory could reduce Meta’s ability to maneuver in an emerging technology area that Zuckerberg has described as “the next generation of computing” — virtual and augmented reality.

If acquisitions in the space are blocked, Meta will face greater pressure to produce its own hit apps and forgo the gains in revenue, talent, data and control associated with bringing innovative developers to the company.

Under the enhanced Supernatural, it advertises itself as a “full fitness service” with “expert trainers,” “excellent directions” and “workouts choreographed to the best music available.”

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

Most of the more than 400 apps available in the Quest app store are produced by foreign developers. Meta Quest owns the most popular virtual reality app in the app store, Beat Saber, which it is considering expanding with a Peloton partnership.

The social media company agreed to acquire Within in October 2021, a day after it changed its name from Facebook to Meta, expressing its ambition to create an immersive virtual environment known as the Metaverse.

Zuckerberg will attend the trial as a witness. Other potential witnesses are CEO Chris Milk and Meta Chief Technology Officer Andrew Bosworth, who runs the company’s metaverse-focused Reality Labs division.

The trial is being held in the US District Court for the Northern District of California.

Reporting by Diane Bartz in Washington and Katie Paul in San Jose, Calif.; Edited by Alexandra Alper, Matthew Lewis, and Cynthia Osterman

Our standards: Thomson Reuters Trust Principles.

Diane Bartz

Thomson Reuters

Focuses on US antitrust as well as corporate regulation and law, with experience covering the war in Bosnia, elections in Mexico and Nicaragua, as well as stories from Brazil, Chile, Cuba, El Salvador, Nigeria and Peru.

Source link