Meta is in a legal dispute with the US antitrust authority FTC. And it’s defending itself with an unusual argument.
At the end of 2021, the FTC launched an investigation against Meta and blocked the acquisition of VR studio Within, which develops the successful fitness app Supernatural. Meta had announced the acquisition in October 2021.
Just under two years earlier, Meta acquired the team behind Beat Saber, the best-selling VR game that kickstarted the VR fitness trend in 2018.
The FTC alleges that through these acquisitions, Meta is trying to monopolize the VR fitness market. “Instead of competing on the merits, Meta is trying to buy its way to the top,” Office of Competition Deputy Director John Newman said over the summer. He said the FTC would take “all appropriate relief” to prevent the “illegal acquisition” and filed a complaint.
Meta admits a serious omission
In Meta’s defense submission, which is freely available online, attorneys lay out the reasons for Within’s acquisition of Meta. Among other things, the court documents state that the company has no experience in fitness, has limited and irreplaceable resources of VR developers, and has never successfully developed a VR app from scratch. For this reason, Meta did not even attempt to develop its own VR fitness app.
Brutal. ? This is Meta arguing that “Meta has […] no history of successfully building VR apps from scratch.”; from its response brief in the Within case.
– NyaVR (@nya_vr_) November 14, 2022
The argument is not far-fetched. Meta’s VR app attempts have not gone over well. From the inherently cool but underutilized Facebook Spaces to the current prime example, Meta’s proto-metaverse Horizon Worlds, which recently saw its targeted user numbers cut in half and continues to generate ridicule and negative headlines.
When Meta has had success with VR apps, they or their developers have always been acquired. The company has acquired nine VR studios since late 2019, including Within, whose acquisition is currently on pause.
The FTC does not want to repeat a momentary mistake
Meta’s argument is double-edged, as it could equally be interpreted in favor of the FTC. After all, contrary to claims, Meta would certainly have the resources to build a development team – even if the acquisition is a much easier path to the top of the VR fitness market.
Meta is not known for innovation. Rather, it’s known for buying up promising startups early on and shamelessly copying ideas from competitors. The acquisition of Instagram and Whatsapp paved the way for Mark Zuckerberg’s social media empire. The FTC did not intervene then and does not want to repeat the same mistake should the Metaverse indeed become the successor to the Internet and the next wave of social technology.
But Meta’s omnipotence is crumbling: Facebook and Co. user numbers are no longer growing as fast as they used to, and social usage is shifting in favor of TikTok. These and other difficulties are currently giving Meta a hard time and have caused the group’s stock to plummet over the past year. It is quite possible that the court will take these circumstances into account.