The Federal Trade Commission has filed a lawsuit against Meta and Within, the startup behind the VR fitness app Supernatural. The agency is asking a federal court for a preliminary injunction to stop the two companies from proceeding with an acquisition, alleging the deal would limit competition.
Meta announced its plans to acquire Within in October. The startup's VR fitness app Supernatural has been a surprise hit, and Mark Zuckerberg has called fitness a key part of his company's strategy to broaden the appeal of VR beyond hardcore gaming.
Through a series of key acquisitions and pricing strategies, Meta has turned its VR business into the market's most dominant platform, with a 90% market share in hardware, according to IDC, and subsidiaries behind some of the most successful VR apps, like best-selling rhythm video game Beat Saber. Acquiring yet more software makers could further cement that dominance, critics and regulators have contended.
The FTC alleges this acquisition would be harmful to consumers and competitors alike. “Instead of competing on the merits, Meta is trying to buy its way to the top,” said FTC Bureau of Competition Deputy Director John Newman in a statement. “Meta chose to buy market position instead of earning it on the merits. This is an illegal acquisition, and we will pursue all appropriate relief.” Meta would be able to close the acquisition of Within by the end of this month if no preliminary injunction is granted, according to the filing.
A Meta spokesperson called those arguments "not credible." "The FTC's case is based on ideology and speculation, not evidence," the spokesperson said in a statement provided to Protocol. "By attacking this deal in a 3-2 vote, the FTC is sending a chilling message to anyone who wishes to innovate in VR. We are confident that our acquisition of Within will be good for people, developers and the VR space.”
The agency further expanded on its position in the complaint itself. "If consummated, the acquisition would substantially lessen competition, or tend to create a monopoly, in the relevant market for VR dedicated fitness apps and the broader relevant market for VR fitness apps," the complaint states. "That lessening of rivalry may yield multiple harmful outcomes, including less innovation, lower quality, higher prices, less incentive to attract and keep employees, and less consumer choice."
The preliminary injunction is meant to give the FTC time to issue an administrative complaint against the merger, and then start full-blown administrative proceedings. Taking that step against a startup acquisition is part of the FTC's more aggressive stance against Big Tech, which includes a focus on emerging technologies.
FTC Chair Lina Khan told Protocol last month that AR and VR were especially important markets for the agency. "I think these types of nascent, expanding markets are definitely on our radar and top of mind," Khan told Protocol. "Especially in as much as VR or AR [are] also becoming a major part of how some of these games are functioning for users and [how] users are interacting."