Bloomberg Law
Free Newsletter Sign Up
Login
BROWSE
Bloomberg Law
Welcome
Login
Advanced Search Go
Free Newsletter Sign Up

FTC Sues Meta to Block Takeover of Fitness App Maker Within (2)

July 27, 2022, 6:38 PM

The US Federal Trade Commission sued to block Meta Platforms Inc. from acquiring virtual reality company Within Unlimited, saying the transaction would allow the social network to dominate the burgeoning virtual reality space.

The FTC said the acquisition of Within, which develops apps for VR devices, including the popular fitness app Supernatural, would “tend to create a monopoly,” according to the complaint, which was filed in federal court in San Francisco Wednesday.

Meta has made a number of acquisitions, most of them small, to bolster its offering in virtual and augmented reality. Chief Executive Officer Mark Zuckerberg believes that in the future, the company will popularize a metaverse -- a more immersive version of the internet, where people can populate an alternative virtual world to go shopping, go to work and see friends.

For more: Facebook Changes Name to Meta in Embrace of Virtual Reality

Meta, which announced its plan to buy Within in October, is the world’s top VR headset maker with its Oculus product controlling about 80 percent of the market, according to research firm IDC.

Virtual reality is a small but growing slice of the consumer technology industry. Meta has identified the space as its next big bet, requiring big investment. The company’s Reality Labs division reported an operating loss of $10.2 billion in 2021, and Zuckerberg has said that investments in virtual and augmented reality will lead to “significant” losses early on.

“Mr. Zuckerberg has made clear that his aspiration for the VR space is control of the entire ecosystem,” the FTC said in the complaint. “The proposed acquisition of Within would be one more step along that path toward dominance.”

The FTC has also sued Meta over its 2012 acquisition of photo-sharing app Instagram and the 2014 WhatsApp transaction, arguing the company sought to buy up nascent competitors to keep them from challenging Facebook, its social networking product. That lawsuit, filed in 2020, remains ongoing. Meta argues that the transactions were lawful.

“The FTC’s case is based on ideology and speculation, not evidence,” said Meta spokesperson Christopher Sgro. “The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible.”

The antitrust agency has faced significant criticism from Congress and antitrust advocates for allowing the biggest tech companies to acquire startups that might grow into rivals. In a 2021 report, the FTC found the five tech giants -- Alphabet Inc., Apple Inc., Amazon.com Inc., Microsoft Corp. and Meta -- acquired hundreds of smaller firms over the previous decade, often using loopholes in antitrust law to avoid notifying antitrust regulators about the deals.

Earlier: Facebook Internal Memo on Rivals Undercuts Antitrust Defense

Meta reports second-quarter earnings after the market close on Wednesday. Analysts expect a 29.6% decline in earnings per share on flat revenue compared with a year earlier due to a slowdown in advertising spending that’s left technology giants competing for fewer marketing dollars.

The FTC voted 3-2 along party lines to bring the case, with the agency’s two Republican commissioners opposed. The FTC asked the court to temporarily halt the transaction, which Facebook said it plans to close on July 31. The agency also sought an injunction blocking the deal on antitrust grounds.

The case is FTC v. Meta Platforms Inc., 22-cv-4325, US District Court for the Northern District of California (San Francisco).

(Updates with additional details from seventh paragraph)

--With assistance from Joel Rosenblatt.

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Alex Barinka in Los Angeles at abarinka2@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Joe Schneider, Sara Forden

© 2022 Bloomberg L.P. All rights reserved. Used with permission.