In a landmark legal challenge to a Big Tech merger, the Federal Trade Commission is suing to block the deal.
Federal regulators and Facebook parent Meta are fighting over Meta’s proposed acquisition of virtual reality company Within Unlimited and its fitness app Supernatural.
In a landmark legal challenge to a Big Tech merger, the Federal Trade Commission is suing to block the deal, saying it would harm competition and violate antitrust laws.
Meta responded Thursday, asking a federal court in San Jose, California, to dismiss the FTC’s July request for an injunction against the takeover.
The tech giant said in its court filing that the government failed to establish that the virtual reality market is concentrated with high barriers to entry. The claims in the agency’s lawsuit “are nothing more than speculation by the FTC about what Meta might have done,” the company says. He claims the FTC failed to meet two key legal standards set forth in previous cases.
In a statement Thursday, the FTC noted that it revised its complaint last week in a way that narrowed the focus of its allegations. In its new form, the statement read: “We are confident that the District Court’s lawsuit will not be dismissed and this case will be heard.”
Meta, in his own statement, said: “The FTC’s attempt to fix its ill-conceived complaint still ignores the facts and the law, and is based on pure speculation of a hypothetical future state.”
He added that he thinks the complaint should be dismissed because there is “vibrant competition in the fitness space and all around (virtual reality), and our acquisition of Within will be good for people, developers and the VR space.”
The FTC vote last summer to try to block the Within acquisition was 3-2, with Chair Lina Khan and the other two Democratic commissioners approving and the two Republicans opposing.
The original FTC lawsuit named CEO Mark Zuckerberg as a defendant, as well as Meta, but it was dismissed in August.
Under Zuckerberg’s leadership, Meta began a drive to conquer virtual reality in 2014 with the acquisition of headset maker Oculus VR. Since then, Meta’s VR headsets have become a cornerstone of its growth in the virtual reality space, the FTC said in its lawsuit. Fueled by the popularity of its best-selling Quest headsets, Meta’s Quest Store has become a leading app platform in the US with more than 400 apps available for download, according to the agency.
Meta bought seven of the most successful VR development studios and now has one of the largest VR content catalogs in the world, the FTC says. The acquisition of the Beat Games studio gave Meta control of the popular Beat Saber app.
In its lawsuit against the Within acquisition, the FTC cited a 2015 email from Zuckerberg to key Facebook executives that said his vision for “the next wave of computing” was control of applications as well as the platform on which those applications are distributed. The email says that a key part of this strategy is for the company to be “completely ubiquitous in killer apps,” which are apps that demonstrate the value of technology.
Zuckerberg announced ambitious plans a year ago to build the “metaverse,” a virtual reality construct intended to supplant the Internet, merge virtual life with real life, and create endless new playing fields for all.
On Tuesday, the Menlo Park, California-based company unveiled a $1,500 virtual reality headset that it hopes people will soon wear to work and play in the metaverse.
The action marked a new salvo by the FTC against Meta, the owner of Instagram, Messenger and WhatsApp as well as Facebook, in the agency’s campaign against what it sees as anti-competitive behavior in the tech industry.
The FTC filed an antitrust lawsuit against Facebook in late 2020. With that action, the agency is seeking remedies that could include a forced spin-off of Instagram and WhatsApp, or a restructuring of the company.