The FTC is throwing a monkey wrench into Meta Platforms’ attempt to make a key acquisition.
When Mark Zuckerberg set his company on the path to the metaverse he must have known that there was no turning back.
Changing his company’s name from Facebook (a brand name that was recognized globally) to Meta drove the point home. Social media on devices with screens represents the past. The future lies in virtual reality.
He must have known also the path forward would be fraught with pitfalls, both technical and regulatory.
Meta’s stock has suffered immensely since as investors seem less certain about the future of the company amid rising expenses and shrinking profits.
Analysts estimated earlier this year that the company has already spent $16 billion on developing the metaverse, and Zuckerberg for his part has remained an ardent evangelist.
“I feel even more strongly now that developing these platforms will unlock hundreds of billions of dollars if not trillions over time,” Zuckerberg told analysts during the second quarter earnings’ call last July.
But the obstacles in Meta’s path to the metaverse are bigger than just technical and financial.
Regulators in the U.S., and potentially around the world, will also have a big say in the company’s journey.
FTC Case Moves Forward
Earlier this summer, the Federal Trade Commission said that it would be seeking to block Meta’s acquisition of virtual reality app Within Unlimited and its popular virtual reality dedicated fitness app, Supernatural.
“Instead of competing on the merits, Meta is trying to buy its way to the top,” said John Newman, FTC Bureau of Competition Deputy Director at the time.
“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.”
On Thursday, the agency said it will ask a judge to stop the acquisition through an injunction.
U.S. District Judge Edward Davila will hear arguments and testimony over a two week trial in San Jose, California, and Zuckerberg himself is listed as a potential witness, the Wall Street Journal reported.
The metaverse is supposed to be an immersive digital world, accessible through virtual reality hardware like VR headsets from Oculus, which Meta (Facebook) also purchased in 2014 for $2 billion.
But right now, the metaverse is pretty empty. It relies on developers making products and experiences that users will be willing to ditch their mobile and laptop screens for, and so far in its infancy it hasn’t really drawn a crowd yet.
Meta’s plan to purchase developers to help its virtual world is in line with the company’s previous strategy of buying popular competitors (Instagram and Whatsapp) instead of developing its own tech.
The FTC says that may have worked, with little pushback from the very same agency, in reality, but it doesn’t want that strategy to fly in virtual reality.
FTC vs Meta’s Future
The FTC cites Oculus in its complaint against Meta, saying that the company already sells the most widely used VR headset, operates one of the most popular VR app stores, and already owns a portfolio of popular VR apps, including Beat Saber, one of the best-selling VR apps of all-time.
If Meta is able to purchase Within, competition will invariably be stifled and “dampen innovation in the dynamic, rapidly growing U.S. markets for fitness and dedicated-fitness VR apps,” according to the FTC.
Meta did not immediately return a request for comment on the FTC’s actions.
“This is an illegal acquisition, and we will pursue all appropriate relief,” Newman said.