SAN JOSE, CALIFORNIA (AP) – Facebook parent Meta is sparring with government regulators in federal court over its pending acquisition of a virtual reality (VR) fitness company Within Unlimited.
Chief Executive Officer Mark Zuckerberg is expected to testify as a witness at the trial in San Jose, California.
At issue is whether Meta’s acquisition of the small company that makes a virtual reality fitness app called Supernatural will hurt competition in the emerging virtual reality market.
If the deal is allowed to go through, the Federal Trade Commission (FTC)argues, it would violate antitrust laws and dampen innovation, hurting consumers who may face higher prices and fewer options outside of Meta-controlled platforms.
Meta, the FTC argued in court this week, scrapped its own plans to enter the nascent VR fitness market in the summer of 2021 when it decided to buy Within.
Without the competitive threat of the tech giant’s entry into the market, the agency asserts, innovation stalls, hurting end users.
“The threat is what keeps firms going,” testified economist Hal Singer, a witness for the FTC.
“If I know there is a chance that someone could come in and steal my lunch,” he said, companies will innovate and constrain pricing.
But Meta said it had no concrete plans to create a competing app beyond the initial discussion stage, where it concluded it had no ability to do so. A vice president at Meta who leads its VR efforts Mark Rabkin, testified that while Meta could definitely build a VR fitness app, its chances of success would be “very low”.
“Achieving what Supernatural has achieved is remarkable and it would be very difficult for us to replicate that,” Rabkin said during a Zoom hearing on Friday.
Meta, in fact, has a history of trying – and often failing – to copy rival platforms or their features, sometimes when it’s not able to purchase a company or product outright.
Meta owns Instagram, which has a Stories feature, for instance, that is very similar to the Story feature on Snapchat. Meta also briefly redesigned Instagram this year to make it look more like rival TikTok, but scrapped the change after an outcry from users, including celebrities. The agency and Meta also disagree on how to define the market that Within’s popular app falls into.
The FTC defines it narrowly as “VR dedicated fitness apps”, while Meta’s definition includes a wider swath of competitors, many of which don’t need VR goggles to work – such as Peloton, for instance.
“Meta has talked about how they want to make virtual reality as ubiquitous as your cellphone,” said legal counsel Lee Hepner of the American Economic Liberties Project, an organisation that advocates for government action against business consolidation.
“It’s the next platform for widespread communication in Meta’s eyes.”