The Federal Trade Commission is keeping its promise to look into Big Tech, though antitrust lawyers say its new attempt to block Meta’s (META) “campaign to conquer virtual reality” is a long shot.
In a lawsuit filed Wednesday, the FTC asked a judge to temporarily halt Meta’s acquisition of virtual reality company Within Unlimited – the creator of the popular exercise app “Supernatural.” This deal, along with Meta’s 2014 acquisition of headset maker Oculus VR, aligns with Meta’s broader ambition to position itself as the core developer of the nascent digital 3D world known as the Metaverse.
The FTC’s lawsuit relies on two potentially difficult arguments that require it to identify markets that are still in their infancy. The problem is common for antitrust watchdogs in the fast-moving tech sector where it can be difficult to define the scope of a still-developing market, says Temple University law professor Erika Douglas.
“I think the FTC has the toughest case to make, but that doesn’t mean they shouldn’t argue it,” Douglas said. “They want the law to change in that direction.”
In its lawsuit, the FTC argues that the deal would stifle competition in two markets for VR fitness apps: the narrower market for dedicated VR fitness apps, like Supernatural, and the broader market for ancillary VR fitness apps. , such as Meta’s Beat Saber, which Meta acquired when it purchased Beat Games in 2019.
“This diminished rivalry can have multiple detrimental effects, including less innovation, lower quality, higher prices, fewer incentives to attract and retain employees, and less choice for consumers,” the report says. FTC lawsuit.
In response to the lawsuit, Meta’s spokesperson told Yahoo Finance that the FTC case was based on ideology and speculation rather than evidence.
“The idea that this acquisition would lead to anti-competitive results in a dynamic space with as much entry and growth as online and connected fitness is simply not credible. Attacking this deal in a 3- 2, the FTC sends a chilling message to anyone who wants to innovate in virtual reality,” the spokesperson said in an email.
Admittedly, the outcome of the case is difficult to predict at this early stage. Still, the FTC could face an uphill battle due to its so-called nascent competitive arguments – i.e. the agency argues that Meta wants to buy Within because its potential innovation threatens Meta’s dominance.
“Typically, these kinds of incipient competitive challenges would relate to mergers in areas where the development pipeline is long and predictable, such as medical devices or drugs, or pesticide cultivation…where the writing is on the wall that the one of the parties will start to compete with each other. with each other,” says Douglas.
In Meta’s case, she explains, it’s not so clear that he was planning to enter the dedicated fitness market.
“It makes the case a little different … and more difficult for the FTC,” she said.
The agency’s broader claim challenging the ancillary market where Meta already competes, she says, shows it is hedging its bets.
Barak Richman, a law professor at Duke University School of Law, echoed that skepticism, noting that this “isn’t the kind of case the FTC has consistently won in the past.”
Still, he says, the agency has a compelling case to make in that Meta has other VR capabilities, both hardware and software. This, he says, makes it easier for the FTC to assert that preventing the acquisition would not prevent Meta from innovating in the virtual reality fitness market.
The case will likely come under scrutiny given the flurry of antitrust policy concerns preceding the FTC’s complaint — including those from the Biden administration’s new FTC chairwoman, Lina Khan, who has long advocated expanding antitrust enforcement.
Lawmakers on both sides of the aisle have spent years pushing to rein in Big Tech. And federal and state governments have already hit Google Meta and Alphabet (GOOG, GOOGL) with a series of antitrust lawsuits. Meanwhile, federal regulators are investigating the competitive practices of Amazon (AMZN) and Apple (AAPL).
In 2020, the FTC filed a separate antitrust lawsuit claiming that Meta’s previous acquisitions of Instagram and WhatsApp, which were not challenged by regulators, now allow it to maintain an illegal monopoly in the market for social networks.
The 2020 lawsuit seeks to break Meta; some may view the latter case as less aggressive as it challenges a proposed acquisition rather than seeking to undo past deals.
“It’s the kind of case that – if you’re worried about platform dominance – you’d want to see from antitrust regulators as a very targeted, non-disruptive way to address these kinds of issues,” he said. Richman.
Within did not respond to Yahoo Finance’s request for comment on the lawsuit.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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