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Meta Goes To Trial to Defend VR Deal From FTC Probe

 |  December 8, 2022

Meta faces a major test to its metaverse strategy starting Thursday in California federal court as US antitrust enforcers seek to block the social network from buying a virtual reality startup, Reuters reported. 

The Federal Trade Commission argues that Meta’s plan to buy Within, the maker of fitness app Supernatural, is intended to give the tech giant a leg up in dominating the burgeoning VR market. The eight-day hearing in San Jose represents a test case for FTC Chair Lina Khan and her more aggressive strategy on mergers, especially by digital giants.

The FTC’s case focuses on “potential competition,” said Florian Ederer, an economics professor at Yale School of Management who specializes in antitrust. The FTC alleges that Facebook parent Meta abandoned its own plans to develop a virtual reality fitness app in favor of buying Within.

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“This is a landmark case for the FTC,” Ederer said. “Meta wants to make more inroads into the virtual reality space. That’s where they see the future is. If Meta couldn’t buy Within, it could develop its own app that would directly compete.” 

The FTC sued Meta in July over the deal, alleging the company was seeking to create a monopoly in virtual reality much in the same way Facebook bought up Instagram and WhatsApp to extend its dominance in social networking. During the Trump administration, the agency sued the company seeking to unwind those deals retroactively. That case is pending.

The Within suit represents the first time the FTC has preemptively challenged a deal by the social media giant, which has bought more than 100 smaller companies over the past decade. Tech companies and investors are closely watching the suit amid concerns the case may make startup acquisitions more difficult. 

Gary Shapiro, the chief executive officer of tech trade group Consumer Technology Association, said the FTC’s suit risks “chopping off the ability of big companies to buy small companies.”

“The success of our economy relies on businesses and startups,” said Shapiro, whose group includes Meta as a member, though he said he hadn’t spoken with the company about the FTC lawsuit. “This fundamental reversal is so bad on so many levels I feel duty bound to speak up.”