Facing off against big tech, the FTC sued to block the Meta virtual reality deal

WASHINGTON — The Federal Trade Commission on Wednesday filed an injunction to block Meta, formerly known as Facebook, from buying a virtual reality company called Within. called the metaverse And it marks a shift in how the company approaches technology deals.

A bankruptcy case is filed first Lina Khan, the commission’s chairman and a leading progressive critic of corporate concentration against one of the tech giants. Mrs. Khan argued that regulators should stop violations of competition and consumer protection laws when it comes to the bleeding edge of technology, including virtual and augmented reality, not just in areas where companies have already become behemoths.

The FTC’s request for an injunction puts Ms. Khan in a quandary Mark Zuckerberg, Meta’s chief executive, is named as a defendant in the lawsuit. He has poured billions of dollars into developing products for virtual and augmented reality, betting that the immersive world of metaverse is the next technological frontier. The lawsuit could cripple those ambitions.

“Meta may have chosen to try to compete on the merits,” the FTC said In its case, which was filed in the United States District Court for the Northern District of California. “Instead, it chose to buy a better company in what the government calls a “core” category.

In a statement, Meta said the FTC’s case “is based on theory and speculation, not evidence. The idea that this acquisition will have anticompetitive effects in a dynamic space with high penetration and growth, such as online and connected fitness, is not credible. The agency added that the case is an attack on innovation, the agency said. “Sends a chilling message to anyone looking to innovate in VR”

Meta said it was buying Within, maker of the wildly popular fitness app Supernatural, for an undisclosed sum last year. The company has promoted its virtual reality headsets for fitness and health purposes.

The case is part of a series of actions against Meta and other big tech companies like Google, Apple and Amazon, which have faced increasing scrutiny for their power and dominance. Under Ms. Khan’s predecessor, the FTC filed a The case against Facebook The company argued that the acquisition foreclosed new competition. There is also a judiciary Google was sued As to whether the company has abused its monopoly over online search.

More cases may come. The FTC is investigating whether Amazon violated antitrust laws, and the Justice Department is investigating Google’s dominance of ad technology and Apple’s App Store policies.

Mr. Zuckerberg is moving meta away from its roots in the social network.

In favor of being thrust into the metaverse, Mr. Zuckerberg has hired staff and a top lieutenant is in charge of the effort. He has authorized Lieutenants to pursue some of the most popular games in the VR space. In 2019, Facebook bought Beat GamesMakers of the hit title Beat Saber, one of the best VR games on the Oculus platform.

Meta is scheduled to report quarterly earnings later Wednesday. The company has recently cut employee benefits and curbed costs amid uncertain economic conditions.

The FTC’s move can be seen as an attempt to learn from history. The company approved the acquisition of Facebook in 2012 Instagram, a photo-sharing app that has grown to over a billion regular users. Instagram helped Meta dominate the market in social photo sharing, though other start-ups have sprung up.

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John Newman, deputy director of the FTC’s Competition Bureau, said Meta acted on the deal within the agency because it was “trying to get on top of that.” The company already had a best-selling virtual reality fitness app, but chose to acquire the Supernatural app in-house to “buy market position,” he said. He called the deal an “illegal takeover and we will pursue all appropriate remedies.”

The FTC’s vote to approve the filing was split 3 to 2.

This is developing news and will be updated.

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