Meta is pausing its acquisition of Within Unlimited Inc, the studio behind the VR fitness app Supernatural, following an FTC suit that seeks to block the deal over antitrust concerns. Meta is planning to “vigorously defend the deal in court.”

The Federal Trade Commission filed the lawsuit in a bid to block the acquisition deal over concerns it would stifle competition and create a monopoly in the industry. FTC’s and Meta Platforms’ lawyers informed a federal judge they have agreed to pause the deal until January 1 2023 or until such a time when there will be a court ruling on FTC’s injunction to block the deal, whichever comes first.

The acquisition came under FTC review in December 2021. Meta Platforms has acquired five very successful virtual reality studios in the past two years, among them Beat Games, the studio behind the hit VR title Beat Saber.

The injunction could potentially limit Meta’s foray into the metaverse where the company has staked billions of dollars. The injunction also heralds a change in how the FTC treats tech deals.

The Federal Trade Commission’s antitrust lawsuit against Meta is its first under its chair Lina Khan. Ms. Khan has been a major progressive critic of corporate concentration. Ms. Khan has pushed for the reigning in of competition and consumer protection violations even in sectors that are at the bleeding edge of technology and not just in sectors where companies have already established market dominance.

The FTC injunction will clash with Zuckerberg’s grand ambition and investments in the metaverse. Meta has invested billions of dollars in building VR and AR products and has bet on the metaverse being the next frontier of technology in which Meta will play a pivotal and dominant role. This lawsuit, if it succeeds, could dent those ambitions.

FTC’s issue with Meta’s expansion strategy is that the company is buying up its way to the top rather than competing on its merits. FTC argues that Meta is attempting to buy market supremacy rather than competing through innovation and the performance of its products. FTC says Meta’s acquisition of Within is illegal and that the agency is taking “all appropriate relief” to stop it from happening. FTC believes that the acquisition would considerably constrict the market for virtual reality fitness apps or even create a monopoly in that market segment that will throttle innovation and lead to lower quality, higher prices, less incentive to hire and retain staff as well as less diversity of such products for consumers.

Meta says FTC’s lawsuit is “based on ideology and speculation” rather than evidence. Meta describes the lawsuit as an attack on innovation that sends a “chilling message” to anyone wishing to innovate in virtual reality.

The New York Times describes FTC’s injunction as “highly unusual” and as pushing the boundaries of antitrust law.

Regulators have typically focused their attention on acquisition deals by large companies in bigger markets rather than on the acquisitions of small startups in a nascent industry that is still at the frontiers of innovation. Courts have typically been reluctant to enforce antitrust law and block mergers based merely on the hypothesis that the two companies would grow into innovative competitors if the acquisition deal was blocked.

On the other hand, critics have argued that inaction by the government has enabled companies such as Meta and other tech giants to zone in on niches and grow into formidable monopolies.

FTC approved Facebook’s acquisition of Instagram in 2012. Instagram has since grown into a social media behemoth with one billion regular users. Instagram has complemented Meta’s vision and helped the tech giant to dominate the social photo-sharing market.

Supernatural Takeover Could Still Proceed

Meta’s Supernatural takeover could still proceed fairly quickly should the federal court fail to grant FTC’s injunction request to block the takeover. In that case, Meta could complete its acquisition of Within by the end of the month.

The FTC was looking into Meta’s VR strategy early this year and was questioning VR studios about Meta’s business practices in January this year.

Meta has completed several acquisitions in the recent past. It purchased exclusive rights to displays by the British manufacturer Plessey and ImagineOptix which manufactures specialty lenses for tech headsets.

The company has also been criticized for its Quest 2 pricing strategy which is deemed as aggressively priced thanks to subsidies from its advertising business. This has allowed Meta to sell the headsets at far below competitors’ prices. There are speculations that Meta’s recently announced price increases may be related to the company’s negotiations with the FTC on its VR strategy.

https://virtualrealitytimes.com/wp-content/uploads/2021/10/Meta-Acquires-Supernatural-Creator-600x376.pnghttps://virtualrealitytimes.com/wp-content/uploads/2021/10/Meta-Acquires-Supernatural-Creator-150x90.pngRob GrantAcquistionsBusinessMeta is pausing its acquisition of Within Unlimited Inc, the studio behind the VR fitness app Supernatural, following an FTC suit that seeks to block the deal over antitrust concerns. Meta is planning to “vigorously defend the deal in court.” The Federal Trade Commission filed the lawsuit in a bid...VR, Oculus Rift, and Metaverse News - Cryptocurrency, Adult, Sex, Porn, XXX