Zuckerberg Takes the Stand in FTC’s Within Acquisition Probe
Meta boss Mark Zuckerberg took the stand in the current FTC probe into its acquisition of Within, the virtual reality company behind the successful VR fitness app Supernatural.
The Federal Trade Commission sued Meta in July this year in an antitrust lawsuit seeking to block the giant tech company’s acquisition of Within. The FTC terms the acquisition deal anti-competitive.
The hearing on FTC’s injunction is coming at a time when Meta is facing difficulties in several areas. The company recently laid off more than 11,000 staff and is making major cutbacks in some of its core departments, including its virtual reality division. Meta’s ad revenues have taken a hit from the current macroeconomic conditions and its corporate has plummeted this year.
Meta’s virtual reality and augmented reality projects are gobbling up more than $10 billion every year against revenues of just about $2 billion. This has raised serious alarm from the company’s investors who are raising concerns over such a major investment in a fledgling technology, especially at a time when the company is seeing a decline in revenues.
In the seven-day hearing, FTC produced a witness, economic expert Hal Singer, who described fitness as “the linchpin to owning VR”, adding (with some hyperbole) that it is what “keeps Mr. Zuckerberg up at night” to which Zuckerberg retorted that he doesn’t lose sleep over his virtual reality fitness competitors.
FTC’s case rests on the argument that Within’s Supernatural VR fitness app is a direct competitor to Beat Saber, a VR rhythm game whose parent company, Beat Games, Meta acquired in 2019. In the course of its ownership, Meta once toyed with the idea of introducing some fitness aspects into Beat Saber, something that FTC mentioned in its suit. Meta did not close the terms of the purchase of Beat Games. The terms of the acquisition of Within have also not been divulged.
Although some gamers use Beat Saber to exercise, there is a fundamental difference between the VR rhythm game and the fitness-focused Supernatural. Supernatural was specifically developed from the ground up as a fitness app with daily workouts steered by professional trainers and accompanied by some popular music hits. Beat Saber is just that, a fun rhythm game whose fitness benefits players have discovered along the way. The FTC alleges that Meta’s acquisition of Supernatural would violate antitrust laws should the tech giant close the deal.
In its lawsuit, FTC accuses Meta of trying to buy its way to the top rather than competing on merit. FTC says that Meta could instead compete with its best-selling virtual reality fitness app since it already had the capabilities to compete on merit. Rather than do that, FTC alleges, Meta chose to “buy market position”.
When Zuckerberg was called to take the stand at the FTC hearing, the consumer protection agency produced email exchanges dated March 2021, before the company’s rebranding from Facebook, which proposed a partnership between Beat Saber and Peloton. Zuckerberg answered that the idea had looked promising in 2021 when Meta had the financial muscle to invest in fitness but the company ultimately opted to purchase Within. Zuckerberg said that a Beat Saber-Peloton partnership was now infeasible due to the company’s weak financial position, due in part to Apple’s new policies relating to privacy.
Zuckerberg continued that fitness was not his priority in the virtual reality sphere and that Meta was focused on social, gaming as well as productivity use cases. He cited Meta’s recently released Quest Pro headset which is geared at remote work applications.
Meta had initially intended to conclude Within acquisition by the new year. However, a court filing seen by Reuters states that Meta is delaying the deal’s conclusion to January 31, 2023, pending court determination on the legality of the acquisition.