FTC sues Facebook to block VR acquisition, hampering metaverse strategy

The Federal Trade Commission on Wednesday filed suit to block Facebook-owner Meta from buying the maker of a virtual reality fitness app, the latest signal of aggressive antitrust action from the agency.

Slowing down Meta's virtual plans: The suit against the acquisition of Within, which makes the Supernatural fitness app, will delay Facebook’s multibillion plans to build out the so-called metaverse, a technology for virtual social interaction.

Khan in the house: The case is also the first brought by antitrust hawk Lina Khan against one of the tech giants. Khan has stressed the importance of keeping powerful companies from expanding into new markets, mentioning virtual reality by name. At a conference last October, Khan said that dominant technology companies often buy startups as part of an “ecosystem play, where the goal is to capture the ecosystem as a whole.”

Supernatural experience: Supernatural is an interactive fitness app in which users use Meta's Quest VR headset to box, stretch or do other workouts in virtual environments.

The next platform: In its lawsuit, the FTC noted that Meta also owns Meta Quest, the dominant virtual reality hardware, which it acquired in 2014, along with a popular virtual reality app store and a number of popular games. “Meta has thus become a key player at each level of the VR ecosystem,” the FTC said.

The deal “would be one more step along that path toward dominance,” the FTC said in its lawsuit. Furthermore “Meta would no longer have any incentive to develop its own competing app from scratch, add new features to Beat Saber or other existing Meta apps to compete with Supernatural on the merits.” Beat Saber is another virtual reality game bought by Facebook in 2019.

Agency urgency: The FTC first began investigating the acquisition last fall, and in its lawsuit said the companies plan to close the deal on July 31, if a court doesn’t intervene. It's asking for a restraining order blocking the deal before the end of the month, while the lawsuit proceeds.

The FTC commissioners voted 3-2 to bring the lawsuit, with Republicans Christine Wilson and Noah Phillips voting no.

Facebook's response: “The FTC's case is based on ideology and speculation, not evidence. The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible,” Facebook spokesperson Stephen Peters said.