The Federal Trade Commission, which enforces antitrust laws, is about to engage in a real-life courtroom fight over virtual reality.
A high-profile trial kicks off on Thursday, in which the FTC will try to prevent Facebook parent Meta Platforms Inc from buying virtual reality app developer Within Inc.
In July of this year, the FTC sued to stop the deal, saying that Meta's acquisition of Within would create a monopoly in the market for virtual reality VR fitness apps. The judge has asked the judge to order a preliminary injunction that would halt the proposed transaction.
The trial that starts on Thursday will serve as a test of the FTC's bid to head off the company buying its way to dominance, this time in the nascent virtual and augmented reality markets.
The FTC is trying to force Meta to unwind two previous acquisitions, Instagram and WhatsApp, in a lawsuit filed in 2020. Both were in relatively new markets at the time the companies were purchased.
A government victory could have a negative impact on Meta's ability to maneuver in an area of emerging technology that Chief Executive Mark Zuckerberg has identified as the next generation of computing. If blocked from making acquisitions in the space, Meta would face greater pressure to make its own hit apps and give up the gains associated with bringing innovative developers in-house.
A popular subscription-based virtual reality workout app Supernatural, which it advertises as a complete fitness service with expert coaches, beautiful destinations and workouts choreographed to the best music available, has been developed by the popular subscription-based virtual reality workout app Supernatural. It's only available on Meta's Quest devices, which are headsets that offer immersive digital visuals and audio that market research firm IDC estimates capture 90 per cent of global shipments in the virtual reality hardware market.
The majority of the more than 400 apps available in the Quest app store are produced by external developers. In the Quest app store, Meta has acquired Beat Saber, which is the most popular virtual reality app in the Quest app store.
Meta is expected to argue that the FTC did a poor job of defining the relevant market and that it competes with a wide range of fitness content, not just VR-dedicated fitness apps.
It is also expected to argue that the FTC underestimated the competition in the market for virtual reality fitness apps.
The social media company agreed to buy Within within in October 2021, a day after changing its name from Facebook to Meta, signalling its ambition to build an immersive virtual environment known as the metaverse.
The Information reported that it was about $400 million, but Meta did not reveal the price tag for the deal.
Zuckerberg will be a witness in the trial. Other potential witnesses are Within CEO Chris Milk and Meta Chief Technology Officer Andrew Bosworth, who runs the company's metaverse-oriented Reality Labs unit.
The trial is in the U.S. District Court for the Northern District of California.
According to a court document, Zuckerberg is expected to be questioned about the Facebook parent's strategy for its VR business and the company's plans to support third-party developers, as well as the company's plans to support third-party developers.