Baltimore Sun

FTC acts to block Meta bid to buy VR company, fitness app

- By David McCabe and Mike Isaac

WASHINGTON — The Federal Trade Commission has filed for an injunction to block Meta, the company formerly known as Facebook, from buying a virtual reality company called Within, potentiall­y limiting the company’s push into the so-called metaverse and signaling a shift in how the agency is approachin­g tech deals.

The antitrust lawsuit is the first under Lina Khan, the commission’s chair and a leading progressiv­e critic of corporate concentrat­ion, against one of the tech giants. Khan has argued that regulators must stop competitio­n and consumer protection violations when it comes to the bleeding edge of technology, including virtual and augmented reality, and not just in areas where the companies have already become behemoths.

The FTC’s request Wednesday for an injunction puts Khan on a collision course with Mark Zuckerberg, Meta’s chief executive, who is also named as a defendant in the request. He has poured billions of dollars into building products for virtual and augmented reality, betting that the immersive world of the metaverse is the next technology frontier. The lawsuit could crimp those ambitions.

“Meta could have chosen to try to compete with Within on the merits,” the FTC said in its lawsuit, which was filed in the U.S. District Court for the Northern District of California. “Instead, it chose to buy” a top company in what the government called a “vitally important” category.

In a statement, Meta said the FTC’s case was “based on ideology and speculatio­n, not evidence.” It added that the lawsuit was

an attack on innovation and that the agency was “sending a chilling message to anyone who wishes to innovate in VR.”

Meta had said it would acquire Within, which produces the highly popular fitness app called Supernatur­al, last year for an undisclose­d sum. The company has promoted its virtual reality headsets for fitness and health purposes.

The FTC’s lawsuit is highly unusual and pushes the boundaries of antitrust law. Regulators mostly focus on deals between large companies in large markets, rather than their acquisitio­ns of small startups in nascent tech areas. Courts have also been skeptical applying antitrust law to block mergers based on the hypothetic­al that the two companies involved would later become competitor­s if the deal was blocked.

But critics have said the government’s inaction has allowed Meta and other giants to vacuum up services that later became formidable. The agency approved Facebook’s 2012 acquisitio­n of Instagram, the photo-sharing app that has since grown to more than 1 billion regular users. Instagram has helped Meta dominate the market on social photo sharing,

though other startups have sprung up since.

“It’s a riskier case, but one they think is worth bringing because if they succeed it will help bring the frontier of enforcemen­t outward,” said William Kovacic, a former chairman of the FTC. “I think this is a first of a kind.”

The FTC’s lawsuit is part of a broader wave of actions against Meta and other large tech companies, which have increasing­ly faced scrutiny for their power and dominance. Under Khan’s predecesso­r, the FTC filed a lawsuit against Facebook that argued the company shut down nascent competitio­n through acquisitio­ns. The Justice Department has also sued Google over whether the company abused a monopoly over online search.

The FTC filed suit on Wednesday hours before Meta reported its first decline in quarterly revenue since it went public in 2012. The company earned profits of $6.69 billion in the April-June period — down 36% from $10.39 billion in the same period a year ago. Revenue was $28.82 billion, down 1% from $29.08 billion a year earlier.

 ?? NICK WASS/AP 2019 ?? The FTC has potentiall­y complicate­d CEO Mark Zuckerberg’s plan to transform Meta, formerly known as Facebook, away from its roots as a social media company.
NICK WASS/AP 2019 The FTC has potentiall­y complicate­d CEO Mark Zuckerberg’s plan to transform Meta, formerly known as Facebook, away from its roots as a social media company.

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