The FTC, the U.S. antitrust authority, wants to block Meta from a second VR fitness app and dominating the market.
Meta added the fitness app Supernatural to its shopping cart in October 2021. The reported acquisition price: some $400M. But, the group is not allowed to cash in for the time being. The Federal Trade Commission (FTC), the US competition authority, is filing a lawsuit with the aim of preventing the takeover.
“Meta buys its way to the top”
As early as the end of December 2021, it became known that the deal was under review at the FTC and was being blocked. Meta bought five highly successful VR studios in the last two years, including Beat Games, the studio behind VR superhit Beat Saber.
The FTC’s criticism of this expansion strategy is clear. “Instead of competing on the merits, Meta is trying to buy its way to the top,” says John Newman, deputy director of the Bureau of Competition.
Meta is trying to buy its supremacy in the marketplace rather than earn it through performance, Newman said. He added that the acquisition is illegal, and the FTC is taking “all appropriate relief” to prevent it.
Supernatural takeover: it could still go quickly
The FTC is suing Meta and asking a federal court for an injunction to stop the takeover. If the federal court does not grant that request, Meta could complete the acquisition by the end of the month.
The FTC believes Meta’s Supernatural acquisition would significantly limit the market for VR fitness apps or could lead to a monopoly in the segment. The result would be less innovation, lower quality, higher prices, less choice for consumers, and fewer incentives to hire and retain staff.
Meta argues that the FTC’s lawsuit is based on ideology and speculation rather than evidence. The lawsuit, it says, sends a “chilling message to anyone who wishes to innovate in VR.” Meta said it is confident that the acquisition “will be good for people, developers and the VR space.”
Don’t repeat social media mistakes: FTC is watching Meta’s VR strategy
In January 2022, the FTC was asking around the industry and questioning VR studios about Meta’s business practices. Meta also bought exclusive rights to British manufacturer Plessey’s displays and, in December, ImagineOptix, which develops specialty lenses for tech headsets.
Quest 2’s pricing has also come under criticism: the VR headset is massively cross-subsidized by money from the advertising business, and Meta thus offers it below competitors’ prices. It is possible that the recently announced price increase for Quest 2 is related to the FTC negotiations.