The US Federal Trade Commission filed a lawsuit Wednesday in an attempt to stop Facebook parent Meta from acquiring VR firm Within, claiming the deal could harm competition and consumers.
Meta CEO Mark Zuckerberg – who is on a quest to build a metaverse of connected 3D virtual-reality worlds in which people work, shop, and play – has been expanding his corporation’s VR technologies since it snapped up Oculus in 2014. The social networking giant has purchased multiple startups since then, though the FTC has drawn the line at its acquisition of Los Angeles-based Within.
This is perhaps partly because regulators may regret allowing Facebook to, back in the day, absorb WhatsApp and Instagram, which gave Zuck a huge chunk of the online landscape, and now think it would be a good time to scrutinize subsequent mergers. Also it’s worth knowing that the FTC is now run by Biden-appointed Lina Khan, a staunch critic of Big Tech’s unchecked reach, power, and influence.
Within is best known for Supernatural, its flagship product that provides fitness functions for Oculus Quest users. Wearers of the VR headset are coached to perform physical exercises while immersed in a digital world. The day after Zuck announced in October his internet empire’s new Meta branding, Jason Rubin, who today is VP of Metaverse content, announced Meta had entered a deal to acquire Within. The FTC reportedly launched a probe investigating the takeover, said to be worth $400 million.
Now, the trade regulator has asked a federal district court in San Francisco, California, to grant a temporary restraining order and preliminary injunction to block the acquisition process from moving forward.
And don’t forget: Meta is also struggling to maintain its acquisition of GIF emporium Giphy after British monopoly watchdogs objected to the takeover.
“If consummated, the acquisition would substantially lessen competition, or tend to create a monopoly, in the relevant market for VR dedicated fitness apps and the broader relevant market for VR fitness apps,” the FTC claimed in court documents [PDF] regarding the Within purchase.
“That lessening of rivalry may yield multiple harmful outcomes, including less innovation, lower quality, higher prices, less incentive to attract and keep employees, and less consumer choice.”
The regulator decided to bring this legal challenge after it held a vote: Trump-appointed Commissioners Noah Joshua Phillips and Christine Wilson were against it; Khan and Democrat Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya were for it.
“The FTC’s case is based on ideology and speculation, not evidence,” a Meta spokesperson told The Register.
“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.
“By attacking this deal in a 3-2 vote, the FTC is sending a chilling message to anyone who wishes to innovate in VR. We are confident that our acquisition of Within will be good for people, developers and the VR space.”
The lawsuit comes on the same day Meta reported its first-ever decline in quarterly revenues, as part of its second-quarter financial results. Here’s a quick summary of those numbers:
- Total revenue for the quarter was $28.82 billion, down one percent from $29.1 billion compared to the same period last year. Its daily active users across all apps and platforms was 2.88 billion on average, in the month of June, up four percent year on year. Facebook alone was 1.97 billion, up three percent.
- Net income was $6.68 billion, a 36 percent dive from $10.39 billion in Q2 2021. Costs and expenses, we note, were up 22 percent, year on year.
- Diluted earnings per share was $2.46, down 32 per cent from $3.61 a year ago.
During an earnings call with Wall St analysts, Zuckerberg blamed the revenue decline on numerous issues including Apple updating its privacy policies preventing Meta from tracking iPhone users, the lack of monetization from creators as it introduces short-form TikTok-like videos (Instagram users will have noticed this being forced on them lately), an economic downturn hitting online ad spending, and the effects of macroeconomics from the Russia-Ukraine war.
So much so that hiring (or headcount growth, as Meta puts it) will continue to slow down at the super-corp. Meanwhile, there will be more and more use of AI to automatically curate the content people are shown: double the amount, in fact, with 30 percent or more stuff on Insta and Facebook being recommended into people’s feeds by computers.
“The changes to the ads landscape over the last year have caused significant disruptions to the ways many businesses advertise online,” Sheryl Sandberg, who is leaving this year as COO, added on the call [PDF].
“Our teams are working closely with our partners to help them navigate this new environment so they can continue to get great return-on-investment. And we’re focused on building products and tools that grow their businesses and ours over the long term.” ®