FTC files lawsuit against Meta over attempted monopolization of metaverse

Regulation

The United States Federal Trade Commission, or FTC, has filed a lawsuit against Meta and CEO Mark Zuckerberg in an attempt to stop the social media giant from “its ultimate goal of owning the entire ‘metaverse.’”

In a complaint filed in the Northern District of California on Wednesday, the FTC alleged Meta’s and Zuckerberg’s potential acquisition of virtual reality firm Within and its fitness app Supernatural was illegal, according to U.S. antitrust laws, as well as a way for the social media firm to “buy its way to the top” as opposed to “competing on the merits.” The complaint alleged that under Zuckerberg, Meta was “a potential entrant in the virtual reality dedicated fitness app market” with the resources necessary to develop its own app, but instead chose to own Supernatural by purchasing Within. The move would allegedly hinder “future innovation and competitive rivalry” among companies in the United States.

“As Meta fully recognizes, network effects on a digital platform can cause the platform to become more powerful — and its rivals weaker and less able to seriously compete — as it gains more users, content, and developers,” said the complaint. “The acquisition of new users, content, and developers each feed into one another, creating a self-reinforcing cycle that entrenches the company’s early lead. This market dynamic can spur companies to compete harder in beneficial ways by, for example, adding useful product features or hiring additional employees.”

The FTC said it planned to block Meta’s acquisition of Within in an effort to promote competition and help consumers:

“The mere possibility of Meta’s entry has likely influenced competition in the virtual reality dedicated fitness app market. If Meta is allowed to buy Within, that competitive pressure will slacken.”

Meta’s move toward allegedly acquiring any potential threats to its bottom line is nothing new. In 2020, the FTC filed a complaint against Facebook — before the firm rebranded to Meta — for “anticompetitive conduct” for its $19 billion acquisition of WhatsApp in 2014 and $1 billion purchase of Instagram in 2012, citing similar concerns around stifling innovation. Both apps, handling messaging services and photo sharing, respectively, were alleged rivals to Facebook’s Messenger app and main platform.

“Facebook’s acquisition of Instagram for $1 billion in April 2012 allegedly both neutralizes the direct threat posed by Instagram and makes it more difficult for another personal social networking competitor to gain scale,” said the FTC at the time. “[Its] acquisition of WhatsApp allegedly both neutralizes the prospect that WhatsApp itself might threaten Facebook’s personal social networking monopoly and ensures that any future threat will have a more difficult time gaining scale in mobile messaging.”

Related: Experts clash on where virtual reality sits in the Metaverse

Since Facebook rebranded to Meta in October 2021, the social media firm has announced many initiatives focused on expanding into the Metaverse, including potentially launching a payments platform with support for cryptocurrency. In May, Meta opened a brick-and-mortar store in the San Francisco Bay Area, which sells hardware for the virtual reality space.

Unless the court stops Meta from acquiring Within, the sale would likely go through on Aug. 1, according to the complaint.

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