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FTC swoops to stop Facebook ‘illegally’ buying VR firm Within Unlimited

Metaverse VR

The US Federal Trade Commission doesn’t like the sound of Facebook/Meta purchasing Within Unlimited and its VR fitness app Supernatural. Are regulators finally rolling their sleeves up against big tech monopolisation?

Within Unlimited is a VR software firm that produced Supernatural, a fitness virtual reality app which provides workouts set to music within virtual environments, such as the Galapagos Islands. “Fitness is the killer use case for VR,” Within’s co-founder and CEO apparently said – which in part seems to have caught the FTC’s attention.

Facebook is of course trying extremely hard to cement its position within the metaverse through its Reality Labs division, going so far as to change its company name to Meta. Though like a kid at school that announced he’s now going by the cool new nickname Iceman, most people just ignore that.

The metaverse remains an ambiguous space, and sometimes when you hear execs waffle on about it they don’t appear to be saying anything very much at all. However one thing it’s definitely about, perhaps all it’s about, is finding VR applications that are actually good and that a mass market might be convinced to spend some cash on. And if it can’t come up with the goods internally, Facebook has demonstrated in the past it is willing to get its wallet out and buy up whoever can. In this case, the FTC goes so far as to call the purchase of Within Unlimited ‘illegal’.

“Instead of competing on the merits, Meta is trying to buy its way to the top,” said FTC Bureau of Competition Deputy Director John Newman. “Meta already owns a best-selling virtual reality fitness app, and it had the capabilities to compete even more closely with Within’s popular Supernatural app. But Meta chose to buy market position instead of earning it on the merits.  This is an illegal acquisition, and we will pursue all appropriate relief.”

The complaint alleges that Meta ‘began its campaign to conquer virtual reality with the acquisition of headset manufacturer Oculus VR’, and also references purchases of ‘seven of the most successful virtual reality development studios’, all of which has given it one of the largest first-party virtual reality content catalogues in the world.

Meta already owns the popular rhythm/fitness VR game Beat Sabre, which again it acquired with the purchase of developer Beat Games. The illegibility bit seems to stem from here since Supernatural is also specifically a VR fitness/music fusion app, and thus its clearly not good on the competition front. A federal court complaint and request for preliminary relief has been filed in the US District Court for the Northern District of California, in order to halt the transaction.

This comes on the same day as Facebook/Meta’s Q2 results came in and clocked its first ever quarterly revenue decline of 1%. Its Reality Labs division posted a $2.8 billion loss for the quarter.

Taking a proper stand against the acquisition shortcuts many big tech firms take in order to have presence or solidify an existing position in a sector will be welcome to those who view the current status quo as a few silicon valley firms absorbing all the successful innovation in the space, or countering any competition by assimilating it through the huge war chests they have accrued. And Facebook has certainly done its fair share of that, perhaps most notably with its purchase of the Instagram, who’s star was in ascension at the time of its purchase contrasting to Facebooks own core platform.

There’s a lot to say against all this, and it’s good to see a regulator finally rolling its sleaves up and demanding to have a look at these sorts of aquisitions as they have been making noises about for some. However at this point it seems the entire VC/start up/big tech ecosystem is entirely built on this model, a lifecycle of pitches, investment, market share tipping point, and then buyouts to larger incumbents. The early VC cash enables many start ups to gain as much success as quickly as they do, and Within certainly looks to have been the beneficiary of plenty of initial investment.

Throwing some interference into this tried and tested model seems a green tick for improving general competition and stopping a couple of firms eat up everything like the Borg – however if these sort of interjections becomes common place it could also have effects on the momentum start ups enjoy in the investments bubbles of Silicon Valley in the first place, who are after all expecting a pay out in one way shape or form with every firm they chuck some money at.

 

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One comment

  1. Avatar Andy Tiller 28/07/2022 @ 2:40 pm

    Your last point is on the money, Andrew. If there is no clear possibility of exit by acquisition then VC investors won’t fund innovative startups. (And fitness is not the killer app for VR any more than it is for smartphones.)

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