WASHINGTON — The Federal Trade Commission on Wednesday sought an injunction to block Meta, the company formerly known as Facebook, from buying a virtual reality company called Within, potentially curbing the company’s push into so-called metaverse and signaling a change in the way the agency approaches technology offerings.
The antitrust suit is the first under Lina Khan, the commission’s chairwoman and a leading progressive critic of corporate concentration, against one of the tech giants. Ms Khan has argued that regulators need to stop breaches of competition and consumer protection laws when it comes to the cutting edge of technology, including virtual and augmented reality, and not just in areas where companies they have already become giants.
The FTC’s request for an injunction puts Ms. Khan on a collision course with Mark Zuckerberg, Meta’s chief executive, who is also named as a defendant in the request. It has invested billions of dollars in creating products for virtual and augmented reality, betting that the immersive world of the metaverse is the next technological frontier. Demand could limit those ambitions.
“Meta could have chosen to try to compete with Within for the bottom line,” 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 leading company in what the government called a “critically important” category.
In a statement, Meta said the FTC’s case was based on “ideology and speculation, not evidence. The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as the online and connected fitness is simply not believable.” The company added that the lawsuit was an attack on innovation, with the agency “sending a chilling message to anyone who wants to innovate in VR.”
Read more on Facebook and Meta
Meta said it would acquire Within, which makes the wildly popular fitness app called Supernatural, last year for an undisclosed sum. The company has promoted its virtual reality headset for fitness and health purposes.
The lawsuit is part of a wave of actions against Meta and other big tech companies like Google, Apple and Amazon, which have faced increasing scrutiny for their power and dominance. Under Ms. Khan’s predecessor, the FTC filed a lawsuit against Facebook that argued the company shut out nascent competition through acquisitions. The Justice Department has also sued Google over whether the company abused its online search monopoly.
More cases could come. The FTC is investigating whether Amazon violated antitrust laws, and the Justice Department is investigating Google’s dominance of ad technology and Apple’s App Store policies.
Mr. Zuckerberg has been moving Meta away from its social media roots as the company’s apps, such as Facebook and Instagram, face growing competition and issues like privacy and misinformation.
To support the push into the metaverse, Mr. Zuckerberg has reassigned employees and put a top lieutenant in charge of the effort. It has also empowered lieutenants to pursue some of the most popular games in the VR space. In 2019, Facebook bought Beat Games, the creators of the hit title Beat Saber, one of the best virtual reality games on the Oculus platform.
Meta is scheduled to report quarterly earnings later Wednesday. The company has recently cut employee benefits and curbed spending amid uncertain economic conditions.
The FTC’s move could be seen as an attempt to learn from history. The agency approved Facebook’s 2012 acquisition of Instagram, the photo-sharing app that has grown to more than a billion regular users. Instagram has helped Meta dominate the social photo-sharing market, although other startups have emerged since then.
John Newman, the deputy director of the FTC’s Office of Competition, said the agency acted on the Within deal because Meta “was trying to buy its way to the top.” The company already owned a best-selling VR fitness app, he said, but then chose to acquire Within’s Supernatural app “to buy market position.” He called the deal an “unlawful acquisition, and we will seek all appropriate relief.”
The FTC’s vote to authorize the filing was split 3-2.
This is a developing story and will be updated.