WASHINGTON – The Federal Trade Commission on Wednesday issued an order blocking Facebook from buying a virtual reality company called Meta. The agency is offering technology deals.
The antitrust case is the first filed against one of the tech giants under Leena Khan, the commission’s chairman and a leading progressive critic of corporate concentration. Mrs. Khan argued that they should stop violating competition and consumer protection laws when it comes to the bleeding edge of technology, including virtual and augmented reality, not only in areas where the companies are already behemoths.
The FTC’s suspension request has put Ms. Khan at odds with Meta CEO Mark Zuckerberg. Having invested billions of dollars in building products for virtual and augmented reality, Metavas is betting that the immersive world is the next technological frontier. The lawsuit may undermine those aspirations.
“Meta could have chosen to try to compete internally,” the FTC said in a lawsuit filed in the U.S. District Court for the Northern District of California. Instead, the government chose to buy a top company in a company it called “very important.”
In a statement, Meta said the FTC’s case was “based on ideology and assumptions, not evidence.” The idea that this acquisition leads to anti-competitive effects in a dynamic space like online and connected exercise is simply not credible. The company added that the lawsuit was an attack on creativity, saying the agency “sends an interesting message to anyone who wants to be creative in VR.”
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Meta said it will acquire the maker of the wildly popular fitness app Supernatural for an undisclosed sum. The company has introduced its virtual reality headsets for fitness and health purposes.
The lawsuit is part of a wave of action against Meta and other big tech companies like Google, Apple and Amazon for their dominance. Under Ms. Khan’s predecessor, the FTC filed a lawsuit against Facebook, arguing that the company shut out startup competition through acquisitions. The Justice Department accused Google of abusing its online search monopoly.
More issues may come. The FTC is investigating Amazon’s violations of antitrust laws, and the Justice Department has questions about Google’s dominance of ad technology and Apple’s App Store policies.
Mr. Zuckerberg has been pushing Meta away from the social network as his company’s apps, such as Facebook and Instagram, face increasing competition and issues like privacy and misinformation.
Mr. Zuckerberg has reorganized his staff to support the push into MetaVas and has appointed a top lieutenant to lead the effort. It also allows lieutenants to watch some of the most popular games in virtual reality. In the year In 2019, Facebook acquired Beat Games, which made the award-winning title Beat Saber, one of the top VR games on the Oculus platform.
Meta is scheduled to report quarterly earnings later Wednesday. The company has recently improved employee benefits and trimmed costs amid uncertain economic conditions.
The FTC’s action can be seen as an attempt to learn from history. The agency Instagram helped Meta dominate the market in social photo sharing, though other startups have emerged since then.
John Newman, deputy director of the FTC’s Office of Competition, said the agency’s crackdown on internal contracts is that Meta is “trying to buy its way to the top.” The company already had a best-selling virtual reality fitness app, but then opted to acquire Inin’s Supernatural app to “buy the marketplace.” They called the deal an “illegal acquisition.”
The vote to approve the FTC filing was split 3 to 2.
This is breaking news and will be updated.
