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FTC’s lawsuit to thwart Meta’s campaign to “conquer” VR may be far-fetched

The FTC makes good on its promise to vet big tech companies, even though antitrust lawyers say its new attempt to block Meta (dead) The “Virtual Reality Conquer Campaign” is a long shot.

in complaint Filed Wednesday, the Federal Trade Commission (FTC) asked a judge to temporarily halt Meta’s acquisition of the virtual reality company. Within Unlimited – The creator of the famous workout app”supernatural. This deal, along with Meta’s 2014 acquisition of headphone maker Oculus VR, aligns with Meta’s broader ambition to position itself as the central developer of the emerging digital 3D world known as Oculus VR. metaverse.

The FTC’s lawsuit relies on two potentially difficult arguments and requires it to identify markets that are still in their infancy. Erica Douglas, professor of law at Temple University, explains that the problem is common for antitrust watchdogs in a fast-moving tech sector where it can be difficult to determine the scope of a still-evolving market.

“I think the FTC has the tougher issue to discuss, but that doesn’t mean they shouldn’t argue about it,” Douglas says. “They want the law to change in that direction.”

In the lawsuit, the FTC asserts that the deal will limit competition in two markets for VR fitness apps: the narrower market for dedicated VR fitness apps, like Supernatural, and the broader market for casual VR fitness apps, like Meta Saber wonwhich was acquired by Meta in its 2019 purchase of Beat Games.

An attendee tries out the Samsung Gear VR headset powered by Oculus during Orange Telecom's annual innovation presentation in Paris on October 2, 2014. REUTERS / Charles Platiau (France - Tags: BUSINESS TELECOMS TPX IMAGES OF THE DAY)

An attendee tries out the Samsung Gear VR headset powered by Oculus during Orange Telecom’s annual innovation presentation in Paris on October 2, 2014. REUTERS / Charles Platiau (France – Tags: BUSINESS TELECOMS TPX IMAGES OF THE DAY)

“This reduced competition may lead to several adverse outcomes, including reduced innovation, lower quality, higher prices, less incentive to attract and retain employees, and reduced consumer choice,” the FTC’s lawsuit says.

In response to the lawsuit, a Meta spokesperson told Yahoo Finance that the FTC’s case is based on ideology and speculation, rather than evidence.

“The notion that this acquisition will lead to non-competitive 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 wants to innovate in virtual reality,” the spokesperson said in an email.

To be sure, the outcome of the case is difficult to predict at this early stage. However, the FTC could face an uphill battle over so-called emerging competition arguments — that is, the agency asserts that Meta wants to buy “within” because of its potential prospect. Innovation threatens the dominance of Meta.

“Typically this type of emerging competition challenge for mergers is in areas where the development pipeline is long and predictable, such as Medical devices or medicinesor growing pesticides…where the writing on the wall is that one party will start competing with the other,” says Douglas.

In the case of Meta, she explains, it’s not yet clear if it plans to enter the dedicated fitness market.

“This makes the case a little different … and more difficult for the FTC,” she said.

She says the agency’s broader claim, challenging the casual market where Meta already competes, shows it’s hedging its bets.

ANKARA, TURKEY - APRIL 1: In this photo, a logo is drawn

ANKARA, TURKEY – APRIL 1: In this illustration, the “Meta” logo is displayed on a computer screen behind a VR headset in Ankara, Turkey on April 1, 2022. (Photo by Ercin Erturk / Anadolu Agency via Getty Images)

Professor of Law at Duke University School of Law Barack Richman She echoed those doubts, noting that these “are not of the kind that the FTC has routinely won in the past.”

However, he says, the agency has a compelling argument to make in that the Meta has other possibilities for virtual reality, both in hardware and software. That, he says, makes it easy for the FTC to argue that blocking the acquisition won’t stop Meta from innovating in the fitness VR market.

The case is likely to attract scrutiny given the amplification of antitrust policy concerns that preceded the FTC’s complaint — including those of the new FTC chair in the Biden administration, Lena Khan, who has long advocated expanded antitrust enforcement.

Lawmakers on both sides of the aisle have spent years lobbying to rein in big tech companies. Federal and state governments have already hit Meta and Alphabet on Google (The GoogleAnd the The Google) in a series of antitrust lawsuits. Meanwhile, federal regulators are conducting investigations into the competitive practices of Amazon (AMZN) And the apple (AAPL).

In 2020, FTC brought a separate device Antitrust suit The claim that Meta’s previous acquisitions of Instagram and WhatsApp, which went unchallenged by regulators, now enable it to maintain an illegal monopoly in the social networking market.

The 2020 lawsuit seeks to dismantle the Meta; Some may view the latter case as less aggressive as it challenges the proposed acquisition rather than seeking to undo previous deals.

“This is the kind of case — if you’re concerned about platform dominance — that you want to see from antitrust regulators that it’s a very targeted, not disruptive, way to tackle these kinds of problems,” Richman said.

In did not respond to Yahoo’s request for funding to comment on the lawsuit.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter Tweet embed.

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