The FTC recently announced it would be attempting to block the merger of Meta, formerly Facebook, and Within, a VR app made to work with the Meta framework.
While there are some (such as the writer of this article at Inc) who believe that the FTC’s blocking of the potential merger between Meta and Within is a terrible thing and extreme overreach, this is what the agency is supposed to do but has been lax for many years.
It’s purpose is to prevent monopolies. While it may be true that many “startups” fail, it is an incorrect perception that such businesses are small businesses.
The vast majority of startups receive millions to hundreds of millions of dollars from “angel investors,” with the goal often to destroy small businesses in a particular market.
Take the example of taxis and ridesharing companies. The two major ridesharing companies received millions from investors, did not have to follow the same laws as small businesses, and essentially destroyed yellow cabs in NYC, along with other car services around the country and around the world.
In many communities, they are now the only choice, limiting consumer choice and creating monopolies. The FTC did not stop this situation, though it could have done so at the time.
In the FTC’s opinion, in this instance Meta is buying their way to the top, instead of improving their competitive app, which they have already.
In this situation, Meta is trying to acquire everything VR related, including buying the headset company, Oculus. This is what is meant by monopoly: Meta is the only provider of the technology that they created and will then dominate by buying all competitors, leaving no room for consumer choice, setting their preferred prices for their new technology with no competition, etc.
While it seems the FTC has been asleep for many years, these are the types of things they are supposed to do, in other words, enforcing the law.
Because a law is only as good as ita enforcement. If something is illegal but the body responsible looks the other way, it’s defacto legal then.
The FTC was formed in the pre Reagan era because it was at the time understood that when wealthy capitalists have the opportunity and freedom to do so, they will form monopolies and consolidate capital.
At the same time, individual citizens will be lead by their pocketbook, buying what is cheapest for them without considering the consequences.
This is why before Reagan, price gouging was illegal and was prosecuted by the FTC. However, at some point it became up to the business that was being destroyed to enforce the illegality of price gouging.
The result is what we see today, with startups destroying competition with their most effective tool: price gouging. Price gouging, to define it, is when a company enters an existing market, and prices their competing product or service at a ridiculously low rate because they can take a loss for, in some cases, many years.
When they’ve destroyed all or most competitors, their prices then skyrocket. A large vitamin retailer did this in the 90s, and destroyed all small vitamin store competition. Now, of course, Amazon is destroying their business, but turn about is fair play.
Contrary to what most people believe, startups are the arch nemesis of small business. Wealthy investors see a market where small businesses seem to be thriving, then they give a favored startup millions of dollars to enter that market, practicing price gouging (which is technically illegal and against the rules of FTC, but there is no enforcement by them) until the startup has effectively destroyed most or all of the competing businesses, which were small businesses.
Although most startups cannot be considered small due to these investments, they use the terms startup and small business interchangeably, so that the perception of the public is that they are, in fact, small business when they are not.
An example, as stated above, is the ridesharing companies who came on the market as “startups,” with millions of dollars. Through not following the rules set for all their competitors (including the requirement of “medallions” to drive a for- hire vehicle in NYC, and having their drivers on- call without payment, potentially violating labor laws), they were able to decimate and nearly destroy the entire car service industry.
They also inspired creation of a union, which caused them to be sued over these labor laws, and the lawsuit was decided in favor of the drivers rather the companies.
So, it is possible car service companies will survive, but with so many already shuttered, it is a very different landscape now with much less competition due to the attempted creation of monopolies.
These types of businesses have been successful in accelerating the consolidation of wealth in this country, making it difficult for small businesses to compete in the marketplace, and consolidating capital in the hands of the very few.
This process has been going on for quite a few years, and hopefully the FTC will step in more than it has previously to stop more monopolies from forming.
See below for the FTC’s press release on this enforcement effort.
FTC Seeks to Block Virtual Reality Giant Meta’s Acquisition of Popular App Creator Within
The Federal Trade Commission is seeking to block virtual reality giant Meta and its controlling shareholder and CEO Mark Zuckerberg from acquiring Within Unlimited and its popular virtual reality dedicated fitness app, Supernatural. Meta, formerly known as Facebook, is already a key player at each level of the virtual reality sector. The company’s virtual reality empire includes the top-selling device, a leading app store, seven of the most successful developers, and one of the best-selling apps of all time. The agency alleges that Meta and Zuckerberg are planning to expand Meta’s virtual reality empire with this attempt to illegally acquire a dedicated fitness app that proves the value of virtual reality to users.
“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 virtual reality industry offers a uniquely immersive digital experience and is characterized by a high degree of growth and innovation. Unlike content on a tablet, phone, or monitor, virtual reality gives users the perception of being completely surrounded as they move. Users typically engage with the virtual reality experience through a headset with displays in front of each eye to place them in a fully rendered, three-dimensional environment. Software and studio companies develop virtual reality apps that run on headsets and are distributed in online app stores. These apps run the gamut of genres from rhythm games to e-sports to creation and exploration and more.
Meta, the global technology behemoth that owns Facebook, Instagram, Messenger, and WhatsApp, is the largest provider of virtual reality devices, and also a leading provider of apps in the U.S. The complaint alleges that under the leadership of Zuckerberg, the company began its campaign to conquer virtual reality with the acquisition of headset manufacturer Oculus VR, Inc. Fueled by the popularity of its top-selling Quest headsets, Meta’s Quest Store has become a leading U.S. app platform with more than 400 apps available for download.
In a publicly reported email to executives, Zuckerberg said that it was critical for the company to also be “completely ubiquitous in killer apps,” which are apps that prove the value of the underlying technology. As part of its app expansion, Meta purchased seven of the most successful virtual reality development studios, and now has one of the largest first-party virtual reality content catalogues in the world. The acquisition of the Beat Games studio gave Meta control of the wildly popular app Beat Saber.
Within Unlimited is an independent virtual reality development studio that designed and built Supernatural, a popular app in the dedicated fitness virtual reality app market. Supernatural offers a variety of high-quality workouts set to music, including tracks from A-list artists like Katy Perry, Imagine Dragons, Lady Gaga, and Coldplay, and virtually located in striking, photorealistic locales, like the Galapagos Islands. The agency’s complaint notes that according to Within’s co-founder and CEO, “Fitness is the killer use case for VR.”
The complaint alleges that Meta is a potential entrant in the virtual reality dedicated fitness app market with the required resources and a reasonable probability of building its own virtual reality app to compete in the space. But instead of entering, it chose to try buying Supernatural. Meta’s independent entry would increase consumer choice, increase innovation, spur additional competition to attract the best employees, and yield other competitive benefits. Meta’s acquisition of Within, on the other hand, would eliminate the prospect of such entry, dampening future innovation and competitive rivalry.
The complaint further alleges that 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. That lessening of competition violates the antitrust laws, according to the complaint.
The complaint also alleges that when viewed against the broader backdrop of the market for all virtual reality fitness apps, Meta’s proposed acquisition of Within is also illegal. Meta already participates in this broader market with its Beat Saber app, as does Within with its premium rival app Supernatural. The two companies currently spur each other to keep adding new features and attract more users, competitive rivalry that would be lost if this acquisition were allowed to proceed.
The Commission vote to authorize staff to seek a temporary restraining order and preliminary injunction was 3-2. Commissioners Noah Joshua Phillips and Christine S. Wilson voted no. A federal court complaint and request for preliminary relief has been filed in the U.S. District Court for the Northern District of California to halt the transaction.
The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. For the latest news and resources, follow the FTC on social media, subscribe to press releases and read our blog.
Banner Image: See no evil, hear no evil, speak no evil (Monopoly mascot). Image Credit – Bp Miller. The creator of Monopoly was a socialist, trying to show how eventually, if played correctly, all property would be in the hands of one player.