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As far as tech deals go, Meta’s bid to buy virtual reality startup Within Unlimited isn’t exactly a blockbuster.
The roughly $400 million that Meta would reportedly pay for the Los Angeles-based firm is certainly a ton of money. But the price tag is relatively small compared to the flurry of multibillion-dollar mergers we’ve seen this year.
Yet, Within now finds itself in the middle of the latest antitrust battle between big tech and Washington. The Federal Trade Commission has sued to block Meta from buying the local company, which is best-known for its VR fitness app Supernatural.
The FTC’s complaint is unusual since the agency typically combats mergers between competing giants in large industries. By contrast, VR is an emerging market with the ultimate winners still to be determined. An FTC victory in this case could open the door for regulators to thwart more mergers between companies that maybe aren’t rivals yet, but could be if the deals are blocked.
Founded in 2014, Within raised more than $50 million from investors as an independent VR studio and had 58 employees as of last year, according to PitchBook Data. The company’s Supernatural app lets users work out to music from Lady Gaga and Katy Perry, while placing people in stunning virtual environments like the Galapagos Islands, according to the FTC.
The FTC contends that Meta is a potential entrant in the VR fitness space, given the company’s ambition to become a player in the much-hyped metaverse—a nascent vision for the future of the internet where people could one day work, shop and socialize in 3D virtual environments. By buying Within, Meta likely won’t create its own app, harming innovation and other benefits that could come from more competition, the FTC argues.
“This acquisition poses a reasonable probability of eliminating both present and future competition,” said the FTC complaint, filed in federal court in Northern California. “Meta would be one step closer to its ultimate goal of owning the entire ‘Metaverse.’”
Antitrust experts have described the suit as “experimental” and believe the FTC has a tough hill to climb to successfully stop the deal. Indeed, the FTC’s own staff recommended against taking up this fight, according to Bloomberg. FTC Chair Lina Khan, a big tech critic, overruled the recommendation to press forward with the suit.
A statement from Khan wasn’t included in the FTC’s announcement of the lawsuit. But speaking about her plans for the agency last month, she told the New York Times: “We’re trying to be forward looking, anticipating problems and taking fast action.”
Meta says the FTC’s case is “based on ideology and speculation” instead of evidence.
“The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible,” Nikhil Shanbhag, Meta’s vice president and associate general counsel on competition and regulatory matters, wrote in a company blog post.
But it’s easy to see why the FTC is trying a more aggressive approach after years of allowing tech giants to gobble up hot startups without much scrutiny, only to recognize problems later. The Within deal may be worth $400 million now, but that could look like a steal later. Back when Meta still called itself Facebook, the company bought a budding photo-sharing app called Instagram for $1 billion. A decade later, Instagram is worth more than $100 billion.—Christian Hetrick
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