This year, Congress has been awfully distracted by its fixation on antitrust legislation targeting big tech. They’ve introduced a series of bills that would supposedly safeguard consumers from such manufactured horrors as companies using their own products and app stores retaining the ability to keep malware off their marketplaces. Now, it’s not only Congress that’s chasing imaginary monsters. The Federal Trade Commission (FTC) is now going after Meta for acquisition of a virtual reality (VR) company, Within, and its fitness app, Supernatural, to improve user experience in their new line of products.
It should first be noted that a wider range of app options within VR headsets is a boost for consumers. With VR still in its earliest stages, acquisitions like these are important signals for new and innovative investments in the industry. Most all proponents of technological innovation should be praising the move. However, the FTC found a way to disagree.
However, saying that the FTC disagrees with this acquisition does not even tell the whole story. The agency had actually given the move its stamp of approval before FTC staff was overruled by Chair Lina Khan. The majority of FTC staff likely agreed with the observations above and thought nothing of it. However, Khan decided to proceed with a lawsuit nonetheless, using a series of convoluted arguments to justify the split with her staff.
The first line of thought pursued by Khan was that the acquisition gave Meta the ability to horizontally monopolize control of the VR fitness space. This was rationalized by pointing out Meta’s ownership of Beat Saber, a VR game that can essentially be described as Dance Dance Revolution, but with VR light sabers. The argument went that, with Meta owning both apps, competition was – or could be in the future – cut off in VR fitness.
Beyond the painfully narrow market definition of VR fitness, this argument still holds very little water. Supernatural is a more dedicated fitness app that has separate modules for cardio, boxing, and meditation. While one can certainly work up a good sweat playing Beat Saber, it is far from being a dedicated fitness app. One could just as easily work up a sweat playing a Star Wars title, with actual light sabers, and yet no one would mistake it for an exercise class. The fact that one of Supernatural’s cardio modules bears a loose resemblance to the game does not change the goal of either app.
Naturally, this argument became apparent to more and more people within the FTC following heavy external criticism. FTC has since filed an amended complaint and the horizontal theory of harm has been dropped as a reason to scuttle the acquisition. However, that has not stopped Khan from continuing to pursue the lawsuit against Meta.
The latest argument is nevertheless similar, alleging that there is “perceived potential competition” between the two apps. Adam Kovacevich of the Chamber of Progress likens this argument to claiming the smart phone game Fruit Ninja is a competitor to Nike. There is no reason to believe that innovators will be scared off by the acquisition or in any other way be prohibited from entering the space as a competitor in the future.
In fact, similar acquisitions have been made by more traditional gaming systems in the recent past. Nintendo acquired four different gaming systems in the last two years. PlayStation has acquired a whopping 15 gaming systems over the life of its company. And, Xbox has acquired five gaming systems in just the past year. All of these acquisitions got the sign-off from FTC regulators. However, Meta seemingly does not get the benefit of the doubt for pursuing the same course of action that other innovators and developers have for years.
All this demonstrates the nakedly political motives behind this lawsuit. Big tech has become a favorite punching bag for policymakers in all corners of the political spectrum. The FTC is now blatantly moving from one flimsy argument to the next – throwing anything at the wall to see what might stick in an effort to punish these frequent targets of wrath. Meanwhile, the agency makes no effort to explain why prior similar acquisitions by other companies got approval, where this one is fought tooth and nail.
New technology always faces an uphill battle. Companies have to explain to consumers what the technology even is before then convincing them it is a worthwhile product. VR and the metaverse may open up a new frontier of possibilities for consumers and businesses alike. This should be championed by an agency that ostensibly exists to safeguard competition and innovation.
As Meta petitions to have this lawsuit dropped, Lina Khan should consider cutting her losses. She should also consider removing her agency from impeding the path of innovation that – in all likelihood – will create jobs and revolutionize the economy.
