The FTC filed an injunction today to block Meta’s acquisition of virtual reality studio Within, which is best known more recently for its subscription-based VR workout app Supernatural.
The regulator has had many skirmishes with Facebook, now Meta, over the past few years, but this is a pretty aggressive signal from the agency that they’re going to make M&A hell for Meta going forward.
“Meta could have chosen to try to compete,” the FTC said in its lawsuit. “instead, Meta decided he’d rather just buy” the startup; “[t]This decrease in rivalry can have multiple adverse effects, including less innovation, lower quality, higher prices, fewer incentives to attract and retain employees, and less choice for consumers.
The lawsuit comes at an inopportune time for the company, which is struggling to balance its lofty ambitions for the VR industry with rampant R&D spending in the category, negatively affecting its bottom line and stock price. This week, Meta took the largely unprecedented step of significantly raising the prices of its Quest 2 headset deep into the device’s lifespan.
Pricing for the Within deal was never announced, although a report from Information pinned the deal at $400 million. Within has raised more than $52 million in venture capital from investors like a16z, according to Crunchbase.
This saga largely resembles the FTC seeking to cast out its own demons for agreeing to the Instagram acquisition a long time ago and further signaling to Meta that they are going to have to expand on the merits of their own internal operations. and cannot count on startup acquisitions in adjacent categories in the future. Some of the FTC’s comments raise fundamental questions about why a company acquires a different company to begin with, other than to create a shortcut to success in one business category.
Meta has acquired a number of popular VR apps and game studios over the years, although the Within deal appears to be one of its biggest bets.
“The FTC’s case is based on ideology and speculation, not evidence. The idea that this acquisition would lead to anti-competitive results 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 sends a chilling message to anyone looking to innovate in virtual reality. We are confident that our acquisition of Within will be good for people, developers and the VR space,” a spokesperson for Meta wrote in an emailed statement to TechCrunch.