The US Federal Trade Commission is suing Meta to stop acquiring VR company Within, maker of VR fitness app Supernatural. The case exposes the enormous challenges for competition law (or antitrust law) in the context of the digital giants. And although the laws differ between jurisdictions, the policy issues are the same.
The FTC’s case has a clear philosophical logic. Meta focuses on building and controlling a VR metaverse. Meta is already the largest provider of VR apps and devices in the US. Giants like Meta have the power and resources to expand and consume pretty much any market. And Meta has shown interest in it by buying in rather than building its own product from scratch.
Entering a market by buying an existing product and being backed by network effects and resources to undercut other competitors gives Meta an obvious advantage. Existing competitors will wither away. Potential competitors will focus their efforts elsewhere. And suddenly, Zuck’s dream of being “totally ubiquitous in killer apps” is a reality.
Current models of competition law are based on competition in specific markets. The FTC says that Meta’s acquisition of Within would reduce competition in the VR fitness app market. US laws, like ours, are crippled by this concept of market definition and the need to speculate about future competitive conditions in any given market. The laws are not designed to consider companies that, like Meta, operate as vast ecosystems.
The FTC wants the court to consider these broader considerations. His case isn’t just about the specific VR fitness app market, but about Meta’s power and ecosystem-level dominance. Looking at it that way, you can see the argument that Meta is on its way to total control of the VR world. But if the court takes a narrower, more traditional approach, its focus will be on that particular VR fitness app market, and that’s where the FTC’s case is weaker; Meta had limited presence in VR fitness apps prior to the acquisition. To succeed in the narrow case, the FTC would need to prove that without the acquisition, Meta and Within would emerge as major players in VR fitness.
Win or lose, the FTC’s prosecution has strategic value. If it wins, there will be precedent for applying an ecosystem view to competitive analysis that is better suited to regulating digital platforms. If it loses, it has evidence that current laws aren’t working and provides a stronger basis to argue for legislative reform. Played well, we say.