By: Marc McCarthy (Brookings Institution)
On October 21, 2021, the day after Facebook changed its name to Meta, the company agreed to acquire Within Unlimited, a virtual reality development studio that designed and built the popular virtual reality fitness app, Supernatural. But on July 27, 2022, the U.S. Federal Trade Commission (FTC) filed a complaint and request for preliminary injunction in the U.S. District Court for the Northern District of California to halt the transaction.
The FTC’s attempt to stop this acquisition transaction is widely seen as a risky attempt to push the envelope of antitrust merger enforcement. “It’s a riskier case, but one they think is worth bringing because if they succeed it will help bring the frontier of enforcement outward,” said William E. Kovacic, a former chairman of the FTC and a well-respected antitrust specialist.
The case is novel—and risky—because antitrust agencies typically seek to block mergers and acquisitions in well-developed markets where a company seeking to merge already holds a dominant position. It is true that Meta’s Oculus division is the market leader in VR hardware with its Quest headsets, and that Meta operates a key VR app distribution hub through its Quest store. But Meta is not the leader in VR apps, even though it produces some apps on its own. The agency is targeting Meta’s attempt to expand in the virtual reality app market through acquisition rather than through its own internal development work…
