Meta: FTC takes aim at VR strategy

Meta: FTC takes aim at VR strategy

The Metaverse isn’t created by one company alone, says Meta CEO Mark Zuckerberg. The U.S. antitrust agency FTC wants to make sure he sticks to it.

With the acquisitions of Instagram and WhatsApp, Meta CEO Mark Zuckerberg created a supremacy in social media, which critics also see as a monopoly in online networks.

These critics include the U.S. antitrust authority FTC (Federal Trade Commission). It wants to separate Instagram and WhatsApp from the Meta Group again. An amended complaint by the FTC against Meta on this was recently accepted in a US federal court. However, the legal dispute now underway is likely to take years, and it is likely that the market will have changed significantly by the time an outcome is reached.

It would have been wiser for the relevant authorities to have prevented the takeovers – they had the opportunity to do so. After all, preventing is easier than undoing. But at the time, the authorities obviously lacked the imagination for the growth and revenues of the social conglomerate.

Meta’s Metaverse plans: FTC pays attention

Apparently, the FTC has taken that realization to heart and is taking a closer look at Meta’s Metaverse expansion. Mind you, this is hardly about the acquisition of the small start-up Oculus in 2014, which, in retrospect, gave Meta an advantage, but it was not as big as initially assumed. This is supported by the fact that hardly any former Oculus executives are still at Meta, and the company transformed the startup’s focus from high-end niche VR for hardcore gamers to standalone mass-market VR.

Much more in focus in the FTC’s review is Meta’s aggressive growth and marketing policy in hardware and software over the past three years or so. In the last two years alone, Meta bought six leading VR development studios, including the studio behind the VR hit Beat Saber. In the acquisition of the second-largest fitness VR app Supernatural for around $400 million, the purchase process is currently said to be blocked by the FTC.

Meta is also creating exclusive advantages for itself in XR hardware through strategic acquisitions: It bought exclusive rights to British manufacturer Plessey’s displays and, in December, ImagineOptix, which develops special lenses for tech eyewear. That technology is no longer available to competitors, or only with Meta’s blessing. Meta is also said to be luring skilled workers from Apple and from Microsoft as well, in some cases with double the wages.

FTC talks to VR studios

Of course, it’s difficult for a government agency to judge which of these acquisitions is ultimately a small, legitimate building block – and which paves the way to a dominant position. Not even Meta is likely to know. When it took over Instagram,  it probably hardly assumed that the then still small photo platform could outstrip Facebook itself.

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This is the context in which the FTC’s ongoing investigations into Meta’s VR strategy should be evaluated. As Bloomberg reports, the authority is currently asking around in the industry and talking to studios and companies that feel disadvantaged by Meta’s business practices. It is not known which specific companies the FTC is talking to.

Some VR studios already openly criticized Meta in 2020, which is said to have copied or blocked software after a failed takeover bid, for example in the case of Yur’s fitness tracking app or Virtual Desktop’s WLAN streaming.

Meta Quest 2: Priced to prevent competition?

The FTC also wants to investigate Meta’s aggressive pricing policy for Quest 2, which is only possible due to strong cross-financing from other business areas, together with authorities from the states of New York, Tennessee, and North Carolina. The authorities are not officially commenting on the investigations at this time.

In the context of Quest’s pricing, the accusation is that Meta is nipping potential virtual reality competition from companies like HTC in the bud. Analysts estimate that about 75 percent of VR goggles sold in 2021 were from Meta, a 34 percent increase over the previous year. Anecdotal reports from the VR industry and SteamVR statistics also show that Meta almost single-handedly dominates the VR business.

In Germany, the Federal Cartel Office is investigating Meta’s VR strategy. Here, it is under question that Meta is gaining uncatchable competitive advantages by combining the data of different platforms. Because of the ongoing negotiations, Meta has so far refrained from selling its Quest 2 VR goggles in Germany.

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Sources: Bloomberg