FTC staff reportedly recommended against suing Meta

Federal Trade Commission head Lina Khan overruled staff advice to intervene in a Meta virtual reality studio acquisition, Bloomberg reports. Sources reportedly told Bloomberg that staff had been “recommending against” suing to block Meta’s acquisition of Within, which makes the popular VR fitness app Supernatural. The FTC voted 3 to 2 in favor of the suit earlier this week, splitting respectively along Democratic and Republican party lines.

Bloomberg’s article doesn’t detail the substance of the disagreement over Meta’s Supernatural acquisition, although it does note that “each of the commissioners had the opportunity to test out Meta’s Oculus product, Within’s Supernatural, and Meta’s Beat Saber.” But the report would emphasize that Khan is making an unusually aggressive push to limit the power of companies like Meta, particularly compared to earlier interventions against major tech players. In 2013, for instance, the FTC overruled input from staff who recommended bringing an antitrust suit against Google, ending the investigation despite concerns about its business practices.

The FTC’s latest suit targets the specific category of VR fitness apps. But a key claim is that buying Within has a larger purpose for Meta: “building, and ultimately controlling, a VR ‘metaverse.’” It asserts that by buying the fitness studio, Meta is removing competition that could spur it to keep improving its own software offerings, including the fitness-adjacent rhythm game Beat Saber. “As early as 2015, Mr. Zuckerberg instructed key Facebook executives that his vision for ‘the next wave of computing’ was control of apps and the platform on which those apps were distributed,” it says. “A key part of this strategy was for his company to be ‘completely ubiquitous in killer apps.’”

Meta, by contrast, claims the suit is “based on ideology and speculation, not evidence.” In an informal response to the suit, it says the suit “misunderstands the nature of the space entirely and ignores the market realities,” positioning Beat Saber and Supernatural as more similar than they are. “The FTC has no answer to the most basic question,” writes Meta associate general counsel Nikhil Shanbhag. “How could Meta’s acquisition of a single fitness app in a dynamic space with many existing and future players possibly harm competition?”