The U.S. Federal Trade Commission said Meta Platforms Inc (NASDAQ: META) squashed competition when it halted plans to build its own virtual reality fitness app and opted to buy Within Unlimited Inc instead, Bloomberg reports.
The FTC said that the acquisition would keep the tech giant from entering the space through homegrown tech, denying consumers the benefit of adding another competitor to the market.
The FTC said that before the deal, Within’s team expected that Meta would try to enter the dedicated fitness app market.
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Meta had already hired Within’s head of product. Hence, the startup developed competitive strategies for its Supernatural app “with the specter of Meta’s potential entry in mind,” the FTC said.
Meta already owned a VR rhythm game in which users hit targets in time to music, Beat Saber, and its founders were excited about expanding their product into a dedicated fitness app, the filing said.
“Meta already has engineers with the skill set to both expand Beat Saber into fitness and to build a VR-dedicated fitness app from scratch,” the filing said.
As of March 2021, internal presentations focused on transitioning Beat Saber to a dedicated fitness app. By June, those efforts were put on hold when Meta decided to pursue the Within acquisition instead.
Meta revealed the acquisition in October, one day after announcing it would change its name from “Facebook,” shifting its focus from solely social media to building and commercializing a virtual world.
The FTC sued to block the deal in July. The FTC claims that Meta would eliminate future competition in a new market.
From 2020 through September 2022, Meta has spent $31 billion on the division working on the metaverse, Reality Labs, including the acquisitions of nine virtual reality app studios over the past three years.
Meta already makes the most widely used virtual reality headset, Oculus, and its VR app catalogue, the Quest Store.
The FTC says the virtual reality fitness market already has a high barrier to entry, as Meta controls the app store on the most popular headset.
A decision by U.S. District Judge Edward Davila is likely by the end of the year whether to block the deal. At the same time, the FTC’s in-house court considers the agency’s allegations that the merger is anticompetitive.
Price Action: META shares traded lower by 0.57% at $110.49 premarket on the last check Tuesday.
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