FTC Seeks to Quash Meta’s Metaverse Monopoly as Income Slumps

Key Insights:

• The Federal Trade Commission alleges Meta is breaking antitrust laws.
• Zuckerberg and co. are trying to buy out another virtual reality company. 
• Meta profits have declined for the first time in company history.

On July 27, the FTC alleged that Meta, formerly Facebook, and CEO Mark Zuckerberg are attempting an Illegal acquisition to expand its Metaverse empire.

The social media giant is aiming to buy virtual reality firm Within, including its popular VR fitness app, Supernatural.

The complaint was filed in the Northern District of California, accusing Meta of already having a monopoly in the virtual reality sector with the top-selling device (Oculus), a leading app store, seven of the most successful developers, and one of the best-selling apps of all time.

The agency alleged that Meta (META) is trying to illegally buy the fitness app to “prove the value of virtual reality to users.”

FTC seeks to block virtual reality giant Meta’s acquisition of popular app creator Within: https://t.co/b87juAolBw

— FTC (@FTC) July 27, 2022

Meta Monopoly

FTC Bureau of Competition Deputy Director John Newman said, “Instead of competing on the merits, Meta is trying to buy its way to the top.”

Meta is already the largest provider of virtual reality devices and apps in the United States. In 2014, Zuckerberg and the company bought VR hardware startup Oculus for $2 billion. It has since expanded that empire to include the leading app marketplace, Quest Store, with 400 apps.

The Meta CEO said the company needed to be “completely ubiquitous in killer apps” in an email to executives. The firm has also gobbled up seven of the largest virtual reality studios, including Beat Games studio giving it control of the wildly popular app Beat Saber, a VR rhythm game.

The complaint hinges on the premise that Meta would instead buy out its competition rather than develop its own product to compete with them and offer greater choice for consumers.

“If consummated, the acquisition would substantially lessen competition or tend to create a monopoly,” read the complaint, which stated that it would violate antitrust laws.

Meta has displayed similar tendencies in the past with its acquisition of social media giants Instagram, where it is already testing NFTs and WhatsApp.

The company rejected the allegations claiming in a statement that “The FTC’s case is based on ideology and speculation, not evidence,” before adding, “by attacking this deal … the FTC is sending a chilling message to anyone who wishes to innovate in VR.”

Meta Q2 Losses

The bad news for Zuckerberg and co. has continued this week with the disclosure that its Metaverse division Reality Labs suffered losses of $2.8 billion in the second quarter.

For the first time in its history, company profits have declined in a quarter. Total revenue of $28.8 billion was down just 1% compared to the same period last year, but net income dropped 36% to $6.7 billion.

Meta stock slumped 4.7% in after-hours trading, falling to $161.70. Company shares are currently down 57% from their all-time high in August 2021.