F.T.C. Sues to Block Meta Virtual Reality Deal as It Confronts Big Tech

WASHINGTON — The Federal Trade Commission on Wednesday filed for an injunction to block Meta, the company formerly known as Facebook, from buying a virtual reality company called Within, potentially limiting the company’s push into the so-called metaverse and signaling a shift in how the agency is approaching tech deals.

The antitrust lawsuit is the first to be filed under Lina Khan, the commission’s chair and a leading progressive critic of corporate concentration, against one of the tech giants. Ms. Khan has argued that regulators must stop violations of competition and consumer protection laws when it comes to the bleeding edge of technology, including virtual and augmented reality, and not just in areas where the companies have already become behemoths.

The F.T.C.’s request for an injunction puts Ms. Khan on a collision course with Mark Zuckerberg, Meta’s chief executive, who is also named as a defendant in the request. He has poured billions of dollars into building products for virtual and augmented reality, betting that the immersive world of the metaverse is the next technology frontier. The lawsuit could crimp those ambitions.

“Meta could have chosen to try to compete with Within on the merits,” the F.T.C. said in its lawsuit, which was filed in the United States District Court for the Northern District of California. “Instead, it chose to buy” a top company in what the government called a “vitally important” category. In a statement, Meta said the F.T.C.’s case was “based on ideology and speculation, not evidence. The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible.” The company added that the lawsuit was an attack on innovation, with the agency “sending a chilling message to anyone who wishes to innovate in V.R.”

Meta said it would acquire Within, which produces the highly popular fitness app called Supernatural, last year for an undisclosed sum. The company has promoted its virtual reality headsets for fitness and health purposes.

The lawsuit is part of a wave of actions against Meta and other large tech companies like Google, Apple and Amazon, which have increasingly faced scrutiny for their power and dominance. Under Ms. Khan’s predecessor, the F.T.C. filed a lawsuit against Facebook that argued the company shut down nascent competition through acquisitions. The Justice Department has also sued Google over whether the company abused a monopoly over online search.


funny thing is i think MS might be the one to escape all the big tech being sued by the government this time


Hey so I found something really interesting about what it seems to be the metric the FTC used to probe that the META/Within acquisition is “illegal”

This is what they said is highly concentrated

Both the VR Dedicated Fitness App market and the broader VR Fitness market are highly concentrated

And this is the metric they used to determine that (the DOJ also uses it)

Market concentration within a properly defined relevant antitrust market is a useful indicator of the competitive effects of a merger. The 2010 U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (“Merger Guidelines”) measure > market concentration using the Herfindahl–Hirschman Index (“HHI”). The Merger Guidelines outline the principal analytical techniques, practices, and enforcement policy of the FTC and Department of Justice with respect to mergers involving competitors. Though the Merger guidelines are not binding on the courts, courts frequently cite the Merger Guidelines as persuasive authority.

Which defines a “concentrated market” and “ilegal acquisitions” as follows:

The HHI for a given market is calculated by summing the squares of the individual firms’ market shares. HHIs range from 10,000 (in the case of a pure monopoly) to a number approaching zero (in the case of an atomistic market). A market HHI above 2,500 is classified as highly concentrated.

If a merger combines two participants in a relevant market, thereby increasing the HHI by more than 200 points and resulting in a highly concentrated market, it is presumed to enhance market power and is, therefore, presumptively unlawful.

On page 17 you can see that the FTC obviously concluded that the VR Dedicated Fitness App Market is Highly Concentrated, but since everything from their calculations to their math about this case is hidden to public. I’ll just put the link of the injunction so you can see it by yourselves:

The VR Dedicated Fitness App market HHI [ REDACTED] “concentrated” or “highly concentrated” under the Merger Guidelines.

In the VR Fitness App market, the Acquisition would increase HHI levels by [ REDACTED] . The Acquisition is thus presumed likely to create or enhance market power and is presumptively unlawful under Section 7 of the Clayton Act, 15 U.S.C. § 18

From what I’ve gathering across the web. The HHI as a formula that can be used to calculate market concentration, you can see more of it here:

I don’t have ANY idea how all this works so I hope really well versed users in this matters could lend us a hand to understand it :sweat_smile:

There were a couple of more reason the FTC as to why this deal was anticompetitive and illegal, but (with my very VERY limited knowledge) I think the HHI is the most important metric regulators use to detremine what is antiwhatever or not and from there, know from what angle the can tackle M&A (@profjjj I would gladly appreciate your to know if everyhting I am saying is stupid as hell or if, at least, there’s some reasonable takes in what I’m saying :sweat_smile: ) . Anyways, these are the other reasons the FTC is saying this is bad for that specific market.

  1. Eliminating potential competition from Meta in the relevant market for VR dedicated fitness apps
  2. Deconcentrate the Market and Have Other Procompetitive Effects
  3. Within Reasonably Perceived Meta as a Potential Entrant to the VR Dedicated Fitness App Market
  4. Basically saying that they should have created a rival from scratch with all their money instead of buying it.

Since I’ve had nothing to do and just by sheer curiosity I decided to search how the HHI from the MS/ABK “compares” to the META/Within acquisition … also found some really interesting information!

So according to this writer (or writers?) from Seeking Alpha, this is the HHI of the gaming market image

Based on the results, we find the gaming market to be not concentrated with a score below 1,000 in both pre-and post-acquisition scenarios with an increase of only 71. Thus, we believe this indicates the low likelihood of the deal being challenged by regulators. image

  • Since US regulators will likely limit their analysis to US markets I don’t know how much we can extract from this worldwide market analysis.

  • I Don’t know if these analysis takes market definition into account (something Hoeg has been saying from the beginning I think?) and that’s something that could help MS immensely. Like are console games a different market than phone-based games or can we fairly aggregate the two into one gaming market (an essential element of this answer will be whether they compete with one another).

  • Going back to the second point…does each relevant market has its own HHI? because that could also change some things.

I don’t know how much of “Big tech should create its own thing instead of buying it” could be applied here since, well, we know the gaming market is huge and that none of ABK games are “vital” (per se) for others to exist…but what to I know :v

What do you think guys? @profjjj just noticed you have already shown us that SA article some time ago :smile:


You could argue that big tech always creating their own thing reduces competition and prevents small business from competing or being able to profit from a success. This should get throttled in court.

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Thanks for tagging me on this. I was not aware of the FTC ruling on the Meta/Within acquisition.

I’m not surprised at all that they are using HHI to measure industry concentration. However, I am shocked at the level of granularity with which they are applying it. The fact that they are computing HHI for the “VR Dedicated Fitness App market” seems completely absurd to me.

“VR Dedicated Fitness apps” is not an industry, it’s a market niche. If you define any niche narrowly enough then you will find it to be highly concentrated. With that logic, I guess we can expect the FTC to compute the HHI for science fiction first person arena shooters, Western RPGs built with the creation engine, open world racing games with realistic driving physics, etc. The implications of defining “industries” that narrowly are profound. If they continue to do that the FTC could find problems with any horizontal merger it wants to stop.

The fact that the FTC is calling the “VR Fitness Industry” “vitally important” is completely absurd.

For the record, my only information on this particular ruling is what is posted above. But I agree completely with the Meta statement. There is even more wrong/absurd about the FTC position and methodology, but I have an early morning tomorrow and don’t have time to get into it now.


I agree.

Here’s me reading heavily between the lines and perhaps seeing things which may not exist …

I think it stems from the complete lack of trust in Meta to not abuse power. They have a history of buying out competition in any market or enough to become the dominate player. Combine the two and you have an unwillingness to allow Meta to even get a foot in the door or even start the first step of a journey towards the general Healthcare market. They don’t want Meta anywhere near Healthcare.

They’re looking beyond what this acquisition actually is and projecting what it could lead to and opting to NOPE out of that possibility.

Part of the trouble is they don’t and won’t ever know what is important until it’s too late, so they’re being aggressive and pessimistic in what could be instead of taking a more level approach. Maybe another part of the trouble is they’re driven by the “Not on my watch” mentality where they don’t want to be known for allowing the next major encroachment to happen.


DO you know why the U.S. Government doesn’t sue Microsoft? It’s because they have no reason to. Simple as that.

This is a good sign for ActiBlizzardKing right ?

MS deal has been in for longer time and no signs of getting sued

Another thing that this can kill is an approach where devs make an app in order to cash out if it becomes big enough and turns into a phenomenon within a niche market. Also I wonder if it can be applied to music games…

It does not change much, but the joke about WRPG monopoly might end up being real with FTC

Great, fuck Facebook. I wonder if part of the calculus here is that they provide nothing of value to the public.

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I honestly think Facebook will challenge this and win. The market definition is too narrow.

This deal has actually been in the works longer.

The Meta/within acquisition has taken 9 months to this point (it was announced basically last November)

The MS/ABK acquisition so far has taken 6 months but we have heard and see a lot of movements from MS to assure its getting as smoothly as possible.

Yeah I have seen theories out there saying the FTC wants to overcompensate for whatsapp (and the such) acquisitions they had let slide in the past…the thing is, as @profjjj stated, it is hard to say if a judge (if this is how this works) will take seriously those complaints.

Seems like the FTC is cherrypicking and doing antitrust for antitrust sake (which is something Lina Khan said they would do in January, that they prefer to challenge and lost than let possible “anti” deals pass through unscatted even if they lose all of them…but I dont see how that seems susteanable in the long term).


this is why I don’t like sara khan and the current layout at the FTC currently, they are so insanely bias against big tech. I am not saying they shouldn’t keep a closer eye on big tech but how are we meant to take this seriously


The saving grace is that courts are not like this for a time being.

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Dont think they could maintain that “antitrust for antitrust sake” focus if they dont manage to solve their problems. Its been a while and it stills doesnt seems like they are working as a unit.


There were rumors (or reports?) about low morale in FTC and looking at this - no wonder.

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Yep and “staff mass exodus”

And I this was found recently:


The FTC’s Inspector General said in an audit dated Monday and obtained by Bloomberg News that the agency, under Khan and her predecessor Rebecca Kelly Slaughter, had recruited nine unpaid experts or consultants between October 2020 and March 2022, creating potential legal and compliance risks, including conflicts of interest.

Considering the weak argument they made to block META’s recent acquisition, the numerous problems they are having under Khan’s leadership and that the government is pressuring them in focusing in ramdom things…I’m starting to think this FTC will be more bark than bite.

Pd: if the ftc were an xbox studio, everyone ans their mother would have already questioned how doomed they are :blush:

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Currently they are more ideological rather than logical trying to act like revolutionaires.

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