The FTC filed an injunction today to block Meta's acquisition of the virtual reality studio Within, which is best known more recently for its subscription VR workout app Supernatural.
The regulatory body has had plenty of skirmishes with Facebook, now Meta, in recent years, but this is a pretty aggressive signal from the agency that they're going to make M&A hell for Meta going forward.
“Meta could have chosen to try to compete,” the FTC said in its lawsuit. “instead, Meta decided it preferred to simply buy" the startup; "[t]hat lessening of rivalry may yield multiple harmful outcomes, including less innovation, lower quality, higher prices, less incentive to attract and keep employees, and less consumer choice."
This lawsuit comes at an inopportune time for the company, which is struggling to balance its grand ambitions for the VR sector with runaway R&D spending on the category, which is negatively affecting its bottom line and its stock price. This week, Meta made the largely unprecedented move to substantially raise prices on its Quest 2 headset deep into the device's lifespan.
A price for the Within deal was never announced, though a report from The Information pinned the deal at $400 million. Within raised over $52 million in venture funding from investors like a16z, according to Crunchbase.
This saga largely looks like the FTC looking to chase its own demons for okaying the Instagram acquisition way back when and further signaling to Meta that they're going to have to grow on the merits of their own internal operations and can't rely on startup acquisitions in adjacent categories going forward. Some of the FTC's comments do raise fundamental questions about why a company acquires a different company to begin with other than to create a shortcut to success in a business category.
Meta has acquired a number of popular VR apps and game studios over the years, though the Within deal appears to be one of its more significant bets.
“The FTC's case is 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. By attacking this deal in a 3-2 vote, the FTC is sending a chilling message to anyone who wishes to innovate in VR. We are confident that our acquisition of Within will be good for people, developers and the VR space,” a Meta spokesperson wrote in an emailed statement to TechCrunch.