The US Federal Trade Commission is suing Meta to stop it acquiring VR business Within, producer of the VR fitness app Supernatural. The case lays bare the huge challenges for competition (or antitrust) law in the context of the digital giants. And although laws differ between jurisdictions, the policy issues are same same.

There’s a clear philosophical logic to the FTC’s case. Meta’s focus is on building and controlling a VR metaverse. Meta is already the largest provider of VR apps and devices in the US. Behemoths like Meta have the power and resources to expand and consume pretty much any market. And Meta has shown an appetite to do this by buying its way in rather than developing its own product from scratch.

Entering a market by buying an existing product, and backed with the network effects and resources to undercut other competition, places Meta at an obvious advantage. Existing competitors will wither. Potential competitors will focus their efforts elsewhere. And suddenly Zuck’s dream of being ‘completely ubiquitous in killer apps’ is reality. 

Current models of competition law are framed around competition in specific markets.  The FTC says that Meta’s acquisition of Within would reduce competition in the market for VR fitness apps.  The US laws, like ours, are hamstrung by this concept of market definition and the necessity to speculate about the future state of competition in a specific market.  The laws are not adapted to consider businesses operating as massive ecosystems, like Meta. 

The FTC wants the court to take account of these broader considerations.  Its case is framed not just around the specific VR fitness app market, but around Meta’s power and dominance at an ecosystem level.  Looking at it that way, you can see the argument that Meta’s on a path towards total control of the VR world.  But if the court takes a narrower, more traditional approach then its focus will be on that specific VR fitness app market, and there the FTC’s case is weaker; Meta has limited presence in VR fitness apps before the acquisition.  To succeed on the narrow case, the FTC would need to prove that absent the acquisition, Meta and Within would each evolve into major players in VR fitness.

Win or lose, the FTC’s prosecution has strategic merit.  If it wins, then there’s a precedent for applying an ecosystem view to competition analysis which is better suited to regulate digital platforms.  If it loses, then it has evidence that the current laws aren’t working, providing a stronger basis to argue for legislative reform.  Well played, we say.