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Facebook parent
Meta Platforms Inc.
CEO
took the witness stand Tuesday in a case in which the Federal Trade Commission is seeking to prevent the social-media company from acquiring a virtual-reality startup.
The FTC is seeking an injunction blocking Meta’s planned acquisition of Within Unlimited Inc., the company behind the popular virtual-reality fitness game “Supernatural.” The legal move poses a direct challenge to Meta’s strategic focus on the metaverse, a term used to describe a platform where numerous online users work and play in virtual worlds.
The case is widely seen as a test of FTC Chair Lina Khan’s expansive interpretation of antitrust law and the commission’s potential to rein in the power of the world’s biggest technology companies. The lawsuit is based on the theory that the deal is set to cause competitive harm because it may limit potential future competition in a nascent industry, a legal interpretation that some antitrust specialists said was unusual.
In Meta’s opening remarks, the tech company argued that the FTC is trying to set a precedent that “if you’re big, you’ve got an interest in something and we think you’d rather ought to build it, we’re going to stop you from buying it and we’re going to make you build it,” said Mark Hansen, a lawyer for the company.
“Your honor, that’s not the law. If it became the law, it would doom just about every single vertical acquisition,” Mr. Hansen said.
In its July complaint, the FTC accused Meta of trying to buy its way to the top of the virtual-reality market, rather than competing or building its own products.
In its opening remarks this month, the FTC argued that Meta could have chosen to use its resources to build its own app, and it was planning to do so until it heard a rumor that rival
Apple Inc.
was interested in buying Within Unlimited, said Abby Dennis, senior trial counsel at the FTC, in her opening remarks.
“Instead of building its own VR-dedicated fitness app, Meta just decided to acquire the market leader, ‘Supernatural,’” Ms. Dennis said.
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Since Facebook’s name change to Meta in October 2021, Mr. Zuckerberg has talked about positioning his company to become the leader in the metaverse. Over the past year, the company has been unable to gain much traction in its efforts to sell its Quest VR headsets and lure users onto its metaverse apps.
In its quarterly earnings report released in October, Meta’s Reality Labs unit, which is driving the company’s virtual-reality and metaverse efforts, posted revenue of $285 million for the quarter, a decline of nearly 49% from a year ago.
Internal company documents also showed that the company’s flagship metaverse, Horizon Worlds, had initially set a goal of reaching 500,000 monthly active users by the end of 2022, but it had fewer than 200,000 as of October, according to a report by The Wall Street Journal.
Write to Salvador Rodriguez at salvador.rodriguez@wsj.com
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