Meta Can't Buy V.R. Fitness Company, Must Make Its Own Competing App, Says FTC
Plus: A rebranded "Build Back Better," the two-party system creates "a disconnect between elites and non-elites," and more...
Another antitrust lawsuit for Zuckerberg. The Federal Trade Commission (FTC) is suing to stop Facebook parent-company Meta from acquiring the virtual reality company Within Unlimited.
Meta has been betting big that virtual reality (V.R.) and augmented reality (A.R.) will finally have their day, pouring billions of dollars into the "metaverse." Within makes a popular V.R. fitness app called Supernatural.
The FTC says that Meta acquiring Within amounts to a violation of U.S. antitrust law.
"Meta is a potential entrant in the virtual reality dedicated fitness app market with the required resources and a reasonable probability of building its own virtual reality app to compete in the space," says the FTC in a statement. "But instead of entering, it chose to try buying Supernatural. Meta's independent entry would increase consumer choice, increase innovation, spur additional competition to attract the best employees, and yield other competitive benefits. Meta's acquisition of Within, on the other hand, would eliminate the prospect of such entry, dampening future innovation and competitive rivalry."
"Meta chose to buy market position instead of earning it on the merits. This is an illegal acquisition, and we will pursue all appropriate relief," said FTC Bureau of Competition Deputy Director John Newman.
The FTC's suit is silly for a number of reasons, starting with its very premise.
Meta is set on making its metaverse happen, and presumably it wants the best technology and programs in that world. The creators of Supernatural have been spending a lot of time on developing this program, and presumably they want it to get to a lot of people. Meta acquiring Within allows Meta to bring some of the best virtual reality fitness programs to the metaverse without duplicating Within developers' efforts, while also allowing the creators of Supernatural to share their expertise and vision with many more people than they would otherwise. Meanwhile, more consumers have easy access to a highly-acclaimed V.R. fitness program. Sometimes, bigger companies buying smaller ones is a win-win-win.
The idea that Meta should have to develop and promote its own virtual reality fitness app (instead of relying on existing technology) and that this would somehow be good for consumers is such a weird, convoluted scheme. With Meta's mighty marketing power and reach, it may be able to crush Supernatural—but who would that benefit? Or it may make an inferior product, meaning anyone who wants a top-of-the-line V.R. fitness experience integrated into the metaverse is out of luck. Either way, it doesn't seem like consumers really win here.
Besides, there are a lot of companies—including behemoths like Microsoft and the video game company Epic—working on virtual and augmented reality applications. And there are also all sorts of programs specifically dedicated to V.R. and A.R. fitness. Meta buying Within hardly dries up all competition within this space.
And since the Oculus Quest Store operates like Google Play or the Apple App Store, many competing fitness apps could still run through Oculus Quest headsets, even if Meta's deal with Within lets it have a preinstalled fitness app in the metaverse.
There are also a lot of more technical issues with the FTC's lawsuit, which Adam Kovacevich—a self-described "pro-tech Democrat" and the founder and CEO of the tech industry coalition Chamber of Progress—lays out in this Twitter thread. Among other issues, Kovacevich takes issue with the FTC's market definition.
FTC's initial stab against Facebook got rejected because of this failure to establish a proper market, and I think this case will fall into the same trap.https://t.co/sQTIjWnbNG 15/
— Adam Kovacevich (@adamkovac) July 27, 2022
In order to prove any antitrust violation, authorities must start by defining the market that is supposedly being monopolized or undermined. The FTC has a history of shadiness in this realm, defining markets in a way that helps their case but defies reality. For instance, in another lawsuit against Meta (this one concerned with personal social networking services), the FTC defined social network to exclude Twitter, Reddit, TikTok, and Pinterest.
In this case, the FTC defines the market to exclude popular fitness programs run though Nintendo, Xbox, and PlayStation (as well as other tech-enabled home fitness program options).
And these companies have been busy snapping up gaming studios—"Nintendo has acquired 4 gaming studios in the last year and a half - Xbox has acquired 15 gaming studios over its history - PlayStation acquired 5 gaming studios in just the last year," noted Kovacevich.
He suggests the lawsuit has more to do with politics and "Facebook derangement syndrome" than Meta's deal to buy Within actually being a threat to competition. "It will be long on headlines, but short on results."
Great thread. Of course, we've been warning against the FTC and DOJ's attempt to use antitrust law – and especially merger enforcement – as a political tool for a while now. See e.g. here: https://t.co/jJjE5VhI8q https://t.co/jstz4Ffr0x
— Lazar Radic (@laz_radic) July 28, 2022
(For background on the politics of anti-tech antitrust action, check out my Reason feature from last summer.)
Lawyer Neil Chilson, former chief technologist at the FTC, also suggests there are "major legal problems" with the FTC's latest Meta suit, "the biggest being the gerrymandered market definition."
You can read the FTC's full complaint here.
FREE MINDS
Another reason to end the two-party system. "In America, you still see a lot of high-income voters in the Republican Party, and you still see a lot of high-income politicians and other elites who are more concerned with economic than cultural issues. But there's also a disconnect between elites and non-elites—within both parties: Republican donors are way to the right of their party's voter base on the issue of taxes; Democratic donors are way to the left of their party's voter base on the issues of abortion and guns," Matt Grossmann, a political science professor at Michigan State University and director of the school's Institute for Public Policy and Social Research, tells The Signal. "In other countries, these different interests would distribute themselves across a number of different political parties, but in the U.S., there are only two major parties, so the vast majority of voters end up in one or the other." Read the whole interview here.
FREE MARKETS
"Build Back Better" spending plan rebranded as Inflation Reduction Act. Sen. Joe Manchin (D–W.Va.) is reportedly on board with a trimmed-down version of President Joe Biden's spending proposal—which in proper Orwellian fashion has been rebranded as an inflation-curbing initiative. More from Reason's Eric Boehm:
In a statement on Wednesday evening, Manchin announced The Inflation Reduction Act of 2022, a bill that the swing-vote senator says will be built around "paying down our national debt, lowering energy costs and lowering healthcare costs."
Though Manchin's statement is light on specifics about the bill, subsequent reporting by Politico and other outlets quickly fleshed out the proposal. The bill will include $370 billion in new spending on climate change initiatives and green energy projects—a linchpin of Biden's Build Back Better plan through its many, many interactions over the past year—and would dedicate about $300 billion of revenue toward reducing the deficit, which has been Manchin's top priority.
The bill also reportedly includes a three-year extension of the expanded Affordable Care Act (ACA) subsidies originally passed as a temporary measure during the early days of the COVID-19 pandemic, as well as changes to how federal health insurance programs price prescription drugs. Though pitched as a way to cut costs for households, the extension of those ACA subsidies could actually worsen inflation, as Reason's Peter Suderman has explained.
Boehm notes that "earlier versions of the Build Back Better plan were loaded up with gimmicks that in some cases hid as much as half of the package's overall cost," and since Manchin opposed these gimmicks, "it might be fair to assume that his support for this new deal is contingent on it being a clean bill." But an "inflation-combatting, deficit-reducing bill that doesn't combat inflation or reduce the deficit" is not exactly great…
QUICK HITS
The difference between 1 million & 1 billion always blows my mind.
One million seconds = 11.5 days.
One billion seconds = 32 years.
One trillion seconds = 31,688 years.
Congress took $3.8 trillion in taxes last year. Yet it had a $3 trillion deficit. This is not right.
— A lady (@Anastasia_esq) July 28, 2022
• How the Supreme Court's decision in Dobbs v. Jackson Women's Health Organization opened up an attack on doctors.
• Stop blaming the Supreme Court for telling Congress to do its job, suggests Hillsdale College politics professor Adam M. Carrington at National Review.
• The CHIPS Act—which passed the Senate on Wednesday—"is corporate welfare disguised as industrial policy," writes Veronique de Rugy.
• Yet another city in the U.K. is trying to ban strip clubs.
• For Reason's banned books issue, Ron Bailey looks back at the banning of Lady Chatterley's Lover.
• What's next for school choice?
• An interesting chart on labor and immigration:
U.S. Labor Demand Explains Most of the Rise in Illegal Immigrationhttps://t.co/atnWGfiLlW pic.twitter.com/pXjoma1PDq
— The Alex Nowrasteh (@AlexNowrasteh) July 27, 2022
