The chief executive of Facebook’s parent company Meta, Mark Zuckerberg, testified in court on Tuesday in a case involving attempts by American antitrust authorities to prevent the digital giant from acquiring the Within Unlimited virtual reality startup.
The question at hand is whether Meta’s purchase of the small business behind the VR fitness app Supernatural would reduce competition in the nascent virtual reality sector. The Federal Trade Commission claims that if the purchase is approved, it would violate antitrust laws, stifle innovation, and harm consumers who could pay more and have fewer options on platforms not owned by Meta Platforms Inc.
Meta, on the other hand, seeks to challenge the FTC’s claim that there is even a market for what it refers to as “VR specialized fitness apps.”
Zuckerberg appeared to downplay the idea that fitness is a unique, top category in virtual reality during his testimony at the trial in San Jose, California. While he acknowledged that fitness was one “use case” for virtual reality, he asserted that Meta has been mostly concentrating on gaming, communication, and socializing, as well as work.
There was a consistent order of popularity, with games, social media, and work being the top three, and “kind of a long tail” of additional uses for VR, including fitness, according to Zuckerberg.
The FTC contends that Meta’s entry into this market through the Within acquisition will hinder competition, hence it is crucial to determine whether or not VR fitness apps represent a separate market. It becomes more challenging to make that case if there is no clearly defined market.
The FTC contends that rather than acquiring the leading independent player in the industry, Meta had the resources and skills to develop its own VR fitness software. Meta is not the only company that might potentially enter this market, according to the FTC.
The startup Zuckerberg created in his dorm room at Harvard turned down takeover bids from a number of major computer firms, including Google, Yahoo, and Microsoft, according to FTC attorney Abby Dennis.
“Would you agree with me that Facebook continued to innovate well while not being acquired?” Zuckerberg responded yes to her question.
And “Facebook’s ability to succeed for 20 years is due to its ability to innovate even though it has never been acquired?” “Yes,” said Zuckerberg in response to her further remarks.
The CEO of Meta later admitted that although his company was “looking at” creating its own VR fitness app before choosing to purchase Within Unlimited in 2021, the current business climate makes it “nearly impossible” to begin such a project.
Like other businesses that rely on online advertising for income, Meta experienced a significant uptick in sales during the pandemic lockdown when people stayed at home and were glued to their phones and computers. But that was short-lived. Online advertising revenue is decreasing, competition is increasing, particularly from rival TikTok, and Meta recently let go of 13% of its workers.
According to Zuckerberg, Meta would have probably terminated a project to develop a VR fitness software if “it didn’t have any traction” given the present business and economic climate.
U.S. District Judge Edward Davila, who also presided over the trial of disgraced Theranos founder Elizabeth Holmes and her business partner Ramesh “Sunny” Balwani, is hearing the case, which is anticipated to be concluded on Tuesday. For their involvement in the business’s blood-testing scam, both received sentences totaling more than ten years in prison.
The acquisition was supposed to be closed by December 31st, but Meta last week extended that deadline to January 31st, pending the result of the case. In his testimony on Monday, Meta’s Chief Technology Officer Andrew Bosworth warned that if the case isn’t settled quickly, the business will likely walk away from the arrangement.
The more time that passes, the more difficult it is for both parties to function, according to Bosworth.
