Last week was a tough one for Meta. Among the news for another quarter of lower-than-expected revenue is the possibility of a drop in Meta Quest 2 sales, thanks to a new price hike for the headset. As of August 1, Quest 2 will be $100 more expensive. If things don’t look like they could get any worse, Meta is now facing a lawsuit from the FTC, claiming it created a monopoly on VR fitness apps.
But the FTC misses the forest for the trees in this suit (Opens in a new tab) which states, in essence, that Meta cannot legally acquire two companies that make the most popular VR fitness games (Opens in a new tab). Those are Beat Games — makers of the ever-popular Beat Saber, which Meta bought years ago — and the announcement last October of the acquisition of Inside, the company that makes the fitness-focused game Supernatural.
Throughout the lawsuit, the FTC compares how similar both games are to each other, a comparison many made when Supernatural emerged for a month in the COVID-19 pandemic in 2020. But it’s not the similarities with each other that the FTC needs to focus on. It’s not an idea that Meta wants to own the rights to these two popular games.
It is a fact that Meta manages and operates the entire store All Oculus Quest 2 apps and games can be officially purchased. This creates a direct conflict of interest when the company’s apps and games are regularly featured on the apps and games of small developers.
But that’s not the only strange thing here.
Justice or revenge?
Sure, the FTC and Meta aren’t friends, but they seem to know each other pretty well these days. This year alone, we’ve seen many similar lawsuits filed by the Federal Trade Commission; Which includes suing Meta for its acquisition of WhatsApp and Instagram (Opens in a new tab)and another lawsuit regarding potential uncompetitive business practices (Opens in a new tab) In the Oculus section.
Both cases make perfect sense, and we’ve previously written about specific developer accounts getting Sherlocked (Opens in a new tab) And other classic schemes for purchase or burial.
But I can’t help but feel it Latest suit (Opens in a new tab) Will the FTC retaliate against the Meta in an attempt to crush it – any way possible.
The evidence is in the candy, and as I mentioned earlier, the reasoning behind the suit is shaky at best. I’m not sure many people think Beat Saber is a fitness app – even if it could technically be used in that way with modifiers, the lawsuit points out – and this isn’t the first time Meta has tried to get the developer of an incredibly popular game app on the its statute.
Last year, we saw Meta acquire People: one developer BigBox VR, and one developer Onward Downpour Interactive. Both companies make two of the most popular multiplayer shooters on the Quest Store, so why not target any of these acquisitions?
Even if the FTC didn’t want to file an individual lawsuit against those, it could have at least mentioned these two common tactics by the Meta if it were to use the same reasoning found in this latest lawsuit.
I spoke with Anshel Sag, chief analyst at Moor Insights & Strategy, about the FTC lawsuit. He seemed equally confused by the FTC’s decision to appropriate this acquisition over several other recent Meta acquisitions. This is of course unless there is another despised entity behind the scenes.
While Meta’s previous acquisitions of its in-house brand Oculus Studios have mostly been under undisclosed amounts, the Inside acquisition bid has made waves because of the cost.
When bids were completed, Meta agreed to pay $400 million to the small development studio. Since this was the company’s first big game, and it was only available on the Quest platform, many baffled their heads over the amount paid.
But, as Sag pointed out, it’s very likely that Meta wasn’t the only big player in the company’s bidding process—as inferred from the bidding term. So who could have bid on a small VR developer with a hugely successful VR fitness app?
Apple of course.
While Apple is still in the process of construction (Opens in a new tab) It’s important for the company to build an impressive suite of apps and games that will convince people to spend money on day one of the headset’s final release. With Apple’s penchant for all things fitness these days — and AR/VR headsets will take its supposed place alongside home gyms, now and in the future — it makes perfect sense that Apple has been the other big bidder over the past year.
With Apple possibly being the other bidder, it’s also possible that Apple convinced the FTC to file the lawsuit. After all, this isn’t the first time Apple has done something like this. A similar enough scenario occurred with the attempted acquisition of Qualcomm by Broadcom that Apple allegedly pushed the case to involve the regulatory authorities.
Considering that Meta currently has 80% or higher market share (Opens in a new tab) For VR headsets, it will be important for Apple to prevent the Meta from becoming more ingrained in the minds and hearts of consumers before it can actually launch a competing product.
Only under this scenario — that is, Apple getting the FTC to stop the Inside acquisition — does this lawsuit make sense. Otherwise, the FTC is barking the wrong tree and failing to do its actual work.
Fix the store first
If there is any real problem in the world of digital markets, it is in the vested interest of the controlling parties to put their applications and services above the competition. Google and Apple have been guilty of this practice for years, and with the exception of the big Epic Games case against Apple, little has been done to challenge this problematic design.
Like these companies, Meta’s Quest Store follows the same formula. The apps are checked by Meta and approved for publication in the Store. Then, someone (or something) in the Meta curates these apps for users, whether it’s an algorithm-based method of customization, or hand-picked titles for packages and other sales.
The FTC mentioned this as a footnote at point 133 in this lawsuit, but it’s a point that needs to be much bigger. It’s entirely possible that the FTC is already dealing with this with the case that opened in January, but anyway (pun intended), the current lawsuit appears misleading and potentially useless in the grand scheme of things.
After all, Meta allows third-party marketplaces like SideQuest (Opens in a new tab) In existence, even if you have to jump through hoops to use it. It even has its own app lab (Opens in a new tab) This is less restrictive than the “official” store but, just like the upcoming price increase for the Quest headphones, it’s entirely possible that Meta will keep these options as a way to get around regulation.
Ultimately, though, holding companies like Meta, Apple, and Google accountable for the stores they keep and the priorities they place on their apps, services, and products is what will fix this problem.
As Sage explained to me, the VR industry is still largely in its infancy, and such claims are almost certain to harm rather than encourage growth. These types of suits make a lot of sense in a mature market – for example, two major players such as Microsoft Activision Blizzard (Opens in a new tab) – And I think the time of the FTC would be much better in these cases instead.