A federal judge has sided with Facebook parent Meta, clearing the way for the company to buy virtual reality startup Within Unlimited, the maker of the popular fitness app Supernatural.
Federal antitrust regulators had tried to block the acquisition because it would hurt competition in the emerging virtual reality market.
But U.S. District Judge Edward Davila denied the Federal Trade Commission’s request for a preliminary injunction against the deal. According to the judge’s ruling, the agency has not provided sufficient evidence to prove its case.
Meta said it is now proceeding with the acquisition of Within Unlimited.
The FTC had argued that Meta’s acquisition of the small company – reminiscent of Facebook’s early purchases of Instagram and WhatsApp – would hurt competition in the emerging virtual reality market.
If the tech giant bought Los Angeles-based Within Unlimited, the FTC argued, it would violate antitrust laws and curb innovation, harming consumers who may face higher prices and fewer options outside of Meta-controlled platforms.
Meta Platforms Inc. said in a statement late Friday after the ruling was unsealed that it is “satisfied” with the decision.
“This deal will deliver competitive advantages to the ecosystem and drive innovation that will benefit people, developers and the wider VR space,” said the Menlo Park, California-based company. “We look forward to completing the transaction quickly.”
The FTC had argued that Meta scrapped its own plans to enter the burgeoning VR fitness market in the summer of 2021 when it decided to buy Within Unlimited. Without the competitive threat of the tech giant’s entry into the market, the agency claims, innovation will stall, hurting end users.
“The threat is what sustains businesses,” said economist Hal Singer, a witness for the FTC. “If I know there’s a chance someone will come in and steal my lunch,” he said, companies will innovate and limit prices.
But Meta executives, including CEO Mark Zuckerberg, tried to play down the idea that the company was close to creating its own VR fitness app. Meta’s CEO testified that while his company “looked” at developing its own VR fitness app before deciding to acquire Within Unlimited in 2021, the business environment has changed and “there’s almost no chance” it will today starting such a project.
Under Zuckerberg’s, Meta moved aggressively into virtual reality in 2014 with the acquisition of headset maker Oculus VR. Since then, Meta’s VR headsets have become the cornerstone of its growth in the virtual reality space, the FTC noted in its lawsuit. Fueled by the popularity of the top-selling Quest headsets, Meta’s Quest Store has become a leading app platform in the US with more than 500 apps available for download, the agency said.
Meta bought seven of the most successful virtual reality development studios and now has one of the largest virtual reality content catalogs in the world, the FTC noted.
However, Davila’s ruling says the FTC had to provide “at least circumstantial evidence” that Meta’s entry into the VR fitness market on its own, and not through the acquisition, would have directly and beneficially impacted consumers by encouraging robust competition.
“By this standard, the FTC’s evidence on this element is insufficient,” Davila wrote.
FTC representatives did not immediately respond to a message asking for comment on Monday.
Davila also oversaw the trial of disgraced Theranos founder Elizabeth Holmes and her partner Ramesh “Sunny” Balwani. Both were sentenced to more than ten years in prison for their role in the company’s blood testing hoax.
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