Meta is building virtual world open to app makers, CEO tells antitrust court
SAN JOSE, Calif., Dec 20 (Reuters) – Meta Platforms Inc ( META.O ) boss Mark Zuckerberg defended his acquisition of a virtual reality fitness app to an antitrust judge on Tuesday, arguing that his company was helping a budding virtual reality industry, it does not dominate.
Zuckerberg testified in federal court in San Jose, Calif., that owning app maker Within Unlimited was “not that critical” to Meta’s ambitions, saying it was primarily focused on building communication tools and a platform for build applications from different developers.
On fitness apps, he said, “it’s less important that we own the experiences than that they exist.” He said he is eager to see other firms build key productivity and gaming apps to attract a mass audience to virtual and augmented reality.
Zuckerberg defended Meta’s proposed acquisition in a high-profile hearing about the future of the social media company’s nascent metaverse business. The Federal Trade Commission accused Meta of trying to buy its way to the top of the VR industry.
FTC lawyers kicked off the proceedings by asking him about an internal email Zuckerberg wrote in 2015 in which he said he expected Meta to build “most of the apps and software services” for the VR industry.
Zuckerberg responded that big platform owners tend to build the most popular apps in their area of expertise, comparing Meta’s emphasis on communication to Microsoft Corp’s ( MSFT.O ) focus on productivity.
Platform companies have built “the key apps, what they call the killer apps,” Zuckerberg said, “but they’re not the only apps out there.”
The FTC sued the Facebook and Instagram owner in July to stop the Within deal and asked the judge to order a preliminary injunction, saying Meta’s “campaign to conquer VR” began in 2014 when it acquired Oculus , a VR headset maker, has acquired.
The trial is just one of many battles Meta is waging against regulators worldwide over its alleged dominance in various markets. The European Commission said Monday it has warned Meta of a possible antitrust violation related to online classified ads.
The company said earlier Tuesday that it does not expect to close the Within deal before Jan. 31 or until the day after the court rules on the FTC’s request for a preliminary injunction.
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FTC lawyers tried to show at trial that Meta planned to compete with apps like Within, arguing that executives identified fitness as a way to expand VR use beyond its existing fan base of young male gamers .
They featured a WhatsApp chat between two Meta executives in which one, Jason Rubin, said he told Within executives that Meta “intends” to get into the fitness segment.
In the chat, Rubin said he conveyed to Within that Meta could move faster if it had a first-party business — one he owns — but would also “support everyone like we do with games.” He said Zuckerberg was aware of the plan to deliver that message.
Zuckerberg said he did not recall a discussion with Rubin on the subject.
Meta has been pouring money into its metaverse-focused Reality Labs unit, which has recently drawn criticism from investors who urged Zuckerberg to slow down as ad sales crumble. Meta said last month it would cut more than 11,000 jobs.
The social media company agreed to buy Within in October 2021, a day after it changed its name from Facebook to Meta.
Zuckerberg told the court that he decided to pursue the deal when Meta was in a stronger financial position and that he was unlikely to make the same decision in the current economic climate.
Inside developed Supernatural, a VR app it advertises as a “complete fitness service” with choreographed workouts. It’s only available on Meta’s Quest headsets, which account for 90% of global shipments in the VR hardware market, according to market research firm IDC.
Meta also controls a Meta Quest Store with hundreds of apps, including the top app Beat Saber, a dance game that executives have considered expanding into the fitness space.
Zuckerberg testified that the Beat Saber proposal never went beyond the brainstorming stage.
The FTC is separately trying to force Meta to unwind two previous acquisitions, Instagram and WhatsApp, in a lawsuit filed in 2020. Both were in relatively new markets when the companies were purchased.
Reporting by Katie Paul in San Jose, California, and Diane Bartz in Washington Writing by Sayantani Ghosh Editing by Peter Henderson, Anna Driver, Jonathan Oatis and Matthew Lewis
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