Meta CEO Mark Zuckerberg takes the stand in the FTC case

Mark Zuckerberg, the CEO of Facebook’s parent company Meta, took the witness stand Tuesday in a trial over US antitrust authorities’ efforts to prevent the tech giant from buying a virtual reality startup called Within Unlimited.

The question is whether Meta’s acquisition of the small company that makes a VR fitness app called Supernatural will hurt competition in the burgeoning virtual reality market. If the deal goes through, the Federal Trade Commission argues, it would violate antitrust laws and dampen innovation, which could hurt consumers who may face higher prices and fewer options outside of Meta Platforms Inc.-controlled platforms.

Meta, meanwhile, wants to poke holes in the FTC’s argument that there’s even a separate market for what the FTC calls “VR-dedicated fitness apps.”

During his testimony, Zuckerberg seemed to downplay the notion that fitness is a distinct top category in VR. He said that while fitness is a “use case” for virtual reality, other uses — namely gaming, communication and socializing and work — have been the main ones Meta has focused on.

“While we focused on a number of use cases,” Zuckerberg said, there was a common order of popularity — with gaming, social, and work being the top 3 and “kind of a longer tail” of other uses for VR, including fitness.

Whether or not VR fitness apps are a distinct market is crucial in this case, as the FTC argues that Meta’s entry into this space through its acquisition of Within would stifle competition. If there is no defined market, this case becomes more difficult to prove.

However, the FTC argues that in addition to being a potential entrant into this market, Meta has the resources and capability to develop its own VR fitness app rather than acquiring the leading independent vendor in the market.

FTC attorney Abby Dennis pointed out that the company, which Zuckerberg founded in his Harvard dorm in Facebook’s early days, has turned down takeover bids from a variety of big tech companies — including Google, Yahoo, and Microsoft.

“You would agree that Facebook has continued to successfully innovate even though it was never acquired?” she asked Zuckerberg, who said yes.

And “the reason Facebook has been able to thrive for 20 years is that it continues to innovate even though it’s never been acquired?” she continued, and Zuckerberg replied, “Yes.”

But Meta’s CEO later testified that although his company is “considering” developing its own VR fitness app ahead of the decision to acquire Within Unlimited in 2021, the business environment has changed and “there’s almost no chance.” “ gives to start such a project today.

Meta, like other companies that rely on online advertising for revenue, experienced a major business boost during the pandemic lockdown as people stayed glued to their phones and computers at home. But that didn’t last. Online advertising spending is declining, competition, particularly from rival TikTok, is growing, and Meta recently laid off 13% of its workforce.

Given the current business and economic climate, Zuckerberg said if Meta had started a project to build a VR fitness app and “it hadn’t had traction,” it likely would have canceled it.

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