Meta’s Zuckerberg goes to court to defend his company’s virtual reality deal

The case is the first to challenge a consumer tech deal from the Federal Trade Commission chaired by Lena Khan — an influential antitrust thinker who has been nominated by President Joe Biden for one of the federal government’s most powerful corporate watchdog jobs. The outcome of the three-week hearing, which is expected to conclude on Tuesday, will be a major test of its authority to pursue alleged anti-competitive behavior using aggressive and largely untested legal theories..

At trial, Zuckerberg An FTC lawyer disputed whether the company planned to build or acquire most of the apps on its VR platform and how important the fitness services were to its ability to gain traction in the metaverse. The FTC’s status hinges in part on whether Meta would have competed in the market had it not been for the acquisition.

“Historically, most major platform providers have built some major applications,” Zuckerberg said in court, referring to the company’s Meta Quest virtual reality headset. However, FTC attorney Abe prompted Dennis Zuckerberg to say that since 2015, he had been planning to build most of the apps for the then-fledged virtual reality operation itself.

Zuckerberg responded that Meta focused on building apps in three main areas, including gaming, social interaction, and productivity. Other use cases, such as fitness, while important, were not at the heart of the Meta’s VR expansion, he said.

Dressed in a blue suit and giving testimony through a face covering, Zuckerberg was only on the stand for two hours.

And at the end of his testimony, under cross-examination by US District Judge Edward Davila, Zuckerberg said that the main reason for building the so-called Metaverse was to get out from under the control of Apple and, to a lesser extent, Google, which It currently controls primary consumer computing user interface Through their stranglehold on the mobile phone industry. An earlier beta testimonial revealed that the Meta decided to buy Inside in part after hearing rumors that Apple was also looking to acquire it.

“To the extent that we can help shape the platform, hopefully that creates a more level playing field,” Zuckerberg said.

The Meta CEO added that his goal is to use the deal to boost the broader VR market. Despite this, Dávila pressured him on whether he could support the companies without buying them.

While Zuckerberg said it wouldn’t be a good idea for Meta to own every developer, he said “there’s a limit to what [start-up] Founders can do with a platform. A tighter feedback loop between the developer and the platform” could help improve the platform in a way that benefits the entire market.

Meta has promised to become a leader in the metaverse — hence the name change from Facebook — and wants to buy Inside to expand its offering into virtual reality. The FTC argues that the deal would unlawfully enhance Meta’s market power in the emerging virtual reality industry and that the company is looking to buy up competition rather than compete on merit.

Meta announced the deal in October 2021, and the agency filed suit in July to block the deal. The two companies did not disclose the purchase price, but the deal was worth $440 million, according to testimony on Monday.

According to a previous pilot testimonial, Meta had a project, dubbed “Operation Twinkie,” to partner with fitness equipment maker Peloton and create its own virtual reality product.

The FTC caught a glimpse of a March 2021 email from Zuckerberg to his deputy Andrew Bosworth and others, in which the CEO of Meta said partnering with Peloton on the virtual reality game “looks great! I’d love to make it happen. Let me know.” how can I help “.

Dennis continually pressed Zuckerberg about his interest in VR fitness, using past statements from him and other executives about potentially building a competing product as evidence that they chose to buy over the competition. On Monday, Bosworth, who oversees Facebook Reality Labs, also testified that the company has no real plan to enter the virtual reality fitness market on its own.

Zuckerberg stressed that while fitness apps are valuable for expanding VR beyond a core group of young, largely morphing gamers and male gamers, they weren’t the most important part of the Meta’s plans. “Fitness was probably the fourth or fifth use case,” he said.

The FTC says Meta’s potential partnership with Peloton was to build a different game, Beat Saber, an interactive virtual reality music game in which users also move physically, in a game that specifically focuses on fitness. The FTC initially said Meta competed with Inside prior to the deal because of the Beat Saber’s fitness aspects but dropped those claims in October.

The FTC is trying, in a separate case, to overturn Meta’s 2012 and 2014 purchases of Instagram and WhatsApp, and the agency said it’s challenging the company’s strategy of buying incumbents, rather than competing. This issue was brought up during the Trump administration.

Meta said throughout the hearing that if the FTC wins the first round, the companies will abandon the deal.

Meta and Inside previously set December 31 as the deadline to close their deal, but on Monday night, extended that through January to give Dávila more time to make a judgment. An administrative trial is currently scheduled to begin in FTC Internal Court in January. The agency typically abandons this effort if it cannot first obtain a preliminary injunction in federal court.

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