Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 1 of 23
`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 1 of 23
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`EXHIBIT 1
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`EXHIBIT 1
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 2 of 23
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`
`LETITIA JAMES
`Attorney General State of New York
`Henry B. Smith
`California State Bar No. 313801
`Assistant Attorney General
`Henry.Smith@ag.ny.gov
`
`Office of the New York Attorney General
`28 Liberty Street
`New York, NY 10005
`(212) 416-8627
`
`Counsel for Amicus Curiae State of New York
`(Additional counsel listed in signature block)
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
`
`
`FEDERAL TRADE COMMISSION,
`
`
`Plaintiff,
`
`
`v.
`
`META PLATFORMS, INC., AND
`WITHIN UNLIMITED, INC.,
`
`
`Defendants.
`
`
`Case No. 5:22-cv-04325-EJD-SVK
`
`[PROPOSED] BRIEF FOR THE STATES
`OF NEW YORK, ALASKA, CALIFORNIA,
`CONNECTICUT, DELAWARE, HAWAII,
`IDAHO, ILLINOIS, MARYLAND,
`MASSACHUSETTS, MINNESOTA,
`MISSISSIPPI, MONTANA, NEBRASKA,
`NEVADA, NEW JERSEY, NEW MEXICO,
`NORTH CAROLINA, NORTH DAKOTA,
`OREGON, RHODE ISLAND, UTAH, AND
`WASHINGTON, THE DISTRICT OF
`COLUMBIA, AND THE TERRITORY
`OF GUAM AS AMICI CURIAE IN
`SUPPORT OF PLAINTIFF’S MOTION
`FOR A PRELIMINARY INJUNCTION
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 3 of 23
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`TABLE OF CONTENTS
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`Page
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`TABLE OF AUTHORITIES .......................................................................................................... ii
`
`INTRODUCTION AND INTEREST OF AMICI .......................................................................... 1
`
`ARGUMENT .................................................................................................................................. 3
`
`I.
`
`The Amici States’ Experience Demonstrates That the Equities and Public Interest
`Favor a Preliminary Injunction of Meta’s Acquisition of Within....................................... 3
`
`A.
`
`B.
`
`C.
`
`A Preliminary Injunction Is Necessary to Preserve the Status Quo While
`the FTC Undertakes a Full Adjudication of Meta’s Acquisition of Within. .......... 3
`
`State Enforcement Efforts Underscore the Dangers That Acquisitions by
`Digital Platforms Like Meta May Pose to Competition and Innovation. ............... 4
`
`Meta’s Acquisition of Within Poses Dangers to Competition and Innovation. ...... 8
`
`II.
`
`The FTC Is Likely to Prevail on the Merits Because Meta’s Acquisition of Within
`Likely Would Substantially Lessen Competition. ............................................................ 10
`
`CONCLUSION ............................................................................................................................. 13
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 4 of 23
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`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Brown Shoe Co. v. United States,
`370 U.S. 294 (1962) .................................................................................................................12
`
`FTC v. Procter & Gamble Co.,
`386 U.S. 568 (1967) .................................................................................................................12
`
`FTC v. Warner Commc’ns Inc.,
`742 F.2d 1156 (9th Cir. 1984) ...................................................................................................3
`
`In re Google Digital Advert. Antitrust Litig.,
`Nos. 21-md-3010, 21-cv-6841, 2022 WL 4226932 (S.D.N.Y. Sept. 13, 2022) ........................2
`
`Massachusetts v. Microsoft Corp.,
`373 F.3d 1199 (D.C. Cir. 2004) .................................................................................................1
`
`New York v. Facebook, Inc.,
`549 F. Supp. 3d 6 (D.D.C. 2021) ...............................................................................................4
`
`United States v. Marine Bancorporation, Inc.,
`418 U.S. 602 (1974) ........................................................................................................... 11-12
`
`United States v. Microsoft,
`253 F.3d 34 (D.C. Cir. 2001) .....................................................................................................1
`
`Laws
`
`15 U.S.C.
`§ 18...........................................................................................................................................10
`§ 45...........................................................................................................................................10
`§ 53.............................................................................................................................................3
`
`Miscellaneous Authorities
`
`Ben Lang, FTC Sues to Block Meta’s Acquisition of Top VR Fitness App Developer,
`Road to VR (July 27, 2022), https://www.roadtovr.com/meta-supernatural-within-
`acquisition-price-ftc-scrutiny-report/ .........................................................................................9
`
`C. Scott Hemphill & Tim Wu, Nascent Competitors, 168 U. Pa. L. Rev. 1879 (2020),
`https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=9715&context=pen
`n_law_review .............................................................................................................................6
`
`Colleen Cunningham et al., Killer Acquisitions, 129 J. Pol. Econ. 649 (2021),
`https://www.journals.uchicago.edu/doi/epdf/10.1086/712506 ..................................................6
`
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 5 of 23
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`Miscellaneous Authorities
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`Page(s)
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`Comments from Att’ys Gen. in Response to Request for Information on Merger
`Enforcement (Apr. 21, 2022), https://www.naag.org/wp-
`content/uploads/2022/08/Public-Comments-of-23-State-Attorneys-General-.pdf ....................2
`
`Cristina Caffarra et al., “How Tech Rolls”: Potential Competition and “Reverse”
`Killer Acquisitions, Ctr. for Econ. Pol’y Rsch. (May 11, 2020),
`https://new.cepr.org/voxeu/blogs-and-reviews/how-tech-rolls-potential-
`competition-and-reverse-killer-acquisitions ..............................................................................6
`
`Federal Trade Comm’n, Non-HSR Reported Acquisitions by Select Technology Platforms,
`2010-2019: An FTC Study (Sept. 2021),
`https://www.ftc.gov/system/files/documents/reports/non-hsr-reported-acquisitions-select-
`technology-platforms-2010-2019-ftc-study/p201201technologyplatformstudy2021.pdf .........5
`
`Jon Fingas, ‘Beat Saber’ Now Has an Official Song Designed to Keep You Fit, Engadget
`(Apr. 12, 2020), https://www.engadget.com/beat-saber-fitbeat-024917974.html ............... 9-10
`
`Meta Platforms, Inc. (META) CEO Mark Zuckerberg on Q2 2022 Results -
`Earnings Call Transcript, Seeking Alpha (July 29, 2022),
`https://seekingalpha.com/article/4527416-meta-platforms-inc-meta-ceo-mark-
`zuckerberg-on-q2-2022-results-earnings-call-transcript ..........................................................10
`
`Nancy Schimelpfening, I Tried It: ‘Supernatural’ VR Workout on Oculus Quest,
`Healthline (Mar. 4, 2021), https://www.healthline.com/health-news/i-tried-it-
`supernatural-vr-workout-on-oculus-quest#Supernatural-vs.-Beat-Saber .......................................10
`
`Press Release, Eur. Comm’n, Mergers: Commission Fines Facebook €110 Million for
`Providing Misleading Information About WhatsApp Takeover (May 18, 2017),
`https://ec.europa.eu/commission/presscorner/detail/en/IP_17_1369 .........................................7
`
`Simple Investing, Meta: The Metaverse Is Becoming a Reality, Seeking Alpha (Oct. 22, 2022),
`https://seekingalpha.com/article/4548312-meta-metaverse-becoming-reality ........................10
`
`Stigler Comm. on Digit. Platforms, Final Report (Sept. 2019),
`https://www.chicagobooth.edu/-/media/research/stigler/pdfs/digital-platforms---
`committee-report---stigler-center.pdf ........................................................................................5
`
`Tim Bajarin, Could Fitness Be the Killer App for the Metaverse? Or Is It Gaming? Or
`Both?, Forbes (Dec. 24, 2021),
`https://www.forbes.com/sites/timbajarin/2021/12/24/could-fitness-be-the-killer-
`app-for-the-metaverse-or-is-it-gaming-or-both/?sh=294291b1146f .........................................9
`
`Tim Wu & Stuart A. Thompson, The Roots of Big Tech Run Disturbingly Deep,
`N.Y. Times (June 7, 2019),
`https://www.nytimes.com/interactive/2019/06/07/opinion/google-facebook-
`mergers-acquisitions-antitrust.html ...........................................................................................7
`
`Within (VR/AR), Summary, Crunchbase,
`https://www.crunchbase.com/organization/vrse/companyfinancials .........................................9
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 6 of 23
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`Miscellaneous Authorities
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`Page(s)
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`Workout Near, Go Far: Stay Fit with ‘Supernatural,’ the Daily Fitness Adventure Out
`Now on Oculus Quest, Meta Quest: Oculus Blog (Apr. 23, 2020),
`https://www.oculus.com/blog/workout-near-go-far-stay-fit-with-supernatural-the-
`daily-fitness-adventure-out-now-on-oculus-quest-/ .................................................................10
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 7 of 23
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`
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`INTRODUCTION AND INTEREST OF AMICI
`The States of New York, Alaska, California, Connecticut, Delaware, Hawaii, Idaho, Illinois,
`Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Jersey, New
`Mexico, North Carolina, North Dakota, Oregon, Rhode Island, Utah, and Washington, the District
`of Columbia, and the Territory of Guam (“Amici States”) file this amicus brief in support of the
`Federal Trade Commission’s motion for a preliminary injunction against Meta Platforms’ proposed
`acquisition of Within Unlimited. As co-enforcers of the federal antitrust laws and enforcers of their
`own state antitrust laws, the Amici States have unique experience and interest in promoting the
`competition, innovation, and economic dynamism that are key drivers of the Amici States’ econo-
`mies, and in protecting their citizens from anticompetitive harms, including those arising from
`acquisitions that eliminate potential competition. The Amici States file this brief to protect busi-
`nesses and consumers in their States from harm that may result if the FTC is denied the opportunity
`to fully adjudicate the lawfulness of Meta’s acquisition of Within before the acquisition takes place.
`The Amici States’ experience demonstrates that the equities and the public interest favor a
`preliminary injunction of Meta’s acquisition of Within. The proposed acquisition fits neatly into a
`pattern of recent acquisitions by Meta that have facilitated its rapid rise to dominance of digital
`spaces, including the virtual reality space at issue in this case, and that have substantially harmed
`competition, innovation, and consumers. The Amici States’ experience also demonstrates that the FTC
`is likely to prevail on the merits because Meta’s acquisition of Within may substantially lessen
`competition and tend to create a monopoly by eliminating both perceived and actual potential
`competition.
`The Amici States have long been at the forefront of efforts to investigate and address the
`potential harms to competition raised by digital platforms. More than two decades ago, a bipartisan
`coalition of States, coordinating with the United States, filed an antitrust complaint against an early
`dominant tech player, Microsoft, resulting in a landmark decision and a remedial decree requiring
`Microsoft to take numerous actions to promote competition in the market for personal computer
`operating systems. See United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001) (en banc); Massa-
`chusetts v. Microsoft Corp., 373 F.3d 1199 (D.C. Cir. 2004).
`
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 8 of 23
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`The Amici States have since continued their leading role in investigating the potential
`anticompetitive effects of digital platforms’ actions and in taking enforcement action when necessary.
`For example, a bipartisan coalition of States, coordinating with the FTC, are currently litigating an
`antitrust case arising from defendant Meta’s acquisitions and monopolization in the personal social
`networking market. In that case, the States’ and FTC’s investigations have revealed that Meta
`(previously Facebook) engaged in a strategy to cement its monopoly by “buying or burying” nascent
`and potential competitors, which chilled innovation and deterred investment in social networking
`alternatives, and freed Meta to weaken user privacy and data protection and to allow misinforma-
`tion and violent or otherwise objectionable content to proliferate on its platform.1 States are also
`litigating antitrust enforcement actions against other digital platforms, like Google, related to harms
`that these platforms have allegedly caused to competition, innovation, and, ultimately, to consumers.2
`And earlier this year, the Attorneys General of a bipartisan coalition of States submitted public
`comments to the FTC and the U.S. Department of Justice, urging robust merger enforcement to
`protect potential competition.3
`
`
`1 See, e.g., Compl. ¶¶ 4-8, New York v. Facebook, Inc., No. 20-cv-3589 (D.D.C. Dec. 21,
`2020), ECF No. 53-1 (“New York Compl.”); accord Am. Compl. ¶¶ 11, 66, 105, 127, 129, 217,
`233, 240, FTC v. Meta Platforms, Inc., No. 20-cv-3590 (D.D.C. Sept. 8, 2021), ECF No. 82 (“FTC
`Am. Compl.”).
`2 See, e.g., In re Google Digital Advert. Antitrust Litig., Nos. 21-md-3010, 21-cv-6841,
`2022 WL 4226932 (S.D.N.Y. Sept. 13, 2022) (largely denying Google’s motion to dismiss); Compl.,
`Colorado v. Google LLC, No. 20-cv-3715 (D.D.C. Jan. 4, 2021), ECF No. 60; First Am. Compl.,
`Utah v. Google LLC, No. 21-cv-5227 (N.D. Cal. Nov. 1, 2021), ECF No. 188.
`3 Comments from Att’ys Gen. in Response to Request for Information on Merger Enforce-
`ment (Apr. 21, 2022) (internet). (For sources available on the internet, full URLs appear in the
`Table of Authorities. All URLs were last visited on November 7, 2022.)
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 9 of 23
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`
`
`ARGUMENT
`Section 13(b) of the FTC Act empowers courts to issue interim injunctive relief to preserve
`the status quo while the FTC decides the legality of an acquisition in an adjudicatory agency
`proceeding. See 15 U.S.C. § 53(b). In evaluating such interim relief, the court does not decide the
`merits, but rather whether preliminary relief is in the public interest, as determined by the equities
`and the FTC’s likelihood of success on the merits. See id. Here, the Amici States’ experience
`demonstrates that the equities strongly favor a preliminary injunction, and that the FTC is likely
`to prevail on the merits.4
`The Amici States’ Experience Demonstrates That the Equities and Public
`I.
`Interest Favor a Preliminary Injunction of Meta’s Acquisition of Within.
`A Preliminary Injunction Is Necessary to Preserve the Status Quo While
`A.
`the FTC Undertakes a Full Adjudication of Meta’s Acquisition of Within.
`The FTC’s requested preliminary injunction is necessary to preserve the status quo until
`the FTC adjudicates whether Meta’s acquisition of Within is lawful. As the Ninth Circuit has
`emphasized, at this preliminary stage, an injunction to preserve the status quo is appropriate so long
`as the FTC raises questions serious enough to provide “fair ground for thorough investigation,
`study, deliberation and determination by the FTC in the first instance and ultimately by the Court
`of Appeals.” FTC v. Warner Commc’ns Inc., 742 F.2d 1156, 1162 (9th Cir. 1984) (quotation marks
`omitted). The FTC has satisfied that standard here. The experience of the Amici States, discussed
`further below, supports the FTC’s view that Meta’s proposed acquisition of Within threatens to
`substantially harm competition in the emerging virtual reality space. Particularly in light of the
`historical pattern of anticompetitive acquisitions by Meta, it is crucial that the FTC be permitted to
`undertake a thorough, careful review of Meta’s proposed acquisition of Within before it is allowed
`to go forward.
`
`
`4 For many of the same reasons that the FTC’s motion for a preliminary injunction should
`be granted, Meta’s pending motion to dismiss the FTC’s complaint (ECF No. 108) is meritless and
`should be denied.
`
`3
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 10 of 23
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`Moreover, the States’ past enforcement efforts underscore that Meta’s acquisition of Within
`should be preliminarily enjoined now, before the damage is done. If the preliminary injunction is
`not granted, the acquisition will proceed, and Meta will be able to access Within’s confidential
`strategic information and to begin integrating the firms. Immediate harms to competition and
`innovation may result. And Meta will likely argue in any future related antitrust challenge—as it
`successfully argued in the district court in the States’ pending antitrust case against Meta—that it
`will be too late to unwind any competitive harms that result from the acquisition of Within once
`the acquisition has closed.5 Accordingly, the public interest strongly supports a preliminary injunc-
`tion to preserve the status quo while the FTC’s adjudication proceeds.
`State Enforcement Efforts Underscore the Dangers That Acquisitions by
`B.
`Digital Platforms Like Meta May Pose to Competition and Innovation.
`In recent years, it has become increasingly clear to the Amici States through their investiga-
`tions and enforcement actions that digital markets are especially prone to threats to competition,
`innovation, and consumers. Digital platforms like Meta’s, which facilitate interactions and trans-
`actions between users in a digital space, can amass market power across multiple complementary
`markets and features, allowing them to dominate entire digital realms, as Meta has dominated the
`personal social networking space and now increasingly dominates the virtual reality space at issue
`here. Meta’s dominance has allowed it to become a gatekeeper, giving it power to dictate the terms
`of access to its digital spaces for other firms and for consumers. Wielding such market power, Meta
`has thrived by exploiting users’ data, both to keep users engaged with its products and to sell profit-
`able targeted advertising. Meta’s digital platforms share a distinctive set of features that can help
`entrench dominance.
`
`
`5 See New York v. Facebook, Inc., 549 F. Supp. 3d 6, 29-31, 35-38 (D.D.C. 2021). Although
`the district court dismissed the States’ complaint against Meta largely on the basis of timeliness
`considerations, the States’ appeal is pending in the D.C. Circuit. See New York v. Meta Platforms,
`Inc., No. 21-7078 (D.C. Cir.). The FTC’s parallel action also remains pending in the district court.
`See FTC v. Meta Platforms, Inc., No. 20-cv-3590 (D.D.C.).
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 11 of 23
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`First, Meta’s digital platforms exhibit strong network effects. The more users its platforms
`have, the more appealing they become for other users to join and use. Such network effects pose a
`substantial barrier to entry for potential competitors because users do not want to switch to new
`platforms that do not have as many other users.
`Second, and relatedly, Meta’s digital platforms exhibit strong economies of both scale and
`scope. The platforms benefit from growing by adding more users (scale) and by expanding into
`features that complement those the platform already offers (scope). The additional users and features
`increase network effects, provide more data to the platform, and can increase entry barriers that
`rivals must overcome.
`Third, Meta’s digital platforms exhibit close-to-zero marginal costs to reach new users. A
`new user can join and use an established platform like Meta’s Facebook platform at virtually no
`cost to the platform. Thus, once a platform establishes strong network effects, it is well positioned
`to grow rapidly into a dominant, gatekeeper position, and to amplify barriers to entry for new
`competitors.6
`It also has become increasingly clear to the Amici States that digital platforms like Meta’s
`have often cemented market dominance in large part through acquisitions. A recent FTC study of
`acquisitions of $1 million or more revealed that, from 2010 to 2019, five leading digital platforms
`(Amazon, Apple, Facebook/Meta, Google/Alphabet, and Microsoft) bought some 616 companies.
`In many cases, the platforms acquired relatively small, young companies.7
`And as leading economists have emphasized, such acquisitions by digital platforms like
`Meta may present serious threats to the public interest by empowering already dominant incumbents
`to eliminate nascent or potential competition, and to discontinue innovation by the platform, the
`
`
`6 See generally Stigler Comm. on Digit. Platforms, Final Report (Sept. 2019) (internet).
`7 FTC, Non-HSR Reported Acquisitions by Select Technology Platforms, 2010-2019: An
`FTC Study 13, 36-37 (Sept. 2021) (internet).
`
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`target firm, or both.8 Indeed, sophisticated incumbent companies sitting at the center of a digital
`ecosystem, like Meta in virtual reality, are uniquely positioned to quickly identify acquisition targets
`that threaten their dominant positions.9
`The Amici States’ experience shows that Meta’s prior acquisitions have harmed competition
`in a variety of ways—underscoring that the FTC should be allowed to adjudicate the lawfulness
`of Meta’s current acquisition of Within before the acquisition is completed and potentially harms
`competition. Meta’s past acquisitions have sometimes eliminated nascent existing competitors
`operating in the same core space as the platform. For instance, Meta acquired Instagram, a growing
`social networking competitor, for a hefty premium of $1 billion.10 It has since become clear to the
`States that this acquisition harmed competition by helping Meta eliminate an emerging competitor
`and entrench its market power over personal social networking services. In fact, as the States learned
`from their investigation, Meta CEO Mark Zuckerberg acknowledged at the time of the Instagram
`acquisition that a rationale for the acquisition was to “neutralize” a nascent competitor.11
`At other times, by acquiring complementary businesses that were operating outside of the
`platform’s core functionality, Meta has eliminated potential competition. For example, Meta acquired
`leading messaging app WhatsApp for an extraordinary sum of nearly $19 billion in an effort to
`prevent WhatsApp from exploiting its large user base to become a competitor of Meta in social
`networking.12 Meta also acquired at least one firm—Onavo, which facilitated analysis of app usage
`data—for the purpose of allowing Meta to identify more emerging competitive threats to eliminate,
`
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`8 See, e.g., Colleen Cunningham et al., Killer Acquisitions, 129 J. Pol. Econ. 649 (2021)
`(internet); Cristina Caffarra et al., “How Tech Rolls”: Potential Competition and “Reverse” Killer
`Acquisitions, Ctr. for Econ. Pol’y Rsch. (May 11, 2020) (internet).
`9 See C. Scott Hemphill & Tim Wu, Nascent Competitors, 168 U. Pa. L. Rev. 1879, 1905-
`06 (2020) (internet).
`10 See New York Compl., supra, ¶¶ 107-128; accord FTC Am. Compl., supra, ¶¶ 80-106.
`11 See New York Compl., supra, ¶¶ 102, 114-116 (quotation marks omitted); accord FTC
`Am. Compl., supra, ¶¶ 89-107.
`12 See New York Compl., supra, ¶¶ 149-175; accord FTC Am. Compl., supra, ¶¶ 107-129.
`6
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`and to preclude existing rivals from having access to the same capabilities.13 In acquiring comple-
`mentary businesses outside its core functionality, Meta cemented its dominance by adding to its
`network effects and economies of scale and scope—thereby generating valuable new user engage-
`ment and data for the platform. For instance, after acquiring WhatsApp, Meta exploited WhatsApp’s
`user data to benefit Meta’s core platform.14
`Meta’s acquisitions also have suppressed innovation. For example, after Meta acquired
`Instagram, it terminated work on its own innovative alternative: Facebook Camera.15 In other cases,
`Meta has shut down the services of innovative acquired firms altogether, having accomplished its
`goal of eliminating a nascent or potential competitor or denying the firm to an existing rival.16 In
`fact, Meta has reportedly shut down nearly half of its acquisitions.17
`But, because Meta’s pattern of anticompetitive acquisitions was not clear until recently, the
`States did not challenge their lawfulness until later, when anticompetitive effects were already
`substantial. That history highlights the need to permit the FTC’s thorough adjudication of Meta’s
`latest proposed acquisition now, before the acquisition proceeds.
`
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`13 See New York Compl., supra, ¶¶ 137-148; accord FTC Am. Compl., supra, ¶¶ 69-74.
`14 See New York Compl., supra, ¶¶ 176-178; accord FTC Am. Compl., supra, ¶¶ 127, 153.
`In fact, Meta exploited WhatsApp’s data despite promising regulators responsible for reviewing
`the acquisition that it would not do so. Meta was ultimately fined €110 million for misleading the
`regulators. See Press Release, Eur. Comm’n, Mergers: Commission Fines Facebook €110 Million
`for Providing Misleading Information About WhatsApp Takeover (May 18, 2017) (internet).
`15 New York Compl. ¶ 124; accord FTC Am. Compl., supra, ¶¶ 84-85, 98-99.
`16 See, e.g., New York Compl., supra, ¶ 184; accord FTC Am. Compl., supra, ¶¶ 74-76.
`17 Tim Wu & Stuart A. Thompson, The Roots of Big Tech Run Disturbingly Deep, N.Y.
`Times (June 7, 2019) (internet).
`
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`Case 5:22-cv-04325-EJD Document 190-1 Filed 11/07/22 Page 14 of 23
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`C. Meta’s Acquisition of Within Poses Dangers to Competition and Innovation.
`Having achieved dominance in personal social networking, Meta has turned its attention to
`the rapidly growing virtual reality space. Meta has acknowledged that its strategy is to “us[e]
`acquisitions opportunistically” to bolster its position as a leading virtual reality company, just as
`it previously used acquisitions as part of its strategy to dominate personal social networking.18
`The need to allow the FTC to adjudicate the lawfulness of Meta’s acquisition of Within now,
`before the acquisition goes forward, is underscored by Meta’s recent moves toward a dominant
`position in each part of the virtual reality space—largely through acquisitions. Meta has moved
`toward a dominant position in (1) the headset used to access the virtual reality environment, with
`its Meta Quest 2, the leading virtual reality headset in the United States; (2) the apps, with number
`one game Beat Saber and many other popular titles; and (3) app distribution, with the Quest Store,
`the leading virtual reality app store.19 As it previously did in the social networking space, Meta
`has used serial acquisitions to move toward dominance in the virtual reality space—as in its
`acquisitions of the Oculus headset manufacturer that provided the basis for Meta’s market-leading
`Quest 2, and the Beat Saber game studio and numerous other app studios.20 The appendix to this
`brief lists seventeen publicly disclosed virtual reality–related acquisitions by Meta, largely in the
`last two years.
`By purchasing Within, the creator of the app Supernatural, Meta seeks to expand its
`developing virtual reality dominance into the fast-growing and highly concentrated market for
`virtual reality dedicated fitness apps—i.e., apps designed to allow users to exercise through a struc-
`tured workout in their own homes.21 Virtual reality fitness is, in the words of Within’s founder and
`CEO, a “killer use case” for virtual reality; it has been driving many new users to buy Meta’s virtual
`
`
`18 Am. Compl. for a Prelim. Inj. (Am. Compl.) ¶ 7 (Oct. 7, 2022), ECF No. 101-1.
`19 See id. ¶¶ 2-5.
`20 See, e.g., id. ¶¶ 3-4.
`21 See id. ¶ 35.
`
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`reality headsets and to begin using virtual reality products.22 Meta is poised to, and perceived as
`likely to, enter the virtual reality dedicated fitness market independently by introducing its own
`competing app.23 But, instead, Meta now proposes to buy the leading existing virtual reality dedi-
`cated fitness app, Supernatural, to eliminate the need for competition and innovation.24
`The Amici States’ enforcement experience strongly suggests that Meta’s acquisition of
`Within threatens harms to competition and the public interest similar to the harms from Meta’s
`past efforts to use acquisitions to entrench market dominance in the personal social networking
`market. By purchasing Within, Meta will have bought a dominant position in the rapidly growing
`dedicated fitness segment of the virtual reality space, and removed competitive rivalry between
`Within and Meta and related incentives for Within to take risks, innovate, and introduce new
`products, features, and experiences. At the same time, Meta will have helped cement its dominance
`in the virtual reality space as a whole, by bringing new, fitness-focused users into Meta’s suite of
`virtual reality products. Thus, the acquisition will raise entry barriers for other potential competitors
`in the virtual reality space. Meta’s reported willingness to pay over $400 million for the acquisition
`of Within, several times the total funding Within received ov