A $353M question: Did Meta muzzle a VR venture?
Quest for control as AEI alleges Meta's monopolistic missteps
A virtual reality (VR) development collective has filed a $353.2 million antitrust lawsuit against Meta, accusing the platform of conspiring to kill a fitness app developed for Quest devices once it learned it would also be available for Apple and Pico headsets.
Lawyers for Andre Elijah Immersive (AEI) claim [PDF] the developers partnered with Meta and yoga/fitness brand Alo to develop a VR exercise app. The complaint claims the pair planned to announce and launch the app at its annual Meta Connect VR conference last month.
"This launch would propel the AEI Fitness App to the forefront of the VR Fitness App market and give it significant market share; and, indeed, that was the exact plan as strategized by the Plaintiff and Defendants," AEI's lawyers claim in the suit.
The launch was never to be, though: Days before, Meta reportedly learned that AEI also planned to launch the app on Apple's new AR headset and TikTok maker ByteDance's Pico devices. And no one likes competition.
"With this new information in hand, Meta, and each of the other Defendants, conspired, colluded, aided-and-abetted one another, and acted in concert, to put an end to the AEI Fitness App," the suit claims, arguing that Meta was only able to do so because of the vertical monopoly it holds on the VR hardware, software and app store market - such as it is.
As of right now, the app is "on ice," CEO Andre Elijah told The Register. "Right now, I'm not thinking about launching the app. Meta contractually owes millions for the development up until this point," it opined.
AEI is seeking a considerable sum of money, some of which it said is agreed-upon development funds that Meta owes and has refused to pay, with the rest being an attempt to recoup lost revenue and repair brand damage. Allegations of Sherman Antitrust Act violations mean AEI claims it is owed another $100 million, which it said is eligible for automatic tripling, bringing the total amount being asked for $353.2 million (£289m).
Did everyone mess up?
Meta, Alo, a VR firm called Robot Invader, and multiple others were allegedly behind the move, but whether AEI can prove that remains to be seen. Per the suit, each of the plaintiffs entered into some sort of agreement, "whether implicit, verbal, or in writing, to terminate the contracts with Plaintiff and to cease doing business with Plaintiff," which seems to imply that AEI and its lawyers don't have direct evidence of a conspiracy.
Meta had a motivation to make the move, the suit alleges, because killing the app would effectively allow it to maintain a monopoly on "one of the fastest growing markets in human history," e.g., VR fitness.
Alo, the suit claims, would have no motivation to restrict the reach of a branded app unless Meta had threatened it. "Meta has a monopoly over the markets described herein, and has the ability to exclude Alo from the marketplace, as Meta has done for Plaintiff and countless other victims."
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A scan of the agreements between AEI and Meta, which are included in the lawsuit, indicate that Meta has rights to terminate its agreement for any reason at any time, and that Meta retains sole and exclusive ownership "to all deliverables."
As to whether that language would give Meta an easy out - probably not, as porting to other platforms is allowed per the contract. There are some qualifications that could end up being sticking points in court, though: Porting is allowed a year from the effective date of the contract (which is dated March 1, 2023), and provided Meta was given prior notice and okayed the move.
Per the lawsuit, Meta only found out about AEI's plans to distribute to Apple and Pico devices when it was told by Alo - not exactly in keeping with the terms of the contract.
But this still sounds a lot like what the FTC warned us about
The suit alleges that Meta's endgame was "to create an artificial scarcity which would … benefit Meta's VR fitness app Supernatural by reducing competition in the VR fitness app marketplace."
If Supernatural sounds familiar, that's because it and its original parent company, VR fitness firm Within, were the subject of a Federal Trade Commission lawsuit when Meta tried buying the company last year.
Meta had absorbed nine VR app studios over three years, the FTC alleged, and if allowed to buy Within was running the risk of reaching anti-competitive levels with its VR landgrab.
"Meta's proposed acquisition of Within would harm competition and dampen innovation in the US markets for fitness and dedicated-fitness VR apps," the FTC claimed at the time, echoing many of the same vertical monopoly claims made in the AEI lawsuit.
The FTC lost its case in February, with the judge concluding the FTC hadn't proved that Meta's buyout of VR workout companies would harm competition. Meta eventually closed its acquisition of Within.
The AEI lawsuit seems to follow directly from the FTC's allegations that more mergers would mean more power for Meta to control the VR fitness space. Whether FTC chair Lina Khan is throwing her hands in the air and shouting "I told you so" over this latest filing is unclear, though: We asked the FTC for comment, but it declined the offer. ®