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DOJ Looking Into Facebook's VR Business Amid Claims It's Crushing Rival Startups
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December 4, 2020
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Dec 4, 20204:57Now PlayingVirtual-reality startups are accusing Facebook Inc. of using a familiar playbook to muscle out rivals in what could be the digital platform of the future -- prompting a new line of scrutiny from U.S. competition enforcers.
Facebook is the world’s biggest virtual-reality hardware maker thanks to its 2014 acquisition of Oculus for $2 billion. Its practices are now drawing the attention of the Justice Department’s antitrust division, which is talking to developers about their interactions with the company, according to two people familiar with the matter.
The scrutiny over Facebook’s virtual-reality business reflects broader concerns that the social-media pioneer has grown too powerful. One U.S. lawmaker, during a hearing with Facebook Chief Executive Officer Mark Zuckerberg, attributed the company’s dominance to a simple strategy: Copy, acquire and kill any company that’s a competitive threat.
Software developers and startup founders say the world’s biggest social media company is now using that same playbook to undermine competition in the virtual-reality market.
Facebook’s Oculus acquisition was a bet by Zuckerberg that virtual reality would go beyond gaming to encompass a broad array of experiences and eventually change the way people work and communicate, experts say.
Facebook is pushing hard to establish its presence in virtual reality because it represents a unique opportunity for the social media player to establish itself as the leader in the next state-of-the-art platform to deliver products and services to its users without relying on Alphabet Inc.’s Google or Apple Inc.
The Federal Trade Commission is preparing to bring an antitrust case against Facebook as soon as next week. But that investigation has been focused mostly on whether the company’s acquisitions of Instagram and WhatsApp harmed competition, Bloomberg has reported.
The social media giant last year disclosed an investigation by the Justice Department, but neither the company nor the department has provided details or explained how the inquiry is different from the FTC probe. The FTC declined to comment. The Justice Department didn’t respond to a request seeking comment.
Developers say Facebook is using its market power to thwart companies that offer competing games and services. It’s copying the most promising ideas, using below-cost pricing for its devices and making it harder for some apps to work properly on the platform, according to developers and a hardware maker.
Faceboook declined to comment about the complaints.
Facebook has a 39% share of the virtual-reality hardware market, making it the industry’s largest player, according to data from market intelligence firm International Data Corporation. Smaller players include Lenovo Group Ltd., Sony Corp. and HTC Corp., while Apple is developing its own mixed virtual and augmented reality headset for launch as early as 2022, Bloomberg has reported. Facebook launched its latest headset, the Quest 2, in October, cutting the price to $299 from $399.
At the core of the complaints is the way Facebook runs the platform and competes against software developers who build apps and depend on the platform for their business.
“Our industry is getting eaten alive by Facebook,” said Cix Liv, who co-founded startup Yur Inc., which makes technology that can be integrated into Oculus games to track fitness metrics. “Any application that has a chance of being mildly competitive with them, they have to kill it somehow.”
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