The United States Federal Trade Commission today announced it has filed an amended complaint with the U.S. District Court for the District of Columbia, renewing its effort to sue Facebook over alleged anticompetitive practices. The initial lawsuit was filed in late 2020 and was tossed out back in June by a judge which argued that the FTC failed to make its case. The Commission is seeking a remedy which includes spinning out Instagram and WhatsApp. Oculus, the company’s XR organization, is not directly mentioned in the suit, but the amended complaint brings the “metaverse” into the picture for the first time.

Update (August 19th, 2021): After having its antitrust case against Facebook rejected by a judge earlier this year, the FTC has chosen to continue perusing the case by filing an amended complaint which it says includes “additional data and evidence” to support allegations of Facebook wielding illegal monopoly power.

“The amended complaint bolsters the FTC’s monopoly power allegations by providing detailed statistics showing that Facebook had dominant market shares in the U.S. personal social networking market,” the Commission writes. “The suit also provides new direct evidence that Facebook has the power to control prices or exclude competition; significantly reduce the quality of its offering to users without losing a significant number of users or a meaningful amount of user engagement; and exclude competition by driving actual or potential competitors out of business.”

The decision to file the new complaint was approved by a 3-2 vote by the FTC along party lines.

The new complaint, available in full here, is nearly twice as long as the original. For the first time it briefly touches on the “metaverse,” which Facebook has recently begun using to describe its strategy for building out an immersive social network of sorts.

“Moreover, Facebook is likely to reinstitute its conditioning or other, similar anticompetitive practices when it next faces acute competitive pressures from a period of technological transition,” the complaint alleges. “Such pressures may arise, for example, around increased use of artificial intelligence or around Facebook’s own view that future dominant technology companies will offer users a compelling ‘metaverse,’ a virtual environment that hosts users in digital spaces—and that, as Mr. Zuckerberg recently said, will be ‘the successor to the mobile Internet’.”

Like the original case, the new complaint doesn’t directly mention Facebook’s XR organizations, Oculus or Facebook Reality Labs, but it’s clear that the case’s outcome would have wide ranging repercussions for all of Facebook’s business segments.

In a comment to the New York Times, Facebook said about the new complaint, “There was no valid claim that Facebook was a monopolist—and that has not changed. Our acquisitions of Instagram and WhatsApp were reviewed and cleared many years ago, and our platform policies were lawful.”

The original article, which outlined the initial case and considered what it could mean for Facebook’s XR initiatives, continues below.

Original Article (December 9th, 2020): Following an investigation backed by the attorneys general of 48 US states & territories, the FTC today announced that it filed a formal lawsuit against Facebook for alleged anticompetitive practices. The complete filing can be read here.

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The Commission’s lawsuit centers specifically around “personal social networking” and two major pillars: anticompetitive acquisitions and anticompetitive platform conduct.

The former pillar focuses on the company’s purchase of photo sharing site Instagram ($1 billion) and messaging app WhatsApp ($19 billion) in 2012 and 2014 respectively. The Commission alleges that Facebook sought to buy-out its competitors rather than compete with them directly. While Oculus, Facebook’s XR organization, is not named in the suit, it represents another of the company’s high-profile acquisitions—having been bought in 2014 for $2 billion.

The latter pillar alleges Facebook offered access to its APIs—pathways for other software and websites to interface with Facebook—on the condition that they wouldn’t be used in competitive products or services. The FTC cites Vine as one example, claiming that Facebook revoked access to an API that would allow Vine users to find their Facebook friends on the app.

Both pillars represent anticompetitive practices aimed at snuffing out competition and maintaining a monopoly position over personal social networking, the FTC claims.

The FTC will have to prove the Facebook engaged in the anticompetitive behavior alleged in the lawsuit. If it succeeds, the Commission is seeking a “permanent injunction in federal court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.”

While Oculus nor any other aspect of Facebook’s XR operations are mentioned directly in the suit, there’s clear overlap between the company’s alleged anticompetitive practices and its strategy in the XR space.

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While Oculus itself clearly wouldn’t have represented a competitive threat to Facebook (as it was a wholly new business segment for the company), its ‘walled garden’ approach to a VR app store, conditional use of APIs with regard to competitive social VR apps, and recently imposed Facebook account requirement for Oculus headsets may all come under scrutiny.

Were the court to side with the FTC—even if Oculus itself was untouched by the legal outcome—it would surely impact the future course of the organization which would need to tread carefully to avoid similar accusations of anticompetitive practices.

Facebook’s acquisition of Oculus was already the subject of a major 2017 lawsuit in which ZeniMax—parent company of Oculus CTO’s former employer, id Software—alleged that Oculus had built its business on proprietary technology developed under its employ. After the court sided with some of ZeniMax’s claims, to the tune of $500 million, the case was appealed and eventually settled in 2018 for an undisclosed sum.

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  • Good. I own both a Rift CV1 and a Quest 2, and even I think Facebook’s practices with its requiring a Facebook account to keep using our VR headsets and games amounts to something illegal, especially in the case of my Rift CV1 where I never ever agreed to this kind of thing when I first bought the headset but have now been forced against my will to do it Facebook’s way or lose access to the hundreds of pounds worth of hardware and software I’ve already paid for. So, yeah, let them have it!

    • Dave

      You can just ignore the request to sign in with an FB account until 2022 I think but by then the rules may have changed… Ah but I guess for the Quest 2 it’s mandatory?

      • It’s too late for me because they forced me to update in order to play my Quest 2 (even to just get into main home screen).

    • Christian Schildwaechter

      This has been discussed before, but many people fail to realize that the only part that is most likely illegal is forcing Rift or Quest 1 users to log in with a Facebook account after 2022. And the reason why it is illegal is that a) they didn’t announce it before customers bought the devices, b) they will cut features from the devices for users that refuse to log in with a Facebook account including c) users losing access to apps they payed for after 2022. So it is basically about misleading customers about the available features before purchase.

      Requiring a Facebook account for the Quest 2 is fully legal, as the terms of use clearly stated that before anyone bought a Quest 2, and a company can require an account for access to any of their devices. Most of the lawsuit is about subduing competition in social networks by buying large competitors.

      For VR they could have avoided any trouble by simply allowing existing Oculus accounts to access the store and updates after 2022 for Rift and Quest 1, and the most likely outcome is that they will have to extend their 2022 deadline until the end of the technical support for these devices. Nothing changes for these that have already “voluntarily” merged their accounts to be able to use the Quest 2, only those that held out and stuck to their older devices and Oculus accounts may benefit here.

      The only other trouble FB could get into is if they sell the Quest 2 below build cost, as this could be interpreted as abusing their resources to prevent others to compete. Which makes it likely that the Quest 2 is sold at just above build cost, so FB technically doesn’t lose money on the hardware, and any losses FRL generated during the development are technically due to research, not anticompetitive behavior.

      • Sven Viking

        It was clearly stated that Internet Explorer would be integrated with Windows 95, but that didn’t prevent the Microsoft antitrust case from succeeding.

        • Christian Schildwaechter

          And after years Microsoft wasn’t forced to remove Internet Explorer, instead they displayed a prompt that allowed users to install other browsers. This was sufficient, as forcefully installing IE as the default browser was what was considered the anticompetitive move, independent of it being announced beforehand. The IE integration into Windows itself was just as legal as FB requiring a login, and the engine was still allowed to be used throughout the system.

          In another case they actually released a separate version of Windows without Windows Media Player, after a complaint by Sun Microsystems, called “Windows XP N”. It was sold at the same price as XP, nobody bought it, but the unbundling “stopped” the anticompetitive behavior. Microsoft was also forced not to discriminate other media players via API access and to no longer provide financial incentives to software developers for using Windows Media, but they were still allowed to integrate and offer it. Similarly, FB taking 30% of the revenue from BigScreen while offering better conditions to Fandango or Netflix is a better example for anticompetitive behavior than the Quest 2 login.

          Antitrust lawsuits are important, as they stop companies from relentlessly abusing their power and actively shutting out competitors, but the consequences for end users are usually small, partly because these lawsuits drag on for years or decades and companies usually only have to make minor changes. The biggest impact is from braking up companies, e.g. forcing FB to sell WhatsApp or/and Instagram, so companies have to always be aware that any attempt to reach a dominant position that reduces marked diversity can be dangerous.

          • Sven Viking

            Optionally unbundling VR hardware and social networks would be fine with me.

  • Ad

    I want them broken up into 5 companies, I want Facebook Reality Labs to be one of those on its own. And then I want it to go bankrupt because this has all been a bad asoep’s fable that needs to end. Their patents can go to the wind.

  • Ad

    This doesn’t really get into how Oculus no longer exists, and how deeply facebook is being integrated into the headset.

  • You get what you f deserve

  • Rudl Za Vedno

    Finally! Awesome news. I hope Evil Zuck is forced to sell Oculus to some big tech manufacturer so we can get back Oculus PCVR headsets back on the menu and without BS FB login requirements. There might be God after all.

    • sfmike

      Sadly when that big tech manufacturer buys Oculus and it doesn’t make a billion dollars the first quarter all Oculus products will be dumped. Corporations don’t want to have ANYTHING to do with niche markets. Remember 3D TV and cameras? VR could go the same way. We are actually lucky a billion dollar+ corporation is trying to build a VR ecosystem and not just concerned about quarterly profits. Look how aggressive Google, Samsung and Sony have been VR. Gone or forgotten when not shown to be a mass market profit driver. Corporate executives don’t want to wait for quarterly profits to grow, if they do they are replaced with someone ready and willing to throw VR enthusiasts to the curb to strengthen the quarterly bottom line. We are at their mercy.

      • sebrk

        True but eventually even “big corporations” will understand what Zuck already has. Question is if it will be too late?

    • jbob4mall

      And force people to buy an expensive pc to play vr? How nice of you. In all likelihood it would just kill vr since most people aren’t going to do that. Fuck pc gaming. Over priced crap with marginal improvements from consoles but major amount of problems.

  • Glad something is finally happening about it. As an Oculus CV1 owner I definitely was not happy about being forced to swap from an Oculus account to a Facebook account. Everything should be optional.

  • wheeler

    Who knows what may happen or how long it will take to happen–I’d be quite surprised if something major occurs like a forced split off of Oculus (or what was Oculus). But if the multibillion dollar money fountain does get shut off VR will certainly get sleepy for a while. At least then the veil of hype will be removed and things will be grounded in reality again, rather than this decade+ long loss leading bid to monopolize a new medium.

  • xyzs

    Glad to see that some people push the action against this company and their abuses. I hope Quest Facebook accounts will be judged illegal one day and that they have to reverse it.

  • William Wallace

    If Facebook gets broken up, the entire VR/AR/XR parts could all be shuttered. All those quests and rifts will be doorstops, there will be no store to go to. Valve, sony, and msft will be laughing their asses off at all the dumbfucks who trusted zuck. Good lord at the egg that is going to be on so many developers like denny unger that will full zuckerberg!

    • User_Name_24601

      The headsets won’t just “stop working”. Some features will (specifically online ones). But users will still be able to sideload, use virtual desktop, etc. Most downloaded games will still be playable (sans multiplayer), etc. All this has happened before with other companies, and all this will happen again.

      • Kevin White

        Thanks Gaius Baltar!

      • You have be able to actually turn on and get into the headset to use Sidequest, which isn’t even possible now without a Facebook account, so it will be a major pain if they ever shut down the Oculus arm of Facebook and just left the headsets out there in the ether. Yeah, someone would surely hack them so they’d still be usable, but most users aren’t geeks/nerds and so would never benefit from that.

      • Billy Wallace

        Palmer paid cruz to murder zuck. They may recall all the hardware and force refunds to all end users.

  • Hangar18

    Good news. I was really excited about the Quest 2 until I read two things; Facebook sign-in required and no IPD/dual screen adjustment.

    I do understand the benefits of being able to instantly share information, but social media (primarily facebook, twitter, etc.) for me is a cancer to society. People are so consumed by it, wasting their time, mindlessly scrolling, worrying about what others are doing, instead of paying attention to the people immediately around them (ie; family/children).

    Please, Sony, Valve, or maybe even HTC – develop and release an excellent competitor product within the price range of the Quest 2…

  • KC Craigs

    I migrated from Rift to the index the week they made the login announcement, took 8 weeks to get the headset, but SOOOO worth it. When Oculus says the Quest is only $299, lets just say you don’t pay with money…

  • DickDastardly

    “Facebook’s acquisition of Oculus was already the subject of a major 2017 lawsuit in which ZeniMax—parent company of Oculus CTO’s former employer, id Software—alleged that Oculus had built its business on proprietary technology developed under its employ. After the court sided with some of ZeniMax’s claims, to the tune of $500 million, the case was appealed and eventually settled in 2018 for an undisclosed sum.”

    It seems a bit misleading to cite a single claim which was rejected by the court (that Oculus had built its business on proprietary technology owned by Zenimax) and follow it with a mention of the court siding with “some of Zenimax’s claims”, thereby erroneously giving readers the impression that the single example given was one of those with which the court sided.

    • benz145

      That was the basis of Zenimax’s allegations. There’s links to much more detailed coverage for anyone who wants the details.

      • DickDastardly

        “That was the basis of Zenimax’s allegations.”

        …and the jury decided that that specific allegation was false. They did award damages for copyright/trademark infringement and breaking an NDA, but not for stealing any trade secrets/technology.

  • Wild Dog

    “The Commission alleges that Facebook sought to buy-out its competitors rather than compete with them directly.”

    I hope this affects quest exclusivity.

    • sebrk

      LOL this is what they all do every day

  • flamaest

    Finally!

  • Psychometrics

    As far as Oculus branch of the FB business model, I may be naive, but it seems a lot of the controversy with data collection could be addressed if an “opt out” option was given in terms of signing in with a FB account. I can’t help but believe that a big chunk of new users wouldn’t care one way or another. At least give the user the option to opt out in terms of data collect. On the other hand, I am not so naive as to not believe that the Oculus business model revolves substantially around data mining.

    • silvaring

      Even with an opt out it becomes incredibly simple to identify people through data inside of VR. We aren’t just talking simple browser cookies here, but the supercharged version where your literal gaze and movement patterns identify individuals. Then there is the fact that Facebooks current business model of selling ‘predictive personality models’ (which they deny) raises some serious dystopian concerns as that’s enormous power for a company the size of facebook to wield.

  • johann jensson

    Well, let’s hope Facebook pays. Especially after they gave up on PCVR, most of my friends and me developed an Apple hate for FB… Personally, i stopped caring for VR, for now at least.

  • James G

    Zuck should be arrested for sedition and treason and publicly stoned as a Chinese saboteur. https://uploads.disquscdn.com/images/13d1a8e26cb85e54e25af640663f339fccf31741571e883f5756a27909624de4.jpg

  • Oscar

    My facebook account was desirables in November of 2020, and I lost access to all my games. I’ve been submitting help desk tickets since November, and Oculus has done nothing to resolve my issue. I recently submitted a BBB complaint, and an FTC fraud complaint. These MF are thieving assholes.

    • Oscar

      Disabled***

  • sebrk

    TBH what needs to happen is an alternative to Oculus. As much as I despise Fecesbook and its enablers they are in many ways reaponsible for a lot of advancement in XR.

    • Ad

      Let go of the VR fanboyism before it makes you throw all the normal people in the world to the wolves.

  • Ad

    lol, the republicans talk a big game about hating social media companies until they actually have to act on it.

  • VRFriend

    In the opinion by those fools, you can’t have a company and work on several projects, make them the best you can…. because it is a monopoly. What a joke.