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Facebook’s VR Oculus business probed by U.S. states

The U.S. Federal Trade Commission and multiple states are investigating Meta Platforms Inc.’s virtual reality unit Oculus over potential anti-competitive practices, according to people with knowledge of the matter.

The FTC and a group of states led by New York have quizzed outside developers that make Oculus apps in recent months as part of the inquiry, the people said. The officials have been scrutinizing how Meta, the world’s largest social media company, may be using its market power in the VR space to stifle competition, said the people, who asked not to be identified because the matter isn’t public.

In interviews with several developers, the antitrust enforcers asked how the Oculus app store may be discriminating against third parties that sell apps that compete with Meta’s own software. They were also curious about Meta’s sales strategy for the Oculus VR headset and how the price of the company’s device undercuts competitors. Meta sells the Oculus Quest 2 headset for $299, well below some models from HTC Corp. and others.

The FTC and states including New York, Tennessee and North Carolina began reaching out to developers concerned about Oculus-related antitrust issues last year, one of the people said. The new inquiries follow earlier scrutiny from the Justice Department under former President Donald Trump’s administration.

Representatives for Meta and the New York and Tennessee attorneys general didn’t respond to requests for comment. The FTC and the North Carolina Attorney General declined to comment.

Facebook changed its name to Meta in October.

The antitrust scrutiny could complicate Meta’s plans to build out what Chief Executive Officer Mark Zuckerberg calls the metaverse — immersive digital worlds accessed through virtual and augmented reality-powered devices. Zuckerberg has said he thinks the devices will become the next major computing platform for human communication, after mobile phones, eventually replacing some in-person interactions.

Developers have complained that Meta uses its market power to thwart companies that offer competing games and services on Oculus. They allege the company copies the most promising ideas and makes it harder for some apps to work properly on the platform.

Yur Inc. released an Oculus fitness tracking app in 2019 only to lose traction when Meta subsequently released a software update that prevented the technology from working within games, Cix Liv, the app’s creator, previously told Bloomberg News. The final blow came when Meta launched Oculus Move, which Liv says has similar functionality to his app.

Another developer, Guy Godin, said his virtual desktop app, which lets users stream content from their PC desktop to their headset, was similarly crushed by Meta. In 2019, he added a feature that lets users stream PC games to the Oculus Quest. Meta threatened to remove his app if that feature wasn’t removed. Soon after, Meta launched Oculus Link with similar functionality.

The investigations into Meta are part of a larger push by the U.S. government to rein in dominant tech companies for conduct that they say undermines competition in the marketplace. The FTC filed an amended complaint last year against Meta alleging the company eliminates competitors by buying them. The lawsuit seeks to unwind the company’s acquisitions of WhatsApp and Instagram. Meta bought Oculus in 2014 for $2 billion.

The inquiry with app developers indicates that the FTC investigation into Oculus goes beyond its acquisitions. The Commission is scrutinizing the purchase of VR fitness app Supernatural, The Information reported in December.

Today, Oculus dominates the standalone virtual reality headset space. The company’s headsets made up 75% of global shipments of VR headsets in the first quarter of 2021, up from 34% in the period the year prior, according to Counterpoint Research.

Just as on smartphones, users can download apps and features from both Meta and third-party developers via the Oculus Quest Store. In most cases, Oculus takes a 30% cut from sales made through the Oculus app store, according to its developer agreement. That cut is similar to the one Apple Inc. and Alphabet Inc.’s Google take from their marketplaces, a strategy that has also led those companies to be investigated by federal antitrust enforcers. Bloomberg

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