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Facebook faces a Lawsuit filed by FTC for illegal Monopolization

Facebook faces a Lawsuit

After a recent investigation, 48 states and The Federal Trade Commission (whose principal mission is the enforcement of civil U.S. antitrust law and the promotion of consumer protection) have launched lawsuits against Facebook and Oculus regarding concerns over anti-competitive and monopolization practices by the company.

Though the FTC’s Lawsuit doesn’t necessarily mention Oculus or VR in particular, It does, however, mention Facebook’s acquisition of Instagram and Whatsapp calling for the two companies to be spun off of Facebook and for Facebook to essentially be broken up.

This is due to some questionable practices by the company including revoking access to Facebook APIs.

Facebook Anticompetitive Acquisitions

Based on the FTC’s complaint, Facebook targets potential competitive threats to its dominance. The Lawsuit is targeted on Facebook’s Acquisitions, Instagram being the particular after it’s $1 Billion purchase in 2012 followed by WhatsApp in 2014 for $19 billion

“Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive,” said Ian Conner, the director of the FTC’s Bureau of Competition.

FTC deems this illegal in certain cases as it stifles innovation and it leads to Monopolization.

These Anticompetitive Acquisitions have also been reported in the VR Industry where Oculus (The VR Company bought by Facebook in 2014 for $2.3 billion in cash and stock) has been buying out developers who posed direct competition to Facebook’s offerings and possibly future rivals. 

“Our Industry is getting eaten alive by Facebook,” said the co-founder of a Yur Inc.

Since they’ve been acquired by Facebook, Oculus has also been accused of outright shutting down applications, and stealing exact ideas from existing apps.

German Government Suing Oculus

Shortly after FTC, the German Government opened legal action against Oculus over similar anti-competitive claims regarding tying Facebook accounts to Oculus headsets

“In the future, the use of the new Oculus glasses requires the user to also have a Facebook account. Linking virtual reality products and the group’s social network in this way could constitute a prohibited abuse of dominance by Facebook. With its social network, Facebook holds a dominant position in Germany and is also already an important player in the emerging but growing VR (virtual reality) market. We intend to examine whether and to what extent this tying arrangement will affect competition in both areas of activity.” said Andreas Mundt, the president of the Bundeskartellamt (Federal Cartel Office)

So Germany and The United States are hammering Facebook for the same thing practically. This will undoubtedly have lasting impacts on the entire VR Industry moving forward.

Smart VR Lab contacted The Netherlands Authority for Consumers and Markets (ACM) to see if they also plan to undertake action against Facebook practices in the Netherlands. The ACM responded and stated they will look into it but did not release an official statement yet.

Consequences for Businesses that are starting with Virtual Reality

In the past, Oculus has changed its terms of service very often. As a user, you are obliged to accept the updated terms. This is also a very inconvenient practice from a user’s perspective because often the updated terms of service curtails previously allowed actions.

Regarding the lawsuits and the herein-above mentioned changing of terms, the Oculus platform can be a bit of an unstable basis for businesses to build their VR endeavours on. Luckily, there are alternatives. If you want to read more about the alternatives of Oculus, please read this article. It outlines all their pros and cons from both a business and developers perspective.
If you want to know more about our Smart VR Lab VR CMS platform or our other VR solutions, feel free to contact us.

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