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The FTC is suing Meta over the metaverse. Are Microsoft and Activision Blizzard next?

One tech giant in the regulatory agency's sights for its activity in gaming. Who's next?

On Wednesday, the retooled Federal Trade Commission introduced a groundbreaking lawsuit, attempting to block Meta from creating a monopoly on the metaverse.

The lawsuit, filed in the Northern District of California, is seeking to block Meta’s impending acquisition of Within, the virtual reality developer behind the Supernatural fitness app. Meta, the parent company of Facebook, which acquired Oculus in 2014 and has since rebranded its line of products to the parent company’s name, is the most invested player in advancing virtual reality—and by proxy, attempting to take the lead in the metaverse. 

The company also owns Beat Saber, one of the most popular VR games, which the FTC contends is a competing fitness app to Supernatural.

“Meta already owns a best-selling virtual reality fitness app, and it had the capabilities to compete even more closely with Within’s popular Supernatural app,” FTC Bureau of Competition deputy director John Newman said in a press release. “But Meta chose to buy market position instead of earning it on the merits. This is an illegal acquisition, and we will pursue all appropriate relief.”

With the suit, the FTC is pushing its progressive antitrust agenda, a change from the line of the agency’s previous leadership under President Donald Trump—who were more lenient on mergers and acquisitions. 

The argument against Meta seems straightforward: The former Oculus devices are the biggest show in town, holding 35.6 percent market share, according to a 2020 study. They own the store. They own a set of competing apps. And they control who publishes on their platform, how it’s prioritized in that store and could, in theory, put themselves before their competition.

It’s a similar argument that Epic Games made last year, in the same court, against Apple for its “walled garden” between iOS devices and the App Store. Yet, unlike Epic—whose arguments were disorganized and poorly presented—the FTC is bringing a case with a set of top lawyers in its antitrust class. The Northern District ruled predominantly in Apple’s favor. It seems more likely they’ll rule for the FTC in this case.

The other factor is the metaverse itself. Outside of the device market, the companies present in the space are smaller, venture capital-backed startups on a mission to land-grab. 

The potential case against the Microsoft-Activision merger is the biggest question in the FTC’s agenda over the next two years and in some ways, it’s related. 

Microsoft is a dominant player in the gaming space and it has continued to expand its influence, acquiring “Fallout” and “The Elder Scrolls” owner ZeniMax in early 2021. It also owns Mojang, the company behind “Minecraft,” one of the first games to pioneer virtual worlds and ownership—though, curiously, it announced its stance against blockchain and NFTs, both considered integral to many metaverse projects. 

If the definition of “metaverse” is boiled down to virtual worlds where people truly own things, then there’s an argument that Microsoft can and will quickly become as powerful in that space as Meta—even more so with the acquisition of Activision Blizzard. 

Blizzard’s most successful title, “World of Warcraft,” is one of the Internet’s earliest virtual worlds. It has not yet incorporated true ownership components, but it wouldn’t be too difficult to do so, and if Blizzard did, it would quickly become the most sought-after asset in gaming.

The FTC has not indicated either way how it will play ball in the Microsoft acquisition of Activision Blizzard. It is reportedly investigating the merger, but that’s par for the course, especially when two highly-significant, billion-dollar public companies are hooking up. The FTC is also reportedly on a countdown clock—as Microsoft has submitted documents to the agency as a part of the acquisition, triggering a 30-day window for a response, per Dealreporter.

So where does the FTC actually stand? They’ve got Meta on the hook. Is Microsoft next?

One More Thing: Heretics Pays $34 Million for Majority Stake in LEC Team, Despite Esports Woes

Team Heretics, one of Spain’s most popular esports organizations, acquired an 80 percent stake in the League of Legends European Championship team owned by Misfits for €34 million on Wednesday, sources familiar with the deal told The Jacob Wolf Report.

That acquisition values the slot at €42.5 million total, a significant increase from €26.5 million, the price point at which FC Schalke 04 Esports sold its slot to Team BDS in June 2021. 

“The purchase price highlights the growth of esports and continues to validate the franchise model that [OverActive Media] is invested in,” Adam Adamou, the chief strategy officer of OverActive, which owns fellow LEC team MAD Lions, said on LinkedIn Wednesday. “This valuation represents an increase of about 67 percent over the price that The Schalke 04 slot was sold for in 2021, and over 400 percent to our purchase price of $8 million in 2019. We believe that there is still room to grow.”

Yet, the sale comes at a particularly crucial time for the global economy and esports, which is facing harsh realities about audience size, funding difficulties and a shift in eyeballs from competitive gaming to more individual entertainers. The world is preparing for a global economic recession, with the stock market struggling. And while not exactly quantifiable just yet, there is an ether in the air that esports isn’t what it was once purported to be (an industry with hundreds of millions of highly engaged fans, just waiting to spend their dollars).

In a way, though, Heretics is insulated from a bit of this blowback. In Europe, more than the U.S., regional fanbases are massive. Heretics is one of the biggest esports brands in Spain, and now, for the millions of Spanish-speaking fans who want to attend their games, a train ride to the Berlin studio in 2023 is feasible. Even amateur “League of Legends” exhibitions between European esports teams have drawn significant in-person attendance.

So while the rest of the industry is feeling a tightening of the belt, it seems Europe isn’t. At least not yet.