Virtual Reality and the Relevant Market Fallacy

The relevant market fallacy is one of the most common analytical mistakes in antitrust policy. One of the first legal questions in an antitrust case is defining the relevant market a company monopolizes. The trouble with this is that any market is a monopoly if you define it narrowly enough. Prosecutors have an incentive to define defendants’ relevant markets as narrowly as possible, in order to make them look more dominant than they are in real life. Over at National Review, Alex Reinauer and I find the relevant market fallacy at work in the Federal Trade Commission’s (FTC) blocking of Facebook parent company Meta’s acquisition of the virtual reality (VR) software company Within Unlimited:

The key product in the deal is Within Unlimited’s VR workout app, Supernatural. The FTC argues that the deal would give Meta illegal market power in the “virtual reality dedicated fitness app market.” Now that’s a narrow market!

Most fitness is neither VR- nor app-based. Home fitness equipment is a $4 billion industry. Amazon just announced that it will begin selling the popular exercise-bike platform, Peloton, which offers subscriptions to live classes and other video products along with its bikes. VR fitness apps also compete against free jogs around the neighborhood, free workout videos on YouTube, gym memberships, and local sports leagues.

Read the whole thing here. CEI analysts have covered other instances of the relevant market fallacy in other cases concerning Amazon, Facebook, Google, and in the United Kingom’s Competition and Markets Authority. See also Wayne Crews’s and my paper “The Case against Antitrust Law.”