Facebook Acquires Mind-Control Startup Amid Antitrust Controversies

Facebook’s newest startup acquisition, CTRL-Labs, hopes its technology will allow users to control augmented reality (“AR”) technology with nothing more than a thought. (Kurt Wagner, Bloomberg Law). The startup, CTRL-Labs (pronounced “Control”), is developing a non-invasive neural interface that would convert user’s electrical muscle impulses into digital signals. (Polina Marinova, Fortune). This would allow users to move a mouse, or video game character, without having to move a muscle. Although the financial details of the acquisition are being kept private, according to people familiar with the deal, Facebook offered between $500 million and $1 billion for the startup. (Kurt Wagner, Bloomberg Law). The acquisition of CTRL-Labs comes at a time when technology companies, especially Facebook, are facing a bipartisan political attack on anti-competitive behavior within the industry. (David McLaughlin et al., Fortune). This post will also briefly address Facebook’s entry into and aspirations of the AR hardware market, and recent governmental oversight concerning Facebook's history of absorbing potential competitors.

CTRL-Labs is the brainchild of Thomas Reardon and Patrick Kaifosh. (Steven Levy, Wired). Mr. Reardon gained notoriety for establishing the project that eventually became Internet Explorer, before leaving the tech industry to get his Ph.D. in neuroscience. Id. His partner, Mr. Kaifosh, is also a neuroscientist who specializes in “neural circuit mechanisms of memory.” (Losonczy Lab). The company, now four years old, uses a mix of machine learning and neuroscience to allow users to manipulate computer interfaces. (Kurt Wagner, Bloomberg Law). One of its most significant breakthroughs was its ability to observe the human motor nervous system at the level of an individual neuron. (Polina Marinova, Fortune).  

Using a bracelet wrapped around the user’s arm, CTRL-Lab’s device measures the neuron activity in the limb and translates the user’s thoughts of movement into actual movements on a digital screen. Id. Based on a post by Andrew Bosworth, Facebook’s AR and VR Vice President, it appears that Facebook intends for the technology to be used with its AR headset, Oculus. (Andrew Bosworth, Facebook). However, the technology being developed by CTRL-Lab could have many significant impacts in the future outside of entertainment because it could potentially allow individuals suffering from physical disabilities to control computer interfaces, mobility devices, or digital speech mechanisms.

Facebook has made a significant push in the last couple of years to bolster its foothold in the augmented reality market. Zuckerberg orchestrated the acquisition of start-up Oculus VR for $2 billion in 2014 as Facebook’s initial pivot away from being simply a social media platform.  Oculus, founded with a focus on developing and producing virtual reality video game headsets, was Facebook’s first foray into the hardware market. (Steven Kovach, Business Insider). Zuckerberg had grand envisions for the AR headset, including uber-realistic video games, allowing people to virtually sit courtside for sporting events, and allowing students to enter a virtual classroom from anywhere in the world. (Mark Zuckerberg, Facebook). Recently, Facebook announced a partnership with Luxottica to develop augmented reality Ray-Ban glasses that would be designed to replace smartphones. (Salvador Rodriguez, CNBC). The two companies are hoping that the glasses could reach consumers by as early as 2023. Id. 

The acquisition of CTRL-Labs comes at a time when Facebook, and the entire technology sector, are facing mounting concerns from politicians about anti-competitive behavior and privacy. President Donald Trump recently criticized the growing power of social media platforms during his address to the United Nations General Assembly, indicating that the industry could soon face scrutiny from federal antitrust regulators. (Sarah Ponczek, Bloomberg). Last month, attorney generals from 48 states, including Puerto Rico and DC (while California and Alabama abstained) launched antitrust investigations into Facebook and Google. (Casey Newton et al., The Verge). Currently, there are 16 government inquiries and investigations surrounding Facebook, Google, Apple, and Amazon at the state, federal, and congressional levels. (New York Times).

Facebook’s acquisition of CTRL-Lab has even garnered the attention of Minnesota Senator, and candidate for the 2020 Democratic presidential nomination, Amy Klobuchar. (David McLaughlin et al., Fortune).  In a recent hearing on Capitol Hill concerning the competitive effects of digital platforms acquiring startups, the Senator expressed her concern by stating that, “If digital giants use strategic acquisitions to snuff out emerging or potential future competitors the harm may not be as immediately obvious but those harms are no less damaging or enduring in the long run." Id. Many others, including Senator Elizabeth Warren, have criticized the FTC for allowing Facebook to acquire social networking startups Instagram and WhatsApp in massive deals that were likely attempts by Zuckerberg to prevent competition in the sector. Id. Currently, a broad investigation has been opened by the FTC into Facebook’s “program of serial defensive acquisitions,” as attempts to maintain the company’s social media dominance. (Jack Nicas et al., New York Times).

Moving forward, it will be interesting to see if the FTC or Justice Department decides to prevent Facebook’s acquisition of CLTR-Lab or even attempts to unwind their approved acquisitions of Instagram or WhatsApp. Based on the FTC Chairman’s recent announcement regarding the new regulatory protocol for acquisitions of nascent competitors, it is likely the FTC will be pursuing an antitrust review of the Facebook-CTRL-Lab acquisition. (David McLaughlin et al., Fortune). Also significant is the release by Senator Elizabeth Warren, a top candidate for the 2020 Democratic presidential nomination, of an aggressive approach to breaking up tech giants Amazon, Google, and Facebook. (MJ Lee et al., CNN). Senator Warren specifically targeted Facebook’s acquisitions of Instagram and WhatsApp in a plan to unwind some of the highest-profile tech mergers. Id. Regardless, moving forward Facebook will be facing a serious political headwind after its acquisition of CTRL-Labs if it is even allowed to do so.