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EU Taking Harder Look At $19B Facebook-WhatsApp Deal
Regulators asking competitors about potential impact on market.
European regulators have reportedly sent an unusual “second wave” of questions to a range of companies as part of its antitrust review of the pending Facebook acquisition of WhatsApp. The Wall Street Journal reports the questionnaire is “extremely detailed” and nearly 70 pages long.
Facebook asked the EU for the antitrust review to avoid going through the process in individual European countries.
At the heart of the inquiry is an attempt to assess the distinctions between Facebook as a social network and WhatsApp as a messaging service. The EU also seeks to determine how WhatsApp could affect European wireless carriers, which rely on MMS and SMS traffic for revenue. They’ve increasingly lobbied regulators against approving the deal.
There’s also the more general underlying concern about US tech companies’ dominance of European consumer services, against the backdrop of the NSA spying scandal. All these things could mean mean a rocky road ahead for the $19 billion deal. The US Federal Trade Commission approved the acquisition earlier this year with some privacy caveats and warnings.
The WSJ quotes one of the questions in the package: “Which of the following websites/apps in your view can be described as a provider of social networking services?” It then lists a wide array of companies, “including Flickr, Foursquare, Google+, InterNations, LinkedIn, Myspace, Meetup, Tumblr, Twitter, Skyrock, Pinterest, Ask.FM and Spotbros.”
One could easily make the case that WhatsApp is a social network or, if not now, has the short-term potential to become one. If the definition of social network does include WhatsApp it could signal trouble because Facebook would be removing a significant competitor (by usage numbers) from the market. By the same token dozens of others would still be present under that rationale.
Privacy and data usage are also likely to be a focus of the inquiry. I could see ultimate EU approval but with significant restrictions imposed on data sharing between the networks.
Regulators have until early October to give a thumbs up to the deal or launch a formal “investigation.” Google is still in the final stages of its EU antitrust investigation, which has dragged on since 2010, though a settlement has tentatively been reached.
Regardless of the WhatsApp-inquiry outcome, concerns about Facebook’s reach and power will continue to be expressed by European politicians and corporate competitors for the foreseeable future. Given all the politics in the background, some regulators may have difficulty separating a desire to protect market competition from an impulse to protect vested corporate interests.