This week, the European Union (EU) Competition Commission approved Facebook’s $19.5 billion acquisition of WhatsApp based on a finding that the two companies’ business models assure that they are “not close competitors.” The ruling clears the last regulatory hurdle for Facebook to consolidate WhatsApp and close the acquisition.
WhatsApp has grown to over 600 million users in about three years, with its largest concentration in the U.S., Brazil, South Africa and Indonesia. Facebook, with 1.3 billion users, only has about 300 million users on its Facebook Messenger service.
Last week, in our “Will Start-up ‘Ello’ Make Facebook take a Faceplant?” article, we pointed out that Facebook’s claim of ownership and right to sell every scrap of its customers’ data regarding their deepest secrets made the company vulnerable as potentially tens of millions of users jump ship for start-up Ello. That is why the EU regulatory approval of the WhatsApp acquisition was so crucial for Facebook:
According to Tech Crunch, “the Commission found that Facebook Messenger and WhatsApp are not close competitors and that consumers would continue to have a wide choice of alternative consumer communications apps after the transaction. Although consumer communications apps are characterized by network effects, the investigation showed that the merged entity would continue to face sufficient competition after the merger.”
Earlier this year, the acquisition of WhatsApp was cleared by the U.S. Federal Trade Commission. Yet the European Commission waited to the last possible day to announce its decision. TechCrunch had suggested there may have been opposition on the Competition Commission that could result in the lodging of an appeal of the decision.
Facebook first applied to the European Commission for an antitrust review of the WhatsApp deal in May, following shortly after the FTC approval. The formal application was filed in late August, and the Competition Commission sent its 60-page follow on questionnaire in September to a number of parties for comment.
TechCrunch reported that parties familiar with the questionnaire said it was sent “far and wide to a range of parties like carriers and other messaging app makers but also potential customers.” The document stated, “Your company is receiving this questionnaire because it has been identified by the Parties as a competing provider or as a customer in at least one of the above mentioned markets.”
Big tech and investment banking firms will be looking closely at the WhatsApp decision to gain understanding of what type of sanctions the European Commission is going to slap on Google, and what their appetite will be for consolidation mergers that may “infringe on three key areas of competition in the digital sphere: consumer communications services; social networking services; and online advertising services.”
Chriss Street suggests that if you are interest in California tech please click on “Will Start-up ‘Ello’ make Facebook take a Faceplant?“