Facebook-Instagram $1 Billion Deal Under Investigation
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The U.S. Federal Trade Commission (FTC) has launched an investigation into Facebook Inc $1 billion acquisition of photo-sharing service Instagram reported the Financial Times on Thursday, with the steep price of the deal said to be under scrutiny by the federal agency.
The U.S. Federal Trade Commission (FTC) has launched an investigation into Facebook Inc $1 billion acquisition of photo-sharing service Instagram reported the Financial Times on Thursday, with the steep price of the deal said to be under scrutiny by the federal agency.
Under FTC regulation, all merger and acquisition deals costing more than $68.2 million must face a federal probe over anti-trust issues. However due to the steep price that Facebook paid, and the high profiles of the companies, the investigation is now expected to take between 6-12 months to complete – which goes against Facebook’s own expectations that the deal could be closed by the end of the second quarter.
[quote]“They’re (The FTC) going to want to take some months to investigate and understand the market and other players,” said Mark Lemley, a professor at Stanford Law School. “And there may be more parties with an interest in submitting information.”[/quote]According to Reuters, Google and Twitter representatives have been asked by the FTC to provide information on the case. Though it was not immediately clear what specific information the FTC was looking for, Reuters understood that the probe may be related to Facebook’s strategy to boost its mobile offerings.
“The government could also be interested in whether a company is killing off a potential rival by swallowing it up,” speculated The New York Times.
“Facebook today is the dominant social network, and it commands the lion’s share of advertising in the social network market. Instagram had no advertisements, but it could have one day started to attract advertisements.”
[quote]“That would have meant real competition for Facebook, especially on mobile devices, where the social network has been unable to, by its own admission, generate ‘meaningful revenue’.”[/quote]Alan Webber, an analyst with the Altimeter Group, added that the probe might affect Facebook’s IPO plans.
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[quote]”They’re assuming nothing will happen, which is the face you want to put to investors,” Webber said. “If they don’t dig too deep, yeah it’s possible it could go that fast. I don’t think that’s likely.”[/quote]Facebook has said it would pay Instagram a $200m termination fee if governmental authorities prevented the deal from being completed. The delay would also hurt Facebook’s efforts to strengthen its mobile division.
