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Facebook’s acquisition of WhatsApp green-lit by EU regulators

European Commission approves Facebook’s proposed $19 billion takeover of mobile messaging startup WhatsApp

3 October 2014, 6:10pm
The merger between Facebook and WhatsApp is the largest in Facebook's 10-year history and will give it a strong foothold in the fast-growing mobile messaging market.
The merger between Facebook and WhatsApp is the largest in Facebook's 10-year history and will give it a strong foothold in the fast-growing mobile messaging market.
The European Union has given its clearance for Facebook’s proposed $19 billion takeover of mobile-messaging service WhatsApp, clearing the way for a deal that had been fiercely opposed by Europe’s telecom industry.

The merger between Facebook and WhatsApp is the largest in Facebook's 10-year history and will give it a strong foothold in the fast-growing mobile messaging market. The landmark deal was cleared by US antitrust authorities in April.

The European Commission, the EU’s central antitrust authority, decided that the companies’ consumer communications apps for smartphones—Facebook Messenger and WhatsApp—weren’t close competitors, and that consumers would continue to have “a wide choice” of alternatives after the transaction.

“We have carefully reviewed this proposed acquisition and come to the conclusion that it would not hamper competition in this dynamic and growing market,” the EU’s antitrust chief Joaquín Almunia said in a statement.

A commission spokesman said consumers seemed to use the two apps in different ways, and “many use them simultaneously on the same mobile handset.” Launching new apps is “easy”, and “doesn’t require significant time or investment,” he added.

The EU’s review had been seen as a test case for how to apply European competition law to the new world of social media. It came amid broader concerns in Europe around the power of U.S. technology companies.

WhatsApp is poised to become a potentially powerful rival to companies such as Deutsche Telekom, Orange and Telecom Italia with its plan to add free voice-call services for its 450 million customers later this year.

Europe’s telecom operators had lobbied against the deal, warning it could give the merging companies excessive market power and control over users’ data. Telecom companies have come under pressure from so-called over-the-top operators such as WhatsApp, Skype Technologies SA and Netflix Inc., which they argue use their infrastructure to provide similar services but aren’t taxed or regulated in the same way.

WhatsApp and its rivals such as KakaoTalk, China's WeChat and Viber have in recent years won over telecoms operators' customers with a free text messaging option, posing a serious threat to the sector's revenues from this business, which totaled about $120 billion last year, according to market researcher Ovum.

Some experts saw warning signs when the European Commission took the unusual step of sending out two separate questionnaires to market participants over the summer, the second running to almost 70 pages, in an effort to get to the heart of the competitive landscape.

But the regulator ultimately decided that Facebook’s control over consumers’ data wouldn’t harm competition in the online advertising market, and that privacy-related concerns fell outside its remit.

Facebook’s social networking platform has 1.3 billion users worldwide, 300 million of which are also users of the Facebook Messenger app. WhatsApp, which provides a kind of low-cost replacement for text messaging, has 600 million users worldwide.

DealToday
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