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05/12/2016

EU clears Facebook’s $19bn bid for WhatsApp

Competition

EU clears Facebook’s $19bn bid for WhatsApp

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Facebook, the world’s most popular social network, gained European Union clearance on Friday (3 October) for its proposed $19 billion (€14.5bn) takeover of mobile messaging startup WhatsApp in a deal setting it against the telecoms industry.

The landmark deal is the largest in Facebook’s 10-year history and will give it a strong foothold in the fast-growing mobile messaging market.

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.

The European Commission said the Facebook-WhatsApp deal would not hurt competition.

“We have carefully reviewed this proposed acquisition and come to the conclusion that it would not hamper competition in this dynamic and growing market. Consumers will continue to have a wide choice of consumer communications apps,” European Competition Commissioner Joaquín Almunia said in a statement.

US regulators nodded through the deal in April.

EU antitrust regulators had sought views from Facebook rivals over the deal, worried that the acquisition would lead to price hikes and curb innovation.

>> Read: Brussels seeks rivals’ feedback on Facebook’s WhatsApp deal

Critics warned the merger might put Facebook in a position “to exploit a uniquely commanding position in the mobile Internet advertising market,” according to David Cantor, a veteran communications and competition lawyer based in Brussels.

But the Commission said this was not a reason for worry “because after the merger, there will continue to be a sufficient number of alternative providers”.

>> Read: WhatsApp in Brussels

Cantor also argued that “Facebook should be required to provide equivalent access to its dominant social media platform on the part of mobile messaging apps other than WhatsApp, much as Microsoft was compelled to open Windows to browsers other than MS Internet Explorer.”

Here too, the Commission estimated the market was not mature enough to impose such drastic measures. “The consumer communications apps market is fast growing and characterised by short innovation cycles in which market positions are often reshuffled,” it said.

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 totalled about $120 billion last year, according to market researcher Ovum.

Further Reading

European Commission