EU competition regulator asks rivals for views on Facebook deal to buy WhatsApp

Out-Law News | 04 Sep 2014 | 10:07 am | 2 min. read

Rivals to social networking company Facebook and messaging service WhatsApp have been asked for their views on the proposed merger of the two companies, according to a report in the media.

The European Commission has confirmed that it received notification of the planned deal on 29 August and that it is "currently examining this proposed acquisition on the basis of the EU Merger Regulation".

However, the Commission refused to confirm a report published by technology news website the Register which cited details of a questionnaire reportedly sent by the Commission to competitors of Facebook and WhatsApp seeking views on the deal and its potential impact on competition.

Earlier this year, Facebook announced that it had agreed to buy WhatsApp in a $19 billion deal. At the time, corporate law expert and specialist in technology mergers and acquisitions Andrew Hornigold of Pinsent Masons, the law firm behind Out-Law.com, said the deal signalled Facebook's intention to "expand its own messaging services and use the WhatsApp brand and existing strong customer base to gain a foothold in the voice market".

Completion of the transaction is subject to clearance from competition regulators.

Competition law expert Guy Lougher of Pinsent Masons previously explained that companies are under a general obligation to "pre-notify the European Commission of a proposed merger and obtain its approval before completion … when certain turnover thresholds are met and the acquiring company would obtain 'decisive influence' over another business." 

After the notification is made, the Commission has 25 days, subject to a potential short extension, in which to analyse the proposed deals and decide whether to give clearance to the deals, with or without remedies to address competition concerns, or launch a more detailed investigation into the plans to better determine how merger deals could effect competition in the relevant market.

According to guidance issued by the Commission, the first phase assessment of a merger deal (3-page / 191KB PDF) notified to the regulator can involve sending questionnaires to "competitors or customers seeking their views on the merger, as well as other contacts with market participants, aimed at clarifying the conditions for competition in a given market or the role of the merged companies in that market".

The Register reported that the questionnaire sent out about the proposed Facebook and WhatsApp deal asks stakeholders whether they expect WhatsApp users to "face greater difficulties in switching to another consumer communications service/app" and whether "there will remain sufficient alternative providers of consumer communications services/apps" if the deal is completed.

The questionnaire also asks whether a distinction should be drawn between social networking services and applications and who stakeholders believe are the five "strongest" communication service providers to consumers, the report said.

In addition, the Commission has asked whether WhatsApp's competitors will find it "more difficult … to expand their user base or to launch a new consumer communications service/app in the European Economic Area" if the Facebook and WhatsApp deal goes through, it said.

In April the US Federal Trade Commission warned Facebook and WhatsApp to adhere to promises made relating to the collection, use and sharing of personal data regardless of whether a merger of the two companies is completed or not.