Google's acquisition of Waze under scrutiny by OFT

Out-Law News | 28 Aug 2013 | 3:06 pm | 2 min. read

Google's acquisition of an Israeli-based mapping technology company is being scrutinised by the UK's Office of Fair Trading (OFT).

The regulator said it is assessing whether the reported $966 million deal, completed in June, constitutes a "relevant merger situation" under UK competition laws. In the event that it does, the arrangement will be assessed as to whether competition in the market for mapping applications has been reduced to an extent not permitted under those rules, it said.

"The Office of Fair Trading is considering whether this agreement has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services," the OFT said in a statement published on its website.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said that it is common for the OFT to look into completed acquisitions that it has not been voluntarily notified of. The regulator can launch investigations into such deals for up to four months after a deal has been completed or it is publically announced, whichever is shortest.

"The OFT will usually require the parties involved in a completed acquisition to provide undertakings to hold separate the acquired business from the purchaser pending the outcome of its investigation," Davis said. "This accounts for any cases that the OFT decides to refer to the Competition Commission for further scrutiny given that the Commission has the power to determine that there needs to be a divestment of the two businesses."

Waze developed a mobile app that allows drivers to plot routes avoiding traffic jams, police speed traps and other hazards. In June it announced it had agreed to join Google in a move it said would allow the company to "enhance [its] search capabilities" and help Google "in their ongoing efforts to build the best map of the world".

The OFT can assess competition concerns arising in the UK if the turnover of a company being acquired is £70 million or more or if it meets a 'share of supply' test. According to the OFT's merger guidelines, the 'share of supply' test is satisfied if the combining businesses "supply or acquire goods or services of a particular description" and would "after the merger collectively supply or acquire 25 per cent or more of those goods or services, in the UK as a whole or in a substantial part of it, provided that the merger results in an increment to that share."

If the OFT identifies substantive competition concerns, it can require merging companies to provide undertakings about how they will operate following an acquisition, or refer the transaction to the Competition Commission for a more detailed investigation.

The OFT is inviting comments on "any competition or public interest issues" around Google's Waze acquisition by 9 September.

The Federal Trade Commission has launched a similar investigation into the deal in the US.