The European Commission has authorized, under the EU Merger Regulation, the proposed acquisition of WhatsApp Inc. by Facebook, Inc.
Facebook through Facebook Messenger and WhatsApp are very popular online programs. Both offer applications for smartphones which allow consumers to communicate through text, photo, voice and video messages.
The European Commission has found that Facebook Messenger and WhatsApp are not close competitors. Being so means that consumers would still be able to have a wide choice of apps that they can choose from after the transaction. The investigation also showed that the resulting company will continue to face sufficient competition after the merger.
Commission Vice President in charge of competition policy, Joaquín Almunia, said: “Consumer communications apps keep European citizens connected and are becoming increasingly popular. While Facebook Messenger and WhatsApp are two of the most popular apps, most people use more than one communications app. 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.”
The Commission found that Facebook Messenger and WhatsApp are not close competitors. Facebook Messenger is a standalone app, the user experience is specific with the Facebook social network. WhatsApp users on the other hand provide consumer access to the service through phone numbers. Facebook Messenger requires users to have a Facebook profile. Furthermore the Commission also assessed that there is a very dynamic market with several competing apps available for consumers like Line, Viber, iMessage, Telegram, WeChat and Google Hangouts.
When it comes to social networking services, the Commission’s market investigation showed that there is a continuous evolution in the two companies’ services. Some third parties mentioned that WhatsApp is deemed as a social network and thus competes with Facebook. The Commission however found that Facebook and WhatsApp are distant competitors in this area, in particular given a “substantially richer experience” offered by Facebook.
It was also noted that there is a large number of alternative service providers, which includes other consumer communications apps, such as Line and WeChat. In the event of integration between WhatsApp and Facebook, Facebook’s position in social networking services could be strengthened because of the transaction. The net gain, when it comes to increasing new members of the social network would be limited, since user base of WhatsApp overlaps to a significant extent with that of Facebook.
WhatsApp is not active in online advertising, however the Commission examined whether the transaction could improve Facebook’s position in that market and affect the competition. The Commission examined the possibility that Facebook could cause the following:
(i) introduce advertising on WhatsApp, and/or
(ii) use WhatsApp as a potential source of user data for improving the targeting of Facebook’s advertisements. The Commission concluded that, regardless of whether Facebook would introduce advertising on WhatsApp and/or start collecting WhatsApp user data, the transaction would not raise competition concerns. This is because after the merger, there will continue to be a sufficient number of alternative providers to Facebook for the supply of targeted advertising, and a large amount of internet user data that are valuable for advertising purposes are not within Facebook’s exclusive control.
The Commission analysed potential data concentration issues only to the extent that it could hamper competition in the online advertising market. Privacy-related concerns resulting from the increased concentration of data within the control of Facebook due to the transaction do not fall within the scope of EU competition law.
And therefore the Commission concluded that the transaction would raise no competition concerns. The transaction was notified to the Commission on 29 August 2014.
Original text available at Europa.eu Press Releases Database.
A.L. Mijares
About Facebook
Facebook provides social network online platforms offering a range of social services, including consumer communications and photo / video sharing functionalities to consumers and advertisers. Facebook offers the social networking platform “Facebook”, the consumer communications app “Facebook Messenger” and the photo and video-sharing platform “Instagram”.
These may be accessed by members through the internet on PCs and via specific apps on mobile devices. Facebook also provides online advertising space. Facebook therefore collects data regarding the users of its social networking platforms and analyses them in order to serve advertisements on behalf of advertisers. Facebook ads are “targeted” at each particular user of its social networking platforms. Facebook’s social networking platform has 1.3 billion users worldwide, 300 million of which are also users of the Facebook Messenger app. Facebook stock market evolution:
http://www.nasdaq.com/symbol/fb
About WhatsApp
WhatsApp is the provider of a messaging app enabling users to exchange multimedia instant messages. WhatsApp is currently available only on mobile computing devices or smart phones and it does not engage in any advertising service. WhatsApp has 600 million users worldwide.
