Antitrust Law Daily Wrap Up, TOP STORY: $19B Facebook/WhatsApp combination gets European Commission's blessing, (Oct 3, 2014)
Organizations Mentioned:Chiquita Brands International | Eli Lilly & Co | Eli Lilly and Co. | Facebook | Facebook, Inc. | Novartis Animal Health | WhatsApp Inc.
By Jeffrey May, J.D.
Facebook, Inc.'s proposed acquisition of mobile message service WhatsApp Inc. has been cleared by the European Commission's competition authority. Today, the EC announced that it was approving the deal valued at approximately $19 billion without conditions. The transaction was cleared by the FTC earlier this year.
Facebook went public with its plans to acquire WhatsApp in February. At that time, Facebook said that it would purchase the “rapidly growing cross-platform mobile messaging company” for approximately $19 billion. Facebook agreed to pay $4 billion in cash and to offer approximately $12 billion worth of Facebook shares. The agreement also provided for an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees.
The EC looked into whether the combination of Facebook, with its Facebook Messenger “app” and WhatsApp would reduce competition among providers of smartphone apps that allow consumers to communicate by sending text, photo, voice, and video messages. WhatsApp Messenger enables consumers to exchange messages without having to pay for text messaging.
The EC's investigation focused on three areas: (1) consumer communications services, (2) social networking services, and (3) online advertising services. With respect to consumer communications services and social networking services, the EC concluded that Facebook Messenger and WhatsApp were not close competitors and that consumers would continue to have a wide choice of alternative consumer communications apps after the transaction. The merged entity would continue to face sufficient competition after the merger, it was noted.
Although WhatsApp is not active in online advertising, the EC examined whether the transaction could strengthen Facebook's position in that market and hamper competition. It concluded that, even if 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, according to the EC.
“We have carefully reviewed this proposed acquisition and come to the conclusion that it would not hamper competition in this dynamic and growing market,” said Joaquín Almunia, EC Vice President in charge of competition policy. “Consumers will continue to have a wide choice of consumer communications apps.”
Other merger approvals. Separately, the EC today announced two other significant merger approvals. It authorized the proposed merger between U.S.-based Chiquita Brands International and rival banana supplier Fyffes of Ireland. In addition, the EC cleared Eli Lilly and Company's proposed acquisition of the Novartis Animal Health business of Switzerland.
Companies: Facebook, Inc.; WhatsApp Inc.; Chiquita Brands International; Novartis Animal Health; Eli Lilly and Co.
MainStory: TopStory AcquisitionsMergers Antitrust