Almunia approves Facebook’s bid for WhatsApp

The European Commission concluded that the merger would not harm competition in the social media and consumer communications sectors.

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Facebook’s €15 billion bid for WhatsApp, a mobile messaging application, was today (3 October) approved by the European Commission, despite concerns about the merger from Europe’s telecoms sector and privacy campaigners.

“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, the European commissioner for competition. “Consumers will continue to have a wide choice of consumer communications apps.”

In the face of strong opposition to the deal from some sectors, the Commission took the precaution of twice consulting the companies’ rivals and other technology firms about the deal – an unusually thorough review. One of the questionnaires stretched to 70 pages.

Facebook’s opponents warned that the merger would give the world’s largest social network, which has 1.2 billion users, a stranglehold over the emerging market for consumers’ data and behavioural habits. Analysing such data is immensely valuable to online companies that want to target advertising and services at individuals.

WhatsApp is a smartphone application that relays messages between two or more users using their phone numbers. It currently has 600 million users. The complainants argued that by connecting WhatsApp’s records of phone numbers and connections to its own social-network database, Facebook could gain an unfair competitive advantage and set its own price for selling on data. They warned that Facebook would reinforce its dominant position in the market for social networks and create another dominant position in the market for online messaging.

But the Commission concluded that there was little overlap between the two services. “Users seem to use the two apps in different ways and many of them use the two apps simultaneously on the same mobile handset,” said the Commission in a written statement. It said that Facebook would not enjoy a dominant position in the market for so-called consumer communications applications because of the number of competing apps available, including Line, Viber and Google Hangouts, and the “dynamic” nature of the market. 

“The consumer communications apps market is fast growing and characterised by short innovation cycles in which market positions are often reshuffled,” the Commission concluded. 

It also dismissed concerns that the merger would reinforce Facebook’s power in the market for social networks, since “the parties are, if anything, distant competitors in this area”. 

The Commission did examine whether Facebook would be able to harvest data from WhatsApp to use for its online advertising business, but it concluded that the amount of data that it would gain would not change competition in the market given the existence of other players with access to large quantaties of data, such as Google.

To temper concerns about privacy, the United States’ Federal Trade Commission, which approved the merger in April, ordered the social network not to tamper with WhatsApp’s privacy settings. But the Commission, which does not have competence over companies’ privacy rules, was not able to impose similar conditions on the deal. “Any privacy-related concerns flowing from the increased concentration of data within the control of Facebook as a result of the transaction do not fall within the scope of EU competition law,” according to the Commission’s statement.

Facebook was represented in the case by Miranda Cole of the law firm Covington & Burling. WhatsApp was represented by Lars Kjølbye of Latham & Watkins.