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Competition Law

Analysis - debate - current awareness

01 AUG 2014

WhatsApp with Facebook? The Competition Angle

John Cassels


WhatsApp with Facebook? The Competition Angle
In February, Facebook announced that it had agreed to purchase WhatsApp, an instant messaging business, for (a paltry) $19bn. Facebook is the world renowned social network with over 1.2 billion users. WhatsApp allows unlimited free text-messaging and picture sending between users and is among the most popular globally downloaded mobile apps. It has over 450 million users, and is estimated to grow by 1m users per day.

It was recently reported that although Facebook has not officially notified the deal to the Commission, the regulator under the EU Merger Regulations will conduct a single review of the transaction rather than Facebook face the possibility of separate reviews in a number of EU countries.

It appears based on reports that the Commission is seeking competitor views on the transaction in relation to the correct market definitions for consumer communication tools and potentially how that data is used for targeted mobile advertising purposes. At present though, WhatsApp does not advertise to its users and its privacy policy stipulates that WhatsApp “does not collect names, e-mails, addresses or other contact information from its users’ mobile address book or contact lists other than mobile phone numbers.” That is in contrast to Facebook which generates much of its revenue by selling advertising space on its website that targets its users by age, gender and other traits.

The Commission will likely assess how closely Facebook and WhatsApp compete in a number of markets and whether there is overlap. For example, Facebook Messenger is a specific Facebook messaging service in contrast to the standalone WhatsApp application. Much may depend on how the Commission characterises the 'social network' market and whether consumer communications on a range of platforms (tablet, mobile, laptop, PC etc) are part of one broader market. The ease by which new entrants can enter the market which may include products like Skype, Facetime, iMessage, and Viber will go some way to assess the effect of the transaction on competition.

If you are interested in these issues, please do not hesitate to contact John Cassels at john.cassels@fieldfisher.com.

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