The EU antitrust regulators are opening an investigation into Facebook’s purchase of U.S. customer service startup, Kustomer. So, the EU worries that the acquisition may hurt competition and boost Facebook’s dominance in online advertising.
EU antitrust regulators: Too much online power
They argue that the company already has a lot of power in social media and online advertising. So, they warned that this deal may hurt competition as well as boost their dominance in the online marketplace.
The European Commission is very skeptical of the sudden wave of mergers between big companies and startups. E fear that large firms are looking to “kill” competitors by buying them up as soon as they start to grow.
In November, Facebook announced its purchase of Kustomer to scale up WhatsApp. So, the EU executive said the merger may result in Facebook blocking competitors’ access to their key customer relationship management (CRM) software. Still, many other companies rely on Facebook’s platforms to communicate with customers and advertise their products. So, this is really concerning.
Kustomer sells CRM software to businesses, which allows them to communicate with consumers in a variety of ways. Therefore the EU watchdog cited concerns about Facebook’s use of Kustomer’s client data for better personalization and targeted advertising abilities. So, this gives Facebook an advantage over competitors.
Margrethe Vestager, Commission Vice President, said it is essential “to closely review problematic acquisitions.” Also, she explained that the Commission would consider Facebook’s leading position in online advertising and messaging channels.
Facebook changed its mind
Facebook says they will continue to fully cooperate with the Commission’s review. But they argue that “the transaction is pro-competitive and will bring more innovation to businesses and consumers.”
During the Commission’s preliminary review, Facebook declined to offer any concessions. Then, an Austrian request made them change their mind .
The Commission has the power to take over cases like this using Article 22, and the deal must fall under the EU turnover threshold.
Also, the German antitrust agency has said it is looking into the acquisition of Kustomer by Facebook. They want see if it needs approval based on the effect in Germany. Moreover, they will check if Kustomer is active in Germany to a significant extent.
On the other hand, the UK’s counterpart, the Competition and Markets Authority, has just started an investigation, too.