Earlier this year, Facebook agreed to purchase the startup messaging company WhatsApp for $19 billion. WhatsApp has become hugely popular in the last few years due to its instant messaging capability, but without the usual carrier fees associated with text messaging, its compatibility with all major mobile operating systems, and its strong effort to keep users’ information private from government agencies. For Facebook, this merger means more revenue, a way to increase its popularity among teen users, which lately has been dwindling, and to strengthen its position internationally, which WhatsApp has done successfully.

The transaction went over relatively smoothly in the United States. The Federal Trade Commission (FTC) approved the deal as long as WhatsApp agreed to be subject to Facebook’s current agreement with the FTC, which includes giving consumers notice and obtaining consent before sharing their information beyond their privacy settings, and to maintain separate privacy programs to protect their users’ information.

However, European Union (EU) antitrust officials are not so sure of the merger between the two companies and have issued, what is now, a second round of questionnaires to competitors and consumers to learn more about the impact the merger will have on competition and specifically, what the effect will be on users’ privacy rights. One goal of the questionnaire is to get an idea of the difference between the two markets, social media and instant-messaging, and thus who are each company’s actual competitors, to determine whether or not the merger will impose antitrust concerns. The questionnaire is about seventy pages long and includes questions such as, what distinctions can be made “between services primarily designed to enable users to keep in touch with their existing friends/relatives as opposed to services primarily designed to enable users to enter into contact with new people.”

The European Commission, the EU’s central authority on competition, is concerned that Facebook will have access to WhatsApp’s user information. Thus the combined entity could potentially become a privacy monopoly, meaning they have acquired so much data about users that it becomes such an advantage that it essentially forms a barrier to entry for other companies in the social media and instant-messaging markets. Furthermore, the European Commission is concerned with how the merged company will use customer information for the purpose of advertising services.

The officials have until October 3, 2014, to decide whether to waive the merger through, or to start a more detailed investigation, which could potentially end in the transaction being blocked in the twenty-eight member states of the EU. How EU antitrust officials rule on this could lay out how EU competition law would be applied in the future to the social media world. It will be interesting to hear their opinion on such a large social media/messaging transaction.

— Brittany Burnham

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