Facebook’s Instagram Deal Prompts FTC ProbeBy: Drew Bowling - May 11, 2012
What was once speculation has now taken shape in reality: Facebook will be on the receiving end of a competition probe from the Federal Trade Commission as a result of the social networking site’s purchase of Instagram last month.
According to the Financial Times, the FTC’s investigation has the potential to postpone the finalization of the deal beyond the second quarter, which was when Facebook expected the acquisition to be completed. Former policy director at the FTC, David Balto, told the Financial times that the likelihood of Facebook still being able to close the deal as it originally planned is “terrifically optimistic.”
Speculation over a possible FTC probe has always revolved around the extraordinary price, $1 billion, that Facebook paid for Instagram. While a competition probe is standard for any acquisition more than $68.2 million, the FTC will definitely be devoting its attention to the price attached to the Instagram purchase.
While the deal is expected to eventually be approved by the FTC, the delay does add to the persistent problem Facebook has with monetizing its mobile platform. Given that Facebook’s IPO is likely for next week, it’s possible investors could balk if Facebook hasn’t found a solution to the mobile ad problem within the near future. The FTC investigation could take anywhere from six to twelve months, possibly paralyzing any attempts by Facebook to improve revenue from mobile ads in the meantime.[Via CNET.]