Facebook faces extended US review of Instagram deal

WASHINGTON: Facebook has received notice that US antitrust regulators will give its proposed purchase of the popular photosharing app-maker Instagram a lengthy investigation, an industry source said.

Facebook has received a “second request” from the Federal Trade Commission (FTC), essentially a request for relatively large amounts of data that the regulators will sift through to ensure that the deal complies with antitrust law.

A prolonged review adds another headache to the No. 1 social network, whose shares on Tuesday slid below US$29 to a new low as nervous investors continued to show their concerns about Facebook’s long-term business prospects and rich initial public offering price of US$38.

Ahead of its rocky May 18 market debut, Facebook announced in April that it would purchase Instagram for US$1bil in cash and stock, its largestever acquisition.

The purchase of the photosharing service on the Internet is a crucial part of Facebook’s strategy to bolster its mobile offerings at a time when consumers are increasingly accessing the Internet through smartphones.

Google and Twitter are among companies that have also been asked about the deal, a second source had previously told Reuters.

The FTC’s questions about the deal to tech companies had indicated it was in a very early stage in its investigation, according to a Reuters story on May 10. The agency was asking in Silicon Valley what concerns tech companies might have about the Facebook purchase of Instagram.

The “second request” letter from the FTC was dated May 16, the industry source said.

Facebook declined to comment, as did the FTC.

The FTC or Justice Department automatically review any acquisi- tion worth US$68.2mil or more.

Facebook earlier this month extended its estimate of how long the review of the deal would take, saying in a regulatory filing the deal would likely close this year instead of the second quarter as it previously indicated.

Antitrust experts said the FTC’s interest could well have been piqued by the high price Facebook offered for two-year-old Instagram. Instagram closed a funding round days before the Facebook deal was announced that valued it at US$500mil. — Reuters