Facebook’s Instagram Deal Moves One Step Closer: UK’s Office Of Fair Trading Gives It The All-Clear

Next Story

Drupal Company Acquires Akismet Competitor Mollom To Kill Spam Dead

Facebook has today moved one step closer in its proposed acquisition of photo-sharing app Instagram. The Office of Fair Trading in the UK has given the deal the all-clear.

The announcement was made via an RNS regulatory statement, which briefly says the OFT would not refer the deal to the Competition Commission. A spokesperson for the OFT has given us more detail:

“We examined this in light of them both offering social networking services, looking at potential competition in social networking services, and in the supply of photo apps and whether the merger might result in the merging parties limiting people from others using other apps or other sites,” he said. “In brief we concluded that there are several relatively strong competitors to Instgram which appear to pose a stronger constraint to Instagram than Facebook does.”

He would not elaborate on what other apps these might be, but there are hundreds in the app store, along with native camera capabilities on devices themselves, that would serve as would-be competition.

He further added that the OFT does not “have reason to believe that Instagram would be uniquely placed to compete against Facebook either as a provider of advertising space or as a photo service.

He noted that the OFT also looked at “whether people would be limited in posting to Facebook or Instagram” without using the two together, as a result of the acquisition. “The evidence we received showed that the parties would not be able to pursue such a strategy.”

The main point of the OFT review was to see whether the deal to buy Instagram would result in a ‘substantial lessening of competition’ among all players. If it did, the OFT would refer the deal to the Competition Commission for review. The OFT reviews all cases in which the companies either make more than £70 million ($110 million) annually, or control more than 25 percent of their market.

The Federal Trade Commission, which is also reviewing the merger, investigates any deal with a value greater than $68.2 million.

When the deal was first announced in April, the price was pegged at $1 billion: $300 million in cash and 23 million shares in Facebook based on the price in the private markets. When Facebook IPO’d that price went up to $1.2 billion. At today’s price (right now just above $21/share), Instagram would be sold for about $796.8 million.

Facebook had originally said its purchase of Instagram would close by June, but as regulatory investigations have continued, it moved that back to the end of this year.