The Office of Fair Trading (OFT) is to investigate Facebook's $1bn bid for Instagram, because it is concerned the giant social network might choke off picture uploads to other sites from the app, or else restrict other apps' ability to upload to it.
The UK competition regulator has asked for comments from interested parties, and given them until 5 July – just two weeks away – to respond. The OFT aims first to decide whether it has jurisdiction over the takeover, and will then determine whether to drop its investigation if it does not or cannot see any harmful effects, or to either seek undertakings from the two companies or refer the entire bid to the UK Competition Commission, by 23 August.
Instagram is one of the fastest-growing social networks ever, starting in October 2010 and reaching 30m users solely through its iPhone app in less than 18 months. The service's simple function allows people to take pictures and then upload them to its own social network, and also to send them to Facebook or Twitter, as well as emailing them. An Android version of the app has been downloaded millions of times.
Facebook's audacious $1bn bid for Instagram in April marked a key shift for Mark Zuckerberg's globe-spanning social network. It aimed to add Instagram users – many of whom already posted their photos to Facebook – into its purview.
Facebook's move, which was approved solely by Zuckerberg, was also seen as a way for it to shift up into the mobile space, where it has admitted it struggles to make money because it had not yet begun serving adverts to users.
While the OFT investigation might derail the takeover, Facebook may initially be more concerned about the ongoing investigation in the US of the same deal by the Federal Trade Commission, which is looking at the same questions as the OFT – namely, whether the takeover might cut off future competition that had been planned by Instagram.
Facebook said in a statement: "We'll continue to work closely with the OFT and look forward to answering any questions that arise."
The US social networking giant is understood to have already responded to the OFT's initial queries, although neither side is yet sure whether the organisation has jurisdiction over the deal.
The OFT has jurisdiction under the 2002 Enterprise Act if two or more enterprises merge to create one with an annual turnover in the UK of more than £70m, or a 25% share of a market is created or enhanced. Facebook has not yet released data about its revenues in the UK, and it is also unclear what share of the UK photo upload market it might have.
Burgess Powers builds and designs web sites and applications for high availability