Facebook’s Instagram deal faces FTC scrutiny

Facebook’s $1-billion purchase of photo-sharing site Instagram is under review by the Federal Trade Commission, according to the Financial Times.

The routine competition investigation could take six months to a year, the FT reports, which could delay the deal’s anticipated second-quarter closing. Facebook had indicated in filings for its initial stock offering that it expected to close the deal by end of this quarter.

Deals for more than $66 million typically undergo greater regulatory scrutiny, under current antitrust law. Initially, the FTC and Department of Justice do a preliminary review to determine whether any antitrust concerns come up warranting closer examination.
The majority of deals reviewed by the FTC and Justice Department are allowed to proceed after preliminary review. However, companies have to provide more information if there’s a second request.

Sources tell the Financial Times that the FTC has already started to gather data from some of the social network’s rivals.
Although the deal may ultimately win approval, experts say that regulators will carefully scrutinize it because of the high price and profile of the companies.
Facebook warned investors on its pre-IPO tour that it faces a significant challenge making money from mobile devices, as advertising has lagged behind the shift to mobile devices. A significant impetus behind the play for Instagram was to bolster its mobile strategy.

If the deal is blocked, Facebook has said it would pay Instagram a termination fee of $200 million.
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