Facebook purchased one of the most popular applications in the app market today; Instagram. The deal between the two companies was finalized at a huge price of $1 billion. However, Facebook’s acquiring of Instagram is under examination by the Federal Trade Commission, reports the Financial Times.
According to Financial Times, the usual competition probe into the deal might take more than six months or nearly a year, which will prolong the deal’s awaited closing in the 2nd quarter of the year. Facebook however had a different story in mind as it wrote in its initial stock offering that it is expecting the deal to finalize by the end of the current quarter.
Usually in America, deals that involve an amount that is more than $66 million go through an extensive regulatory examination due to the antitrust law. At first, the Department of Justice and the Federal Trade Commission conduct a preliminary review of the deal to find out if antitrust show up which leads to further and extensive examination of the deal.
Mostly, deals are allowed to proceed after they go through preliminary review but companies are requested to provide detailed information if the FTC requires a second request from them.
The Financial Times has reported that the Federal Trade Commission has begun collecting information from some of Facebook’s competition.
We don’t know if Facebook’s $1 billion deal to buy Instagram might eventually materialize or gain approval. Mostly, experts are of the opinion that the deal might ultimately get approved but on the other hand, they say that regulators will be careful in scrutinizing the deal since the price involved is high and the companies involved are big.
FTC’s further probe into the deal may affect Facebook’s initial public offering and may also have a negative effect on investors. However, analysts believe that since talks of the deal were relatively new, investors may not be concerned at all. However, if things turn against Facebook’s favor, it said that it will pay the photo sharing app a termination charge of $200 million.