Facebook common stock (
). Facebook proposes to acquireInstagram through [ ].
The Office of Fair Trading (
) opened its own investigation into theTransaction on 21 May 2012. The administrative deadline is 16 August2012.
As a result of the Transaction Facebook and Instagram will cease to bedistinct. Given that Instagram has not generated any turnover since it wasestablished, the turnover test set out in section 23(1)(b) of the EnterpriseAct 2002 (the
) is not met. The parties overlap in the supply of virtualsocial networking services. Facebook’s share of supply in the UK of virtualsocial networking services is over 25 per cent
and, given that Instagram isactive in the supply of virtual social networking services, the Transactionwould result in an increment.
Consequently, the share of supply test insection 23 of the Act is met.
The OFT therefore believes that it is or may be the case that arrangementsare in progress or in contemplation which, if carried into effect, will resultin the creation of a relevant merger situation.
FRAME OF REFERENCE
Social networks are two-sided markets. They compete to add users and toattract advertising revenue. Advertisers are willing to pay to purchaseadvertising space on the social networks’ sites and apps based on thenumber of users that the network has and the information that thenetworks records on those users (for example, their demographics).
Facebook is active in the provision of three relevant services: socialnetworking to users, a camera app to users (launched after the
The parties are deemed to supply these services even though they do not charge for them byvirtue of section 128(3)(c) of the Act.