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Facebook's Instagram Purchase Faces Government Review

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FacebookFacebook's $1 billion acquisition of photo-sharing service Instagram is reportedly facing delays of several months, as U.S. regulators probe the deal.

According to the Financial Times, two people familiar with the matter have confirmed that the Federal Trade Commission has launched an investigation into the purchase, because of the eye-popping price paid by the social networking maven.

That investigation could last up to 12 months, meaning Facebook cannot close the deal in the timeframe outlined in its initial public offering (IPO) prospectus.

As part of the investigation, the FTC has contacted Google and Twitter, though its unclear what information the FTC has requested from the two companies, Reuters reported.

Facebook originally announced its intention to buy Instagram in early April, with many market watchers expressing surprise at the price. It subsequently emerged that the deal had been largely brokered by Facebook founder and CEO Mark Zuckerberg, without input from the company's management board.

But according to the FT, the major threat facing Facebook is not that the deal will be blocked by U.S. competition regulators, which is seen as unlikely, but that it will disrupt Facebook's mobile strategy.

Instagram has proved to be a massive hit with smartphone users, a market where Facebook is desperate to expand.

This article was originally published on V3.


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