The European Commission has started an investigation into a Facebook acquisition that may potentially hurt the competition. The acquisition in question concerns a customer service company called Kustomer.
Facebook bought the company in December for a little over $1 billion.
Kustomer was founded in 2015 and offers a SaaS (software-as-a-service) customer relationship management (CRM) platform, whose core strength is the ability to centralize entire workflows.
The acquisition was valuable to Facebook since it could be used to support the businesses that leverage its social media platform in customer interactions.
The European Commission
The Commission is concerned that the transaction will reduce competition in the CRM software market. In addition to that, the Commission is also concerned that Facebook will gain a unique and even more powerful position in the online display ad business.
Allegedly, the social media giant could increase its power by increasing the amount of data it collects to personalize the ad it shows users.
The Executive Vice-President of the body, Margrethe Vestager, said it is important to review “potentially problematic” acquisitions by companies that are already dominating some markets.
Potential anti-competitive behavior
Vestager added that this call to review acquisitions is especially important in the tech market, where Facebook is leading in both online display advertising and over-the-top messaging channels (Instagram, WhatsApp, and Messenger).
The Commission said that with Kustomer, Facebook could cut off access to its messaging channels for other CRM solutions, essentially crushing them.
These channels, which Facebook owns, account for a significant portion of its business-to-consumer OTT messaging market, which is why the Commission has determined that Facebook has the incentive to block Kustomer’s rivals from using those channels. Facebook has said that it is ready to cooperate with the review.