Facebook Infected by Google's Anti-trust Limbo

Agenda-Setting Financial Insight.
April 23 2012 6:34 PM

Facebook Infected by Google's Anti-trust Limbo

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It took a mere weekend for Facebook founder Mark Zuckerberg to hustle together his offer for Instagram.

Photo by KAREN BLEIER/AFP/Getty Images

Facebook hasn’t even gone public yet. But it looks as though the social network is already being viewed with concern by acquisition targets. Instagram, the revenue-challenged, lightly staffed startup Facebook just agreed to acquire for $1 billion, has snagged a whopping 20 percent break fee if the sale isn’t consummated by December. That’s a wise safety measure given the life cycle of mobile apps. It could also be a comment on Facebook’s lurking antitrust risks. 

To understand why Instagram boss Kevin Systrom might be worried, rewind the tape to last April. That’s when the U.S. Department of Justice allowed Google to acquire ITA Software, a startup active in the online travel business. That deal took nine months to close, and required a host of concessions to American competition authorities. 

In the fast-moving economy of mobile applications, that’s an eternity. It took a mere weekend for Facebook founder Mark Zuckerberg to hustle together his offer for Instagram. Or look at it another way: nine months is half of Instagram’s life to date. 

Naturally, Facebook doesn’t think Instagram has anything to worry about. The company, which on Monday filed a revised prospectus for its initial public offering, said it expects to close the purchase in the current quarter. In his zeal to acquire the upstart Zuckerberg may not even have put up a fight on the break fee - though a hands-on board might have. But to the extent Instagram’s hefty insurance policy stems from concern over how much of a Google-like target Facebook has already become for competition authorities, that’s another red flag for IPO investors to consider.

Read more at Reuters Breakingviews.

Rob Cox helped establish breakingviews in 2000 in London. From 2004 he spearheaded the firm's expansion in the U.S. and edited its American edition, including the daily breakingviews column in the New York Times. Prior to joining breakingviews, Rob held senior editorial positions at Bloomberg News in London, Milan, and New York.

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