Facebook’s acquisition of Kustomer, a producer of CRM solutions, has been allowed by the UK’s competition authorities. The deal was announced in November, with a price tag of $1 billion, according to our sources, but it is still pending regulatory approval.
At the end of July, the Competition and Markets Authority (CMA) in the United Kingdom started an investigation into the proposed merger. The European Commission has also been looking into the deal’s ramifications, having launched an investigation in August.
The CMA considered whether allowing Facebook to buy the customer service software maker would harm competition by raising barriers to entry in the online display advertising market; whether Facebook would harm the competitiveness of customer service tools makers by limiting or degrading their access to Facebook; and whether Facebook would harm the competitiveness of customer service tools makers by limiting or degrading their access to facebook; and whether Facebook may use cross-subsidization from its online ad business to undercut competitors by distributing Kustomer for free or on a freemium basis, putting others out of business.
The CMA goes on to say that it was satisfied that the acquisition did not result in a “significant decrease” of competition for each concern (or “theory of damage”).
Kustomer’s small size appears to have alleviated concerns that allowing Facebook to absorb the CRM Company might harm the larger market for such business products.
“The CMA considers that even if some competitors would struggle to respond to Facebook offering Kustomer for free or freemium, sufficient competitive constraints would remain,” the regulator writes in its conclusion on the last theory of harm, adding that “the largest providers may be in a position to adopt a freemium model or to develop a basic low-price CR,” for example.
“Most significantly, competing CRM vendors are not required to copy the Merged Entity’s strategy in order to remain competitive,” it adds. “While price is undoubtedly an essential dimension of competitiveness, CRM vendors can fight against the Merged Entity on a number of other fronts.”