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June 25, 2012

Facebook under investigation for Instagram purchase

The Office of Fair Trading (OFT) has launched an investigation into Facebook’s $1bn acquisition of Instagram amidst fears that the social network could monopolise photo uploads.

By Tineka Smith

Instagram

The OFT‘s involvement could threaten the Facebook-Instagram deal.

Facebook acquired Instagram back in April for a whopping $1bn. The large price tag for the photo sharing app surprised many as the company was less than 2 years old and making no profit.

However, Instagram currently has around 30 million users – using the Apple App Store alone and its founders think it can hit 100 million.

"This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users," said Zuckerberg in a statement about the purchase. "We don’t plan on doing many more of these, if any at all. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."

Zuckerberg has said he intends to keep the company running as a separate entity, rather than dissolve it into Facebook completely. Facebook then made another suprising move by launching its own photo app ‘Camera’ just six weeks after its controversial $1bn purchase of Instagram leaving many to wonder why the site would want to compete with itself.

The OFT is concerned that Facebook’s acquisition of Instagram could significantly limit the ability of Instagram photos to upload to other social networking sites as well as other photo apps uploading to Facebook’s site.

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The OFT is able to investigate any merger where more than £70m is being generated.

According to CNET, Facebook is being cooperative with the investigation.

"We’ll continue to work closely with the OFT and look forward to answering any questions that arise," a Facebook spokesperson said.

The social network is also being investigated for its Instagram purchase by the Federal Trade Commission.

Please follow this author on Twitter @Tineka_S or comment below.

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