UK clears Facebook purchase of CRM creator Kustomer – TechCrunch

The UK competition watchdog has cleared Facebook’s acquisition of Kustomer, a maker of CRM tools.

The purchase was announced last November – with a price we reported as $ 1 billion – but is pending closing after going through regulatory review.

The UK Competition and Markets Authority (CMA) opened an investigation into the proposed merger this summer at the end of July. The European Commission has also looked into the implications of the agreement.

In a summary of its decision to give the green light to Facebook’s latest b2b purchase, the CMA said it was examining whether letting Facebook go ahead and take over the customer service software maker would hurt competition by raising barriers to it. entry into the online display advertising market; whether Facebook could harm the competitiveness of the manufacturer of customer service tools by limiting or degrading their access to its messaging channels; whether the tech giant could hurt the competitiveness of other b2c messaging services by preventing them from integrating with Kustomer’s services; what if Facebook could count on cross-funding its online advertising business to undermine its competition by offering Kustomer for free or on a freemium basis, thereby compromising the ability of others to compete.

For each concern (or “theory of harm”), AMC goes on to explain that it was satisfied that the acquisition did not meet the required bar of “substantial lessening” of competition.

Kustomer’s small size appears to have helped allay concerns that letting Facebook assimilate the creator of CRM could hurt the larger market for these business tools.

“The CMA considers that, even if some competitors would have difficulty responding to Facebook by offering Kustomer on a free or freemium basis, sufficient competitive constraints would remain,” writes for example the regulator in its conclusion on the latest theory of injury, adding that he “considers that larger vendors may be able to adopt a freemium model, or develop a low-cost, basic CRM product aimed at small businesses, in the hope that CRM revenues would increase as they go. that the needs of businesses were increasing ”.

“More importantly, there is no need for other CRM vendors to replicate the merged entity’s strategy in order to remain competitive,” he also writes. “While price is certainly an important dimension of competition, there are several other dimensions on which CRM vendors could compete with the merged entity. “

Commenting on the green light in a statement, a Facebook spokesperson sought to turn the authorization into a positive endorsement of the deal as a boon to competitors, writing: “We welcome the decision by the CMA, which shows that this agreement is good for the competition. The transaction will increase competition and bring more innovation to businesses and consumers in the dynamic and competitive spaces of CRM and corporate messaging. More people will benefit from faster, richer, and more available customer service when and how they need it. “

While the CMA has decided that there is nothing to see here, the EU is still considering deleting Facebook-Kustomer. The regulatory review is therefore continuing.

A Commission spokesperson made no comment on the CMA’s authorization – but confirmed that its own “full investigation” was underway, adding that there was a tentative deadline of January 7, 2022, for EU regulators to make their own decision.

Despite the CMA’s relatively quick clearance for this particular Facebook purchase, the UK regulator continues to dig into competition concerns related to Facebook’s earlier acquisition of the animated Gif platform, Giphy.

After a discovery of provisional concerns on Facebook-Giphy earlier this summer, he proposed remedies that could include ordering Facebook to unwind the acquisition – leading the tech giant to respond with a scathing rebuttal of any prejudice, earlier this month, accusing the regulator of making “fundamental errors” in its assessment of the competitive implications of the deal.

The regulatory review of major technology acquisitions in the region tends to focus on a fairly narrow consideration of competitive harms, such as how the CMA viewed the Kustomer’s purchase through the lens of overall market competitiveness. CRM.

However, in the Kustomer case, concerns were also raised about the privacy implications of letting ad tech giant Facebook get its hands on help desk customer data given the smaller company operates in industries such as the health sector where it is likely to process sensitive information on behalf of its customers.

In February, for example, the Irish Civil Liberties Council (ICCL) raised a series of privacy concerns in a letter to Facebook – which it also has published online, asking what uses the tech giant would make for customer data held by Kustomer and asking if this data would be combined with other data held by Facebook and companies owned by Facebook.

Months later, the ICCL said it had received no response from Facebook to the letter raising privacy concerns.

Despite Europe’s comprehensive data protection framework – which is supposed to help protect people’s digital information – competition watchdogs in the region rarely consider privacy implications as part of their work. digital market assessments.

And there have been calls for closer collaboration between competition and privacy regulators to properly tackle market effects and the harm to consumers that can arise from the digital giants’ mastery. information from others.

An outlier on this front is the German Federal Cartel Office which did just that – in a pioneering case against Facebook superprofiling (which is ongoing).

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