Home Technology Europe clears Facebook-Kustomer with API access commitments

Europe clears Facebook-Kustomer with API access commitments

The EU has cleared Meta/Facebook’s acquisition of CRM maker, Kustomer — accepting a set of commitments from the tech giant to allay competition concerns linked to the fact it also owns a suite of popular messaging apps frequently used by small businesses for customer outreach (aka Facebook Messenger, Instagram and WhatsApp). 

The Commission said Meta had guaranteed non-discriminatory access without charge to public APIs for the aforementioned messaging channels to competing customer service CRM software providers and new entrants.

Meta has also offered what the Commission describes as “a core API access-parity commitment” — meaning it has pledged to maintain the same level of feature capabilities for Kustomer rivals/new entrants in the event that it enhances or otherwise expands the functionality of Messenger, Instagram messaging or WhatsApp.

So, basically, Meta has committed not to cut off access to or freeze the competition’s ability to keep pace with its messaging platforms’ feature sets.

The two access commitments each have a ten year lifespan.

The Commission notes that a trustee — to be appointed before the transaction can close — will monitor the implementation.

“To fulfil its duties, the trustee will have far-reaching powers, including access to Meta’s records, personnel, facilities or technical information, and can appoint a technical expert to assist in the performance of its duties,” it writes in a press release.

“The commitments also include a fast track and binding dispute resolution mechanism that can be invoked by third parties. They also include the requirement for Meta to publish details of relevant APIs and functionalities on its website, in addition to quarterly reporting to the monitoring trustee on any ongoing beta testing of new messaging features.”

The Commission’s decision to clear Facebook-Kustomer is conditional upon full compliance with the commitments, it adds.

The Facebook-Kustomer acquisition would not normally have triggered an investigation under EU merger rules, given the revenue thresholds involved in the deal not being high enough.

However, in response to rising concern about tech giants using M&A to crush competition — aka so-called ‘killer acquisitions’ — the bloc recently expanded the ability for concerned Member States to refer deals for scrutiny. So Austria referred the deal to the Commission for investigation, with Belgium, Bulgaria, France, Iceland, Ireland, Italy, the Netherlands, Portugal and Romania also joining the request — suggesting a fairly broad concern.

“The Commission assessed the impact of the acquisition of Kustomer by Meta within the territory of these Member States under the EU Merger Regulation,” the Commission notes, before going on to say it concluded that the proposed transaction “as modified by the commitments, would no longer raise competition concerns”.

The UK’s competition watchdog (CMA) had already cleared the Facebook-Kustomer deal — last fall.

Although, in a major reversal of the usual tech M&A playbook, the CMA ordered Facebook to undo its acquisition of animated GIF platform, Giphy.

The UK’s competition watchdog is also in the process of consulting on whether to accept a bundle of commitments from Google related to its Privacy Sandbox proposal to deprecate support for third party tracking cookies.

So the rise of Big Tech M&A with caveats looks clear.

Even as regulators actually blocking tech giant’s acquisitions remains as rare as hens’ teeth.

(See also: The EU clearing Google-Fitbit — after it gave a ten year pledge not to use Fitbit users’ data for ad targeting, among other behavioural commitments.)

Privacy concerns had been raised over both the Facebook-Kustomer acquisition (given the latter has a number of customers operating in the health sector); and over Google-Fitbit (also on account it entailed an adtech giant buying up health data).

But competition regulators continue to be wary of joining the dots between access to data and market power. (With some honorable exceptions.)

The Commission says it did look at data issues in its competition probe of Facebook-Kustomer — writing that it investigated what information Meta would obtain from Kustomer’s customers.

Albeit, seemingly, the “data” scrutiny it applied was largely through a competition lens.

The Commission does argue that Kustomer, as a b2b provider, “does not own the data of its business customers” and that “access to data would be dependent on agreements with its business customers who need consent from their end customers”. 

Which looks very much like the EU’s competition division kicking the can on privacy concerns related to acquisition-enabled data access — which is highly problematic considering how sketchy EU ‘consent’ flows can be.

(This may also explain why the Commission has been cranking up the pressure on data protection regulators of late, urging “effective” enforcement of regulations like the GDPR.)

Instead, its PR quickly falls back to discounting data as a competition issue — “because of Kustomer’s small size, even taking into account its potential growth, the amount of additional data will not be significant” — which, again, simply glosses over any privacy concerns. (Yet a data breach under EU law does not have to involve large amounts of data to be considered a breach.)

The Commission’s assessment of Facebook-Kustomer also considered the market for the supply of online display advertising services — where it had raised preliminary concerns.

But, here too, it decided the merger was “not likely to lead to a significant impediment of effective competition”.

This component of its assessment also considered data — discounting any competition concerns by, suggesting: “[R]ival providers of online display advertising services have, and will continue to have, access to similar commercial data because of the strong commercial interest of businesses in sharing such data with both Meta and rival advertising platforms in order to measure and optimise the performance of their ad campaigns.”

The Commission’s reasoning here highlights the traditional tension between competition and privacy regulation — as it’s essentially leaning into a market dynamic (imbalance) fuelled by Meta, as one half of the adtech duopoly, who, along with Google, has leveraged data-fuelled market power and network effects to turn the mainstream web into a pervasive net for tracking and profiling Internet users, overriding any objections, to further empower their ad targeting empires.

Indeed, the pair have so much market power they can, Death Star like, suck other businesses’ users’ data into their tracking empires and ignore consumers’ objections to privacy-hostile uses of their data.

Yet that dynamic — the “strong commercial interest of businesses in sharing such data with both Meta and rival advertising platforms”, as it puts it — is being considered by the Commission as a reason to waive another Big Tech data-enriching acquisition through. Hmmm!

Looking ahead, competition regulation will — hopefully — get a lot smarter than this.

The EU and the UK both have plans for ex ante regulation of the most powerful platforms — with the EU’s “gatekeeper”-targeting Digital Markets Act, and the UK’s planned “pro-competition” reform — so a lot more operational conditions are set to come down the pipe. Although neither are yet in force.

Germany already has its own ex ante regime up and running. And, as a sign of what may be soon coming across the region — Google has been quick to try to settle a local antitrust probe of its News Showcase, by amending practices and offering future commitments around how it will operate the product to try to placate an empowered regulator.

More proactive competition regulation looks like it will play an increasingly important role in shaping behavior in digital markets.

What exactly that will mean for Big Tech’s heavily squeezed competition — or for Internet consumers’ privacy — still isn’t clear.

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