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Watchdog stalls Facebook's Instagram purchase

Published: 11:04AM Friday May 11, 2012 Source: ONE News

An investigation into Facebook's billion-dollar acquisition of photo-sharing Instagram could mean the deal is not sealed for up to a year.

America's Federal Trade Commission (FTC) has launched the investigation and has started collecting information on Instagram.

The FTC is the consumer watchdog in the US and also regulates competition, similar to the Commerce Commission in New Zealand.

Investigations like the one the Commission has started are routine for any deal worth more than $US66 million and could take from six months to a year to finish.

But Facebook still expects to close the deal by the end of June - something policy director David Balto said is "terrifically optimistic".

Experts in competition expect the merger will be approved, but also forsee a high degree of scrutiny because of the companies' high profile and the steep price Facebook paid for the company.

Professor Mark Lemley from Stanford Law School thinks the Commission will want to take its time investigating the market and other players.

"And there may be more parties with an interest in submitting information."

Another analyst, Alan Webber, said if the Commission does not "dig too deep", it could be finished by Facebook's ambitious deadline.

But Webber said "I don't think that's likely".

Facebook has said it would pay Instagram a $US200 million termination fee if governmental authorities stopped the deal from being completed.