Facebook Kustomer Acquisition: EU Probe Possible
EU Scrutiny Possible for Facebook’s Kustomer Acquisition
The European Union is considering an investigation into Facebook’s $1 billion purchase of Kustomer, a customer service platform. This review stems from concerns brought to the EU’s attention through established merger regulations.
Referral Under EU Merger Rules
A representative from the European Commission has verified the receipt of a referral request from Austria, submitted under Article 22 of the EU’s Merger Regulation. This article enables Member States to highlight proposed transactions that don’t necessitate notification under national thresholds, often due to a company’s turnover being too low for formal review.
The case was officially notified in Austria on March 31st. The Commission is now obligated to share this request with other Member States.
Decision Timeline
Other Member States have a 15-working-day window to support the initial referral request after being informed by the Commission. Subsequently, the Commission will have 10 working days to determine whether to accept or decline the referral.
A decision regarding a full investigation is anticipated within a few weeks. Acceptance could potentially delay the integration of Kustomer’s platform into Facebook’s operations for an extended period.
Data Privacy Concerns
Both Facebook and Kustomer have been approached for comment regarding this development. The acquisition, announced last November, immediately sparked worries about the potential use of personal data held by Kustomer.
Kustomer serves sectors including healthcare, government, and financial services, potentially holding sensitive user information.
ICCL Raises Red Flags
In February, the Irish Council for Civil Liberties (ICCL) contacted the Commission and data protection agencies, expressing concerns about the acquisition’s “data processing consequences”. They highlighted the broad scope of data processing permitted under Kustomer’s existing terms of service.
The ICCL cautioned that Facebook’s acquisition could further expand the definition of “improving our Services” within Kustomer’s terms, potentially encompassing any Facebook service or project.
Legal Precedents
The ICCL emphasized that vague statements like “improving our services” do not constitute a valid ‘processing purpose’ according to rulings by the European Court of Justice and the European Data Protection Board.
The ICCL has also directly requested clarification from Facebook regarding the post-acquisition processing purposes for user data, but has yet to receive a response, as confirmed by Johnny Ryan, a senior fellow at the ICCL.
Past Scrutiny of Tech Acquisitions
Google’s acquisition of Fitbit underwent months of competition scrutiny in the EU, ultimately being approved only after Google committed to restrictions, including a ten-year prohibition on using Fitbit data for advertising.
Facebook’s Acquisition History
Historically, Facebook’s acquisitions, such as Instagram and WhatsApp, have faced less regulatory resistance. However, the company was later fined by the EU for combining WhatsApp and Facebook data after initially assuring regulators it was impossible.
Increased Scrutiny and Reputation
Due to numerous data scandals, Facebook now operates under heightened scrutiny and diminished public trust. This is creating obstacles for its expansion into the B2B market through acquisitions like Kustomer.
The company’s past approach of “move fast and break things” is now being tempered by a need for caution, given its established reputation.
Update from Facebook
Update: The following statement has been provided by a Facebook spokesperson: