11 May 2012 at 12:25 BST

Competition watchdog probes Facebook deal

Facebook's $1 billion purchase of photo-sharing application Instagram is being investigated by the US Federal Trade Commission, potentially postponing the deal's close beyond the forecasted second quarter.

Facebook: deal investigation

According to a report in the Financial Times, the commission has already begun to collect information on the deal from two of Facebook’s competitors. Competition specialists expect that the deal will ultimately be approved, but the investigation – which could take six to 12 months – will further slow Facebook’s already delayed mobile strategy.

Extravagant price

The California-headquartered  social network giant announced last month in its initial public offering documents that it expected the deal to close in the second quarter. But commission officials are likely to take their time because of the extravagant price that Facebook paid, and the high profile of both companies.

'Terrifically optimistic’

David Balto, former FTC policy director and now antitrust lawyer at his own Washington DC firm, told the FT that the second quarter target was ‘terrifically optimistic’.
Stanford Law School professor Mark Lemley added: ‘[The FTC is] going to want to take some months to investigate and understand the market and other players. And there may be more parties with an interest in submitting information.’
If the watchdog puts the kibosh on the deal Facebook has said it would pay Instagram a $200 million termination fee.

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