On January 27, 2022, the Commission conditionally cleared Meta’s (formerly Facebook) acquisition of Kustomer, a U.S.-based Customer Relationship Management (“CRM”) software provider.[1] The transaction was initially notified in Austria in March 2021. The Austrian competition authority referred it to the Commission in April pursuant to Article 22 of the EU Merger Regulation, and several other Member States subsequently joined the referral.[2] The deal was notified in the EU at the end of June, and the Commission opened an in-depth investigation in August.[3]

In its recent clearance decision, the Commission dismissed the preliminary concerns it had articulated in August regarding potential leveraging of Kustomer’s data to advantage Meta’s online display advertising services—the in-depth investigation having shown that the transaction would not grant Meta a significant amount of additional data.

On the other hand, the Commission maintained a concern that Meta would have the ability and incentive to foreclose Kustomer’s rivals, including by denying or degrading access to the APIs[4] needed to interoperate with Meta’s B2C messaging channels—WhatsApp, Messenger and Instagram.[5] The Commission considered that these services are important inputs for the supply of CRM software. Reductions in access to these services for Kustomer’s rivals may reduce downstream competition and result in higher prices, lower quality and less innovation for business customers.

To obtain clearance, Meta committed to providing Kustomer’s current and prospective rivals fair and equal access to its messaging services for a period of ten years. The messaging services in the scope of the commitment are both (i) those that Facebook makes publicly available to its ecosystem—implying that Facebook cannot treat Kustomer’s rivals less well than it treats third parties with whom it does not compete—and; (ii) the APIs used today or by a “sizable proportion” of Kustomer’s users in the future—implying that Facebook cannot treat Kustomer meaningfully better than it treats Kustomer’s rivals.

These commitments mirror the approach accepted by the Commission in Google/Fitbit.[6] Both commitments evidence the Commission’s care in making remedies in digital market “future-proof.” Google/Fitbit featured innovative benchmarking systems that ensure that rivals have access to relevant APIs on a standard that is objective while also able to accommodate technological developments. The Facebook/Kustomer resolution adapts a similar standard to its own facts. Technologically-savvy resolutions of this nature are likely to feature increasingly prominently in the Commission’s work in the digital space—an area where it is one of a small number of authorities willing to develop innovative solutions to address new types of concern.

Unusually, as shown in the timeline below, the Commission’s clearance decision was not the final step in Facebook’s journey to acquire control of Kustomer. The German Federal Cartel Office (“FCO”) decided not to join the referral request initiated by Austria. In parallel to the Commission’s own investigation, the FCO assessed whether it had jurisdiction to review the transaction. Having decided that it had competence, the FCO opened its own probe in December 2021[7] before ultimately clearing Meta’s acquisition on February 11, 2022. In a rather succinct press release, the German watchdog stated that the impact of the transaction would not have warranted a prohibition under German competition law.[8]

The FCO’s parallel review in this case evidences the complex jurisdictional situation created under Article 22. Under this article, referrals by one or more Member States do not prevent other Member States from carrying out their own independent investigation. The FCO did reduce this tension somewhat by expressly taking the Commission’s findings into consideration and instead “concentrated on further aspects” in its assessment.[9] For the time being, this represents a diplomatic solution to the jurisdictional tensions inherent in the Commission’s recently revised approach to Article 22,[10] which is currently under review by the General Court, as discussed above.

Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer

[1]      Commission Press Release IP/22/652, “Commission clears acquisition of Kustomer by Meta (formerly Facebook), subject to conditions,” January 27, 2022.

[2]      Belgium, Bulgaria, France, Iceland, Italy, Ireland, the Netherlands, Portugal and Romania. See Commission Press Release MEX/21/2464, “Commission to assess proposed acquisition of Kustomer by Facebook,” May 12, 2021.

[3]      Commission Press Release IP/21/4021, “Commission opens in-depth investigation into proposed acquisition of Kustomer by Facebook,” August 2, 2021. See also our August-September 2021 EU Competition Law Newsletter.

[4]      Application programming interfaces (“APIs”) are intermediary software allowing two applications to ‘talk’ to each other.

[5]      The Commission found that these channels are particularly used by small and medium business customers – the same segment targeted by Kustomer – and are “particular drivers of innovation.”

[6]      Google/Fitbit (Case COMP/M.9660), Commission decision of December 17, 2020. To address the Commission’s concerns, Google proposed inter alia to keep licensing for free the public APIs covering functionalities that devices need to interoperate with Android smartphones, thus keeping the Android operating system open to competing makers of wearable devices.

[7]      See Federal Cartel Office Press Release “Bundeskartellamt considers Meta/Kustomer merger to be subject to notification,” December 9, 2021.

[8]      See Federal Cartel Office Press Release “Bundeskartellamt clears acquisition of Kustomer by Meta (formerly Facebook),” February 11, 2022.

[9]      Ibid.

[10]    See our Alert Memorandum of April 23, 2021 and our March 2021 and April 2021 EU Competition Law Newsletters.