CELEX: 32014M7217
Language: en
Date: 2014-10-03 00:00:00
Title: Commission Decision of 03/10/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7217 - FACEBOOK / WHATSAPP) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 03.10.2014
C(2014) 7239 final

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|To the notifying party                                                 |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7217 – Facebook/ WhatsApp
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

 1) On 29 August 2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation,
    and following a referral pursuant to Article 4(5) of the Merger Regulation, by which Facebook, Inc. ("Facebook", USA)  acquires  within  the
    meaning of Article 3(1)(b) of the Merger Regulation control of the whole of WhatsApp Inc. ("WhatsApp", USA) by way  of  purchase  of  shares
    (the "Transaction"). Jointly, Facebook and WhatsApp are designated hereinafter as the "Parties".

       THE PARTIES

 2) Facebook (hereinafter also referred to as the "Notifying Party") is a provider of websites and  applications  for  mobile  devices  ("apps")
    offering social networking, consumer communications and photo/video sharing  functionalities.  Facebook  also  provides  online  advertising
    space. In particular, Facebook offers the social networking platform "Facebook", the consumer communications app  "Facebook  Messenger"  and
    the photo and video-sharing platform "Instagram".

 3) WhatsApp is a provider of consumer communications services via the mobile app "WhatsApp". WhatsApp does not sell advertising space.

       THE CONCENTRATION

 4) The Transaction consists of the acquisition of WhatsApp by Facebook for a purchase price of USD 19 billion.[2] Pursuant to an Agreement  and
    Plan of Merger and Reorganization signed on 19 February 2014, WhatsApp will successively merge with and into  wholly-owned  subsidiaries  of
    Facebook. As a result of the Transaction, Facebook will solely control the entity into which WhatsApp will have merged.

 5) Therefore, the Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

 6) The Transaction contributes to Facebook's current strategy of focusing its business on mobile development. According to Facebook's  internal
    documents, there are two main ways in which the Transaction serves this objective.

 7) […].

 8) […].

       UNION DIMENSION

 9) The Transaction does not have a Union dimension within the meaning of Article 1(2) or Article 1(3)  of  the  Merger  Regulation  as  the  EU
    turnover of one of the Parties (WhatsApp) amounted to only EUR […] in 2013.

10) Nonetheless, the Transaction fulfils the two conditions set out in Article 4(5) of the Merger Regulation since it is a concentration  within
    the meaning of Article 3 of the Merger Regulation and it is capable of being reviewed under the national competition laws  of  three  Member
    States, namely […].

11) On 19 May 2014, the Notifying Party informed the Commission by means of a reasoned submission that the Transaction should be examined by the
    Commission pursuant to Article 4(5) of the Merger Regulation. A copy of that submission was transmitted to the Member States on 19 May 2014.

12) As none of the Member States competent to review the Transaction expressed its disagreement as regards the request to refer  the  case,  the
    Transaction is deemed to have a Union dimension pursuant to Article 4(5) of the Merger Regulation.

       RELEVANT MARKETS

1 Consumer communications services

1 Introduction

13) The Transaction concerns consumer communications services. Consumer communications services are  multimedia  communications  solutions  that
    allow people to reach out to their friends, family members and other contacts in real time.

14) Historically, those services were developed and offered as software applications  for  personal  computers  ("PCs").  Gradually,  they  have
    shifted away from PCs towards smart mobile devices, in particular smartphones and tablets. Today, consumer communications services  are  one
    of the fastest-growing types of mobile apps ("consumer communications apps").

15) Consumer communications services can be offered as a stand-alone app (for example, WhatsApp, Viber, Facebook Messenger  and  Skype),  or  as
    functionality that is part of a broader offering such as a  social  networking  platform  (for  example,  Facebook  or  LinkedIn).  Consumer
    communications services can be differentiated on the basis of various elements.

16) First, as regards functionalities, consumer communications apps enable one-to-one and/or group real-time  communication  in  various  forms,
    such as voice and multimedia (text, photo or video) messaging, video chat, group chat, voice call, sharing of location, etc.,  although  not
    all functionalities are available on all consumer communications apps (in particular, voice calls).

17) Second, certain consumer communications apps are available on only one operating system (so called  "proprietary  apps"),  such  as  Apple's
    FaceTime and iMessage, while an ever-growing number of consumer communications apps are offered for download on multiple  operating  systems
    ("cross-platform apps"). For example, WhatsApp is available on a variety of mobile operating systems, including iOS, Android,  BlackBerry  7
    and 10, Windows Phone, and Nokia Series 40 (Asha) and 60 (Symbian). Likewise, Facebook Messenger currently runs on Android, iOS, BlackBerry,
    Windows Phone and certain Nokia Asha handsets.

18) Third, certain consumer communications apps are available for all types of devices, while others are not:  for  example,  WhatsApp  is  only
    available on smartphones, but not on tablets and PCs, whilst Facebook Messenger is available on smartphones, tablets and PCs.

2 Product market definition

1 Notifying Party's view

19) The Notifying Party submits that the relevant product market includes  all  consumer  communications  services,  without  any  further  sub-
    segmentation. This is in particular because of the incremental nature of any functional differences, the pace of  development  and  blurring
    between the targeted use cases of competing consumer communications apps.

2 Commission's assessment

20) The Commission has considered the market for consumer communications services in previous cases, notably in  Microsoft  /  Skype  and,  more
    recently, in Microsoft / Nokia.[3] In the decisions in these cases, the Commission identified separate markets for  consumer  communications
    services and enterprise communications services.  In  addition,  while  ultimately  leaving  the  market  definition  open,  the  Commission
    investigated whether the consumer communications market should be further segmented by functionality, by platform or by operating system.[4]

21) The Commission notes that the segmentation that is most relevant for the assessment of  the  present  case  is  the  segmentation  based  on
    platforms, since WhatsApp is offered only for smartphones and it does not  have  any  plan  to  expand  its  offering  to  other  platforms.
    Therefore, the present case can be assessed on the basis of a relevant product  market  including  only  consumer  communications  apps  for
    smartphones.

22) On the basis of the results of the market investigation, further segmentations of the market for consumer communications apps on  the  basis
    of the operating system or the functionalities offered do not seem to be appropriate.

23) Indeed, regarding the operating system, with a few exceptions (notably iMessage), the overwhelming majority of consumer communications  apps
    are offered for download on at least both Android and iOS, which are the operating systems installed on the greatest  share  of  smartphones
    (together representing over 81% of global smartphone operating systems in use in 2013).[5] The market investigation  indicated  that,  while
    different operating systems may enable slightly different experiences,  consumer  communications  apps  available  for  different  operating
    systems are normally regarded as a single product by users and providers.[6]

24) Moreover, with respect to functionalities, the following should be noted.

25) First, the market investigation did not provide any indication that only certain functionalities (text messaging, rather than photo or video
    messaging or calls) should be considered essential to a consumer communications  service.  It  instead  pointed  to  the  fact  that,  while
    different services may take different approaches to facilitating consumer communications, that does not put those  services  into  different
    markets or market segments.[7]

26) Second, while all competitors to the market investigation explained that  the  time  and  cost  associated  with  the  development  of  each
    functionality depend on the complexity of the relevant feature, all consumer communications apps providers offer a range of  functionalities
    which greatly overlap with the functionalities offered by Facebook Messenger and WhatsApp.

27) Therefore, the Commission considers that for the assessment of the present case  the  relevant  product  market  should  encompass  consumer
    communications apps offered for all operating systems and including all communications functionalities.

28) Another issue is whether the product market definition should be  broadened  to  include  traditional  electronic  communications  services.
    Indeed, the functionalities offered by consumer communications apps are also accessible via traditional electronic communications  services,
    such as voice calls, SMS, MMS, or e-mails.

29) The majority of the respondents to the market investigation consider that traditional electronic  communications  services,  such  as  voice
    calls, SMS, MMS, e-mails, etc., can be regarded as substitutable to the communications functionalities offered  by  consumer  communications
    apps.[8] However, there are also elements which suggest an imperfect substitutability or complementarity between the two types of services.

30) While the two types of services are used for the same general purpose (communication), the overall experience of the user is richer in terms
    of functionalities in consumer communications apps. Hence, consumer communications apps provide additional functionalities to  their  users,
    for example users can see when their contacts are online, when they are typing or when they last accessed the application.

31) Moreover, to a great extent, there is a difference in the pricing conditions, since consumer communications apps are mainly offered free  of
    charge and in any event not priced per messages. Although there are offerings of bundles of messages by telecom operators, users  are  still
    usually charged separately when they send MMS, messages to other countries or messages from abroad (while roaming), which is  not  the  case
    with consumer communications apps.

32) Finally, telecoms operators who took part in the market investigation consistently explained that there is a competitive interaction between
    the two services, but only one way (that is, consumer communications apps constrain traditional electronic communications services  but  not
    the other way around).

33) Nevertheless, the Commission notes that if traditional electronic communications services were to be included in the  relevant  market,  the
    Parties' combined position on such hypothetical larger market would be weaker. Therefore, the Commission considers that for the  purpose  of
    the assessment of the present case the exact product market definition can be left open. Indeed, the  Transaction  does  not  raise  serious
    doubts as to its compatibility with the internal market even on the basis of the narrowest product market  definition  limited  to  consumer
    communications apps for smartphones and excluding traditional communication services.

3 Conclusion on product market definition

34) In the light of the above, taking into account that the Parties' combined position would be attenuated in  a  market  including  traditional
    electronic communications services, the Commission will assess the effects of the Transaction in the narrowest relevant product  market  for
    consumer communications services, that is the market for consumer communications apps for smartphones.

3 Geographic market definition

1 Notifying Party's view

35) According to the Notifying Party, the geographic scope of the market for consumer communications apps is EEA-wide, if not worldwide. Indeed,
    the functionality provided by consumer communications apps is inherently cross-border. As consumers are free to install any app  they  want,
    the geographic scope for either demand or supply of consumer communications apps is not limited to  the  Member  State  where  the  consumer
    acquires connectivity to her/his device. Moreover, developers distribute similar products to all of  their  customers  regardless  of  their
    geographic location. According to the Notifying Party, the fact that the market shares of  Facebook  and  WhatsApp  may  vary  significantly
    between different Member States does not change that conclusion, and neither does the existence of national "app stores".

2 Commission's assessment

36) In previous decisions, while ultimately leaving the exact geographic market definition open, the Commission found that a number  of  factors
    suggested that the geographic market for consumer communications apps would be at least EEA-wide, if not worldwide.[9] The factors  pointing
    to such conclusion included the lack of legal or technical barriers restricting the use or trade of consumer communications apps,  the  lack
    of differences in terms of quality, price and features (with the exception of  some  geographic  areas),  the  identical  users'  habits  in
    consumer communications apps within the EEA and worldwide and, finally, the fact that suppliers  of  consumer  communications  apps  provide
    their services on a global level with limited differentiation in the quality and the features in the EEA.[10]

37) The market investigation conducted in the present case revealed that no major differences exist in the offering of  consumer  communications
    apps across the world. All respondents stated that the consumer communications apps they offer do not differ  depending  on  the  region  or
    country concerned, either in terms of price, functionalities, platforms or operating system.[11] This is consistent with the fact  that  all
    consumers with unrestricted access to the Internet are in principle free to download and install any app they want,  irrespective  of  their
    geographic location anywhere in the world.

38) However, certain consumer communications apps enjoy a greater reach  than  others  in  certain  world  regions.  For  example,  WhatsApp  is
    widespread in the EEA, but not so much in the USA; LINE and WeChat are particularly popular in  Asia.  The  Commission  considers  that  the
    different degree of penetration is the indication of different  competitive  dynamics,  which  could  be  explained  by  different  consumer
    preferences,[12] regulatory environment and marketing efforts.  In  particular,  in  the  EEA  customers  enjoy  freedoms  of  movement  and
    communicate across borders much more than in other regions of the world. However, when using cross-border mobile communications services EEA
    customers, unlike US ones for instance, still incur roaming  and  international  charges.  This  creates  a  specific  environment  for  the
    proliferation of consumer communications apps.

39) Moreover, the Parties' market shares are greater in the EEA than at worldwide level.

40) In this context, while there are indications that the geographic scope of the consumer communications  apps  market  could  be  global,  the
    Commission considers that the relevant geographic market for the assessment of the case  is  EEA-wide  in  line  with  a  more  conservative
    approach.

41) As regards the possibility of an even narrower geographic definition within the EEA, while the degree of penetration of  the  Parties'  apps
    differs from one Member State to the other, the Parties' apps tend to be consistently number 1 and number  2  in  all  large  Member  States
    (except for Spain and France).[13] In smaller Member States, other market players have stronger market positions than either or both of  the
    Parties.[14]

42) Moreover, the fact that WhatsApp is not free but is subject to a subscription fee in some Member States (currently,  Italy  and  the  United
    Kingdom)[15] is not sufficient to justify the definition of national markets, since WhatsApp has introduced such subscription-based business
    model on an experimental basis only for users of iOS and Android phones in certain countries (where  the  payment  infrastructure  currently
    allows it) with the aim of potentially extending it to further countries.

43) Finally, the main factors relevant for the assessment of the Transaction (such  as  closeness  of  competition,  customer  switching,  entry
    barriers) do not differ according to the Member State concerned. In particular, if the factors taken into account by the Commission  in  its
    analysis of the Transaction were considered at national (as opposed to EEA) level, the Commission's conclusions would not change.

3 Conclusion on geographic market definition

44) In light of the above, the Commission considers that the relevant geographic market for the assessment of the Transaction is at  least  EEA-
    wide, if not worldwide.

2 Social networking services

1 Introduction

45) A core service offered by Facebook is its online social networking platform, which connects more than 1.3 billion people around the world.

46) Online social networking services are a relatively recent phenomenon with a majority of today's providers having launched their services  in
    the 2000s.[16] Their business models and functionalities vary considerably and are  constantly  evolving.  While  there  is  no  established
    definition, social networking services can be generally described as services which enable users to connect, share, communicate and  express
    themselves online or through a mobile app.

47) The vast majority of social networking services are provided free of monetary charges. They can however be monetised  through  other  means,
    such as advertising or charges for premium services.

2 Product market definition

1 Notifying Party's view

48) According to the Notifying Party, Facebook's social networking service consists of the following  core  functionalities:  user  profile,[17]
    newsfeed,[18] and timeline.[19]

49) The Notifying Party explains that Facebook's users can express themselves in a variety of ways, including by posting pictures  or  links  to
    their timelines, commenting on or “liking” other user’s activities, or playing games connected to Facebook. In this way, Facebook provides a
    rich social experience organised around users' and their friends' online identities. In the Notifying Party's view, the other services  that
    are characterised as social networks (such as Google+, LinkedIn, MySpace, Pinterest and InterNations) offer similarly rich experiences.

50) The Notifying Party does not pronounce itself on the existence of a distinct market for social networking services. However,  the  Notifying
    Party submits that in any event WhatsApp is not active in such potential market in competition with Facebook. This is  notably  due  to  the
    lack of core social networking  functionalities  in  WhatsApp.  In  particular,  WhatsApp  is  focussed  on  facilitating  fast  and  simple
    communications between users and does not enable users to create detailed profiles containing a number of data fields like  date  of  birth,
    relationship status, job status, etc., time-lines or news feeds, or to post information, explore other users’  networks  (that  is,  through
    visible “friend lists”) or carry out many of the other features that form part of the social networking user experience.

2 Commission's assessment

51) The overwhelming majority of respondents to the market investigation indicate that the essential  functionalities  of  a  social  networking
    service include creation of a public or semi-public profile and list of friends/contacts.[20] Other important  features  include  exchanging
    messages (one-to-one, one-to-group or one-to-many), sharing information (for example, posting  pictures,  video  or  links),  commenting  on
    postings and recommending friends. A service does not necessarily have to have all of these functionalities to  be  qualified  as  a  social
    network.

52) As concerns the comparison of social networking services with consumer communications apps, the  respondents  to  the  market  investigation
    noted that there is a certain overlap in the functionalities of these two types of services. The lines between  social  networking  services
    and consumer communications apps are becoming blurred and each of these services adopts  traditional  functionalities  of  the  other.  Most
    importantly, similarly to social networks, consumer communications apps enable users to exchange content (text messages,  video,  audio  and
    photos) with other people.

53) However, the market investigation revealed a number of important differences between social networking services and consumer  communications
    services.

54) On a general level, social networking services tend to offer a richer social  experience  compared  to  consumer  communications  apps.  For
    example, the users of social networks are able to indicate their interests, activities or life  events,  create  photo  albums  and  express
    opinions on other users' postings (for example, by commenting or "liking"). Also, in social networks, a user's contact list  is  by  default
    visible to other users which facilitates adding new contacts. The functionalities of consumer communications apps today are more limited and
    focus on enabling basic communication between users rather than creating a richer experience around their digital identity.

55) Also, while both social networks and consumer communications apps enable communication between users, the communications functionalities and
    their usage differ. Hence, consumer communications apps facilitate instant real-time communication (with handsets ringing and  notifications
    being pushed to recipients). Responses are generally sent promptly allowing a conversation. By contrast, messages in social  networks,  such
    as comments on a posting, are not normally expected to be responded to in real time.

56) Moreover, social networks tend to enable communication and information sharing with a wider  audience  than  consumer  communications  apps,
    which are more personal and targeted. For example, postings on a social network are generally shared with all contacts  of  a  user  (unless
    restricted), while communication on such consumer communications apps as Facebook Messenger and WhatsApp occurs mainly on a one-to-one basis
    (more than [90-100]% of all messages are one-to-one). Also, even though Facebook Messenger and WhatsApp enable users to create groups, their
    size is relatively limited (on average in the EEA, [0-5] users for WhatsApp and [0-10] users for Facebook Messenger).  By  contrast,  social
    networks enable creation of larger groups which can consist of users who do not directly know each  other  (for  example,  an  event  or  an
    interest group).

57) The Commission further assessed whether it is appropriate to segment social networking services according to  the  platform  (that  is,  PC,
    smartphone and tablet) or the operating system (such as Windows, Mac, Android or iOS) on which they are available.

58) Respondents to the market investigation generally consider a social networking service which is offered on several platforms or  on  several
    operating systems to be a single service. From a supply side perspective, while the  development  of  a  social  networking  service  for  a
    particular platform or operating system requires time and resources, these do not appear to be significant enough to support  the  existence
    of separate markets. Finally, most social networks are accessible on multiple platforms and operating systems.

59) Therefore, social networking services should not be further segmented according to a  platform  or  an  operating  system.  Finally,  social
    networking services could be further differentiated depending on their intended use.  Respondents  to  the  market  investigation  generally
    consider that a distinction could be drawn between social networking services promoting interpersonal contact for private and  entertainment
    purposes (such as Facebook or Google+) and services which are used for professional purposes  (such  as  LinkedIn  or  Xing).  Nevertheless,
    respondents acknowledge that there are overlaps between the purposes of intended use.

60) In the present case, it can be left open whether social networking services should be segmented according  to  the  intended  use  since  no
    competition concerns arise under any alternative market definition.

61) Based on the above, the Commission concludes that while consumer communications apps like Facebook  Messenger  and  WhatsApp  offer  certain
    elements which are typical of a social networking service, in particular sharing of messages and photos,  there  are  important  differences
    between WhatsApp and social network services, as described in paragraphs (50) and (53)-(56).

3 Conclusion on product market definition

62) For the purposes of the present case, the exact boundaries of the market for social networking  services,  in  particular  whether  consumer
    communications apps such as Facebook Messenger and WhatsApp fall within the scope of such a potential market can be  left  open,  since  the
    Transaction would not give rise to serious doubts as to its compatibility with the internal market under any alternative market definition.

3 Geographic market definition

1 Notifying Party's view

63) The Notifying Party does not take a firm view as to the geographic dimension of the market for social networking services.

2 Commission's assessment

64) It is common for the same social networking services to be available throughout the world, or at least in most geographic regions, given the
    global scope of the Internet.

65) Respondents to the market investigation state that there are generally no differences in a social networking service  offered  in  different
    geographic regions or countries, in particular in terms of price, functionalities, platforms  and  operating  systems  served.  However,  it
    appears that limited adjustments such as language and minor functionalities are present. Other possible differences include marketing costs,
    legal/regulatory requirements and customers' preferences.

66) Moreover, the Parties' market shares are greater in the EEA than at worldwide level

67) In this context, while there are indications that the geographic scope of the market for social networking services  could  be  global,  the
    Commission considers that the relevant geographic market for the assessment of the case  is  EEA-wide  in  line  with  a  more  conservative
    approach.

3 Conclusion on geographic market definition

68) In light of the above, the Commission concludes that the geographic scope for the market for social networking services  is  at  least  EEA-
    wide, if not worldwide.

3 Online advertising services

1 Introduction

69) Facebook's activities in the advertising sector consist of the provision of online (non-search)  advertising  services  on  Facebook's  core
    social networking platform,[21] both on PCs and on mobile devices.[22] By contrast, Facebook  does  not  currently  serve  any  ads  on  its
    Facebook Messenger app.

70) For the purpose of its online advertising activities, Facebook collects data regarding the users  of  its  social  networking  platform  and
    analyses them in order to serve advertisements on behalf of advertisers, which are as much as possible "targeted" at each particular user of
    its social networking platform. However, Facebook does neither sell any of the user data it collects nor provides data analytics services to
    advertisers or other third parties as a stand-alone product separate from the advertising space itself.[23]

71) WhatsApp does not currently sell any form of advertising and does not store or collect data about its  users  that  would  be  valuable  for
    advertising  purposes  (for  example,  concerning  age,  verified  name,  gender,  social  group,  activities,  consuming  habits  or  other
    characteristics).[24] Moreover, messages that users send through WhatsApp are not stored in WhatsApp's  servers,  but  only  on  the  users'
    mobile devices or elected cloud.

72) The Commission has investigated the market definition as regards advertising, since  Facebook  is  currently  active  in  that  market.  The
    Commission has not investigated any possible market definition with respect to the provision of data  or  data  analytics  services,  since,
    subject to paragraph (70) above, neither of the Parties is currently active in any such potential markets.

2 Product market definition

1 Notifying Party's view

73) According to the Notifying Party, given the continuous evolution of online advertising it is not appropriate to  differentiate  between  the
    various types of online advertising. As regards the possibility to define a separate market for  online  advertising  on  social  networking
    websites, the Notifying Party takes the view that there is no basis for defining such a market, in particular because advertisers place  ads
    within a broad range of online publishers within any given advertising campaign.

2 Commission's assessment

74) In previous decisions, the Commission distinguished between the provision of online and offline advertising space.[25] The  Commission  also
    considered whether the market for online advertising could be sub-segmented into search and non-search advertising, but ultimately left this
    question open.[26] The Commission also assessed whether, within online advertising, mobile (search or non-search) advertising constitutes  a
    product market separate from static online (search or non-search) advertising.[27] The  Commission  noted  that  mobile  and  static  online
    advertising currently present significant differences, which may diminish at some point in the future, but left open whether  a  distinction
    should be made.[28]

75) The market investigation conducted for the purpose of reviewing the Transaction clearly confirmed the distinction  made  in  the  Commission
    precedents between the provision of online and offline advertising.[29]

76) The market investigation also supported to a large extent the existence of a further  sub-segmentation  of  the  online  advertising  market
    between search and non-search advertising. Indeed, the majority of the advertisers who took part in the market investigation considered that
    search and non-search ads are not substitutable as they serve different purposes (for search ads, mainly generating direct user  traffic  to
    the merchant's website, while, for non-search ads, mainly building brand awareness) and, as a result, most advertisers would not  be  likely
    to switch from one type to another in the event of a 5-10% price increase.[30] Similarly, the majority of the competitors who took  part  in
    the market investigation submitted that search and non-search ads are not substitutable from an advertiser's point of view.[31]

77) In addition, the Commission also examined whether a separate product market should  be  defined  for  the  provision  of  online  non-search
    advertising services on social networking websites. However, the results of the market investigation were mixed in this regard. A number  of
    respondents considered that other forms of non-search advertising are not as effective as advertising  on  social  networking  websites  and
    notably on Facebook, due to Facebook's large and highly engaged audience and its ad targeting opportunities. However, other respondents took
    the view that many other advertising platforms offering non-search ads are equally well-placed to serve non-search needs.[32]

78) As regards a possible distinction between online advertising on different platforms (PCs vs. mobile devices),  the  results  of  the  market
    investigation were also mixed. While some respondents highlighted the differences between advertising on different platforms  (for  example,
    in terms of technical characteristics, user experience and  ad  profitability),  other  respondents  submitted  that  they  are  essentially
    substitutable.[33]

3 Conclusion on product market definition

79) In line with its decisions in Google / DoubleClick and Microsoft / Yahoo! Search Business, the Commission concludes that online  advertising
    constitutes a relevant market separate from offline advertising. Whether segments of that market constitute relevant markets  in  their  own
    right can be left open for the purposes of this decision, because the  Transaction  would  not  give  rise  to  serious  doubts  as  to  its
    compatibility with the internal market under any such narrower product market definition.

3 Geographic market definition

1 Notifying Party's view

80) The Notifying Party does not take a firm view as to the geographic dimension of the market for  online  advertising  or  its  possible  sub-
    segments.

2 Commission's assessment

81) In previous decisions, the Commission concluded that the market for online  advertising  space  is  to  be  divided  alongside  national  or
    linguistic borders within the EEA, although it ultimately left the geographic market definition open in one case.[34] Factors pointing to  a
    national or linguistic geographic market definition included customers' purchasing preferences and languages, and the  presence  of  support
    and sales networks located at national level.[35]

82) The market investigation in this case generally confirmed the Commission's previous findings as regards the geographic market definition for
    online advertising. The majority of the  respondents  to  the  market  investigation  stated  that  advertisers  typically  purchase  online
    advertising space and conduct advertising campaigns on a national (or linguistic) basis, although a number of respondents also  pointed  out
    that, depending on the type of campaign, global companies may also procure advertising space on a broader geographic scale (EEA-wide or even
    worldwide).[36] Moreover, the majority of the respondents submitted that prices for online advertising  tend  to  differ  depending  on  the
    country, based on a number of factors, such as demand and supply, local market conditions, Internet penetration rate, etc.[37]

3 Conclusion on geographic market definition

83) In line with its decisions in Google / DoubleClick and Microsoft /  Yahoo!  Search  Business,  the  Commission  concludes  that  the  online
    advertising market and its possible sub-segments should be defined as national in scope or alongside linguistic borders within the EEA.

       COMPETITIVE ASSESSMENT

1 Consumer communications services

1 Introduction

84) The Parties operate two consumer communications apps, Facebook Messenger (which has approximately [250-350] million users worldwide and [100-
    200] million users in the EEA) and WhatsApp (which has approximately 600 million users worldwide and [50-150] million users in the EEA).

85) A number of other players provide consumer communications apps in competition with the Parties in  the  EEA  and  worldwide.  These  include
    integrated companies active also in the provision of smartphone hardware and operating systems, such as Apple with iMessage, BlackBerry with
    BBM, Samsung with ChatON, Google with Google Hangouts  and  the  Android  messaging  platform,  Microsoft  with  Skype.  Competing  consumer
    communications apps are also provided by mobile network operators along with traditional telecommunications services: examples of these apps
    are Joyn (the brand name of the Rich Communication Services program launched by the GSM Association ("GSMA")  for  the  creation  of  inter-
    operator communication services over the Internet),[38] Libon by Orange and Tuenti by Telefónica. Finally, many other providers of  consumer
    communications apps are active on the market, such as LINE, Viber, Threema, Telegram, Snapchat and WeChat.

86) On the basis of the results of the market investigation, the Commission notes that the main drivers of the competitive  interaction  between
    consumer communications apps appear to be (i) the functionalities offered and (ii) the underlying network.[39]

87) First, consumer communications customers have a broad range of choices when it comes to selecting and using  consumer  communications  apps.
    Many of them use more than one consumer communications app simultaneously depending on their specific needs (so-called  “multi-homing”).[40]
    In this context, consumer communications apps compete  for  customers  by  attempting  to  offer  the  best  communication  experience.  The
    functionalities offered are at the heart of the consumer communications apps' value proposition to customers and their improvement in  order
    to gain the largest user base is a key innovation driver. In this  regard,  according  to  the  market  investigation,  important  areas  of
    improvement include: (i) reliability of the communications service, which has a direct impact on the service's reputation and its appeal  to
    users; and (ii) privacy and security, the importance of which varies from user to user but which are becoming increasingly valued, as  shown
    by the introduction of consumer communications apps specifically addressing privacy and security issues and by WhatsApp's plan to  introduce
    […] (see paragraph (169) below).

88) Second, a consumer communications service can offer utility to customers if the people they want to communicate with are also users of  that
    service. Therefore, the relevance of the user base appears to be more important than its overall size. In this context, however, the size of
    the network of a consumer communications app can have a value for customers in two ways: (i) a larger network implies that it is more likely
    that existing contacts will already be using a consumer communications app; and (ii) a larger network will afford greater opportunities  for
    contact acquisition and discovery.

89) Furthermore, perceived trendiness and "coolness" amongst groups of users is also an important  factor  in  attracting  new  users  and  thus
    shaping the competitive landscape.

90) Finally, price is one factor that influences the popularity of a consumer communications app. Indeed, the users of  consumer  communications
    apps tend to be very price-sensitive[41] and expect a consumer communications app to be provided for free. This is a  standard  practice  in
    the industry, with virtually all consumer communications apps not charging any fees. There are few exceptions to this: Threema, which offers
    increased security of communications, and partially WhatsApp, which can be downloaded against an annual subscription fee of around EUR  0.89
    in Italy, the United Kingdom, Canada and the United States.[42]

91) In this respect, the Commission notes that WhatsApp was previously charging subscription fees also in Germany and Spain.  However,  WhatsApp
    cancelled subscription fees in these two Member States in the first half for 2014 for several reasons, among which: […].

2 Notifying Party's view

92) The Notifying Party takes the view that market shares are of limited use for the assessment of the Transaction, since it  concerns  services
    which are characterised by ease and rapidity of entry and fast growth, as well as multi-homing, and which are mainly offered for free.

93) The Notifying Party claims that, regardless of any analysis of market shares,  the  Transaction  will  not  result  in  any  anticompetitive
    horizontal unilateral effects. Indeed the market would be characterised by the presence of many other alternative service providers and  the
    Parties' would not be close competitors.

94) Moreover, barriers to entry and expansion for competitors and switching costs for customers would be very low, so that any  attempt  of  the
    merged entity to leverage its market position could be easily countered. In particular, should the merged  entity  introduce  or  raise  its
    prices or stop innovating, customers could easily switch to competing services which are available free of charge and which will provide new
    features and better quality services.

3 Commission's assessment

1 Market shares

95) According to the Horizontal Merger Guidelines, market shares and concentration  levels  provide  useful  first  indications  of  the  market
    structure and of the competitive importance of both the merging parties and their competitors.[43]

96) On the basis of the data provided by the Parties, their combined share in the EEA market for consumer communications apps on iOS and Android
    smartphones in the period between November 2013 and May 2014  was  around  [30-40]%  (WhatsApp:  [20-30]%;  Facebook  Messenger:  [10-20]%),
    followed by Android's messaging platform ([5-10]%), Skype ([5-10]%), Twitter ([5-10]%), Google Hangouts ([5-10]%), iMessage ([5-10]%), Viber
    ([5-10]%), Snapchat ([0-5]%) and other market players with a share of [0-5]% or less. The Parties submit that they have no reason to believe
    that their usage of consumer communications apps globally is higher than it is in the EEA.

97) The Commission notes that the market  shares  indicated  above  are  likely  to  underestimate  the  Parties'  position,  and  present  some
    shortcomings.[44] During the market investigation, the Commission attempted  to  collect  additional  metrics  to  measure  the  competitive
    importance of players in the market for consumer communications apps. However, no reliable dataset could be produced. For example, assessing
    the traffic volumes of consumer communications apps was vitiated by the lack of data from some providers and inconsistent recording  methods
    (for example, in relation to the number of messages sent, messages received, group messages, etc.).[45]

98) In this context the Commission considers that the methodology proposed by the Parties for the calculation of market shares still  represents
    the best (albeit imperfect) available proxy to measure relative market positions in this sector.

99) Even if the data provided by the Parties were to underestimate the Parties' combined market shares, the Commission notes that  the  consumer
    communications sector is a recent and fast-growing sector which is characterised by frequent market entry and  short  innovation  cycles  in
    which large market shares may turn out to be ephemeral. In such a dynamic context, the Commission takes the view that in  this  market  high
    market shares are not necessarily indicative of market power and, therefore, of lasting damage to competition.[46]

100) In order to assess the impact of the Transaction for consumers, the Commission has examined the competitive  constraints  that  the  Parties
    exert on each other pre-merger as well as those that they will continue to face post-merger.

2 Closeness of competition

101) The Commission notes that the Parties' offerings in consumer communications apps are different in several respects.  These  differences  are
    mainly the result of Facebook Messenger being a stand-alone app which has been developed from  functionalities  originally  offered  by  the
    Facebook social network.[47]

102) These differences relate to: (i) the identifiers used to access  the  services  (phone  numbers  for  WhatsApp,  Facebook  ID  for  Facebook
    Messenger);[48] (ii) the source of the contacts (the user handset's address book for WhatsApp, all Facebook users  in  Facebook  Messenger);
    (iii) the user experience (which is richer in Facebook Messenger given the integration with the core aspects of  Facebook  social  network);
    (iv) the privacy policy (contrary to WhatsApp, Facebook Messenger enables Facebook to collect data regarding its users that it uses for  the
    purposes of its advertising activities);[49] and (v) the intensity with which the apps are used […].[50]

103) All these elements make the look and feel of the Parties' consumer communications apps different in the views  of  the  respondents  to  the
    Commission's market investigation. The only factors on the basis of which WhatsApp and Facebook Messenger were considered close  competitors
    by certain respondents are the communications functionalities offered and the size of their respective networks.[51]

104) However, the Commission notes that there is no feature offered by Facebook Messenger or WhatsApp which is not offered also by  other  market
    players.[52] Moreover, the Commission notes a significant overlap exists between the networks  of  WhatsApp  and  Facebook[53]  which  could
    rather point to a complementarity in the use of the two apps rather than to close competition.

105) Furthermore, the EEA market for consumer communications  apps  features  a  significant  degree  of  "multi-homing",  that  is,  users  have
    installed, and use, on the same handset several consumer communications apps at the same time.[54]  In  particular,  WhatsApp  and  Facebook
    Messenger have been reported as being the two main consumer communications apps simultaneously used by the majority  of  the  users  in  the
    EEA.[55] This fact suggests that the two consumer communications apps are  to  some  extent  complementary,  rather  than  being  in  direct
    competition with each other.

106) On the basis of their characteristics, WhatsApp's offering seems to be closer to that of Viber and of other similar consumer  communications
    apps which use phone numbers or email addresses to let users access the services and do not require the "affiliation" to a  social  network,
    as is the case for Facebook Messenger or Twitter. In contrast, Facebook Messenger seems to be in closer competition with services offered by
    Google Hangouts or Twitter, since to access the consumer communications service users are required to register on a social network or in any
    event for a broader range of services (such as email).

107) In light of the above, the Commission considers that Facebook Messenger and WhatsApp are not close competitors.

3 Consumers' ability to switch providers

108) The majority of respondents to the Commission's market  investigation  indicated  that  post-Transaction  there  will  remain  a  number  of
    alternative providers of consumer communications apps.[56] The Commission has investigated whether consumers  can  easily  switch  to  these
    providers, with the result of constraining the behaviour of the merged entity.

109) In line with the Notifying Party's arguments, the Commission has found in its market investigation  that  there  are  no  significant  costs
    preventing consumers from switching between different consumer communications apps.[57] This  is  for  the  following  reasons.  First,  all
    consumer communications apps are offered for free or at  a  very  low  price.[58]  Second,  all  consumer  communications  apps  are  easily
    downloadable on smartphones and can coexist on the same handset without taking much capacity. Third, once consumer communications  apps  are
    installed on a device, users can pass from one to another in no-time.[59] Fourth, consumer communications apps are normally characterised by
    simple user interfaces so that learning costs of switching to a new app are minimal for consumers. Fifth,  information  about  new  apps  is
    easily accessible given the ever increasing number of reviews of consumer communications apps on app stores.

110) In this context, the Commission notes that customers of consumer communications apps normally multi-home.[60] This  means  that,  when  they
    try new consumer communications apps, users do not generally stop using the consumer communications apps they were previously using. On  the
    basis of the data provided by the Notifying Party, approximately [80-90]% of EEA users of consumer communications apps  use  more  than  one
    service per month, and approximately [50-60]% use more than one such service on a daily basis.[61] The existence of  multi-homing  has  been
    acknowledged by the overwhelming majority of the respondents to the market investigation.[62] According to  these  respondents,  users  have
    installed on their smart-phones three or more consumer communications apps and on average use two or more apps every month.[63]

111) The Commission also notes that neither Facebook Messenger nor WhatsApp are pre-installed on a large basis  of  handsets.[64]  Software  pre-
    installation can make switching more difficult, in view of users' inertia which leads to the so-called "status quo bias."[65] In this  case,
    however, users normally have to actively download both Facebook Messenger and WhatsApp. Users are therefore also  more  likely  to  actively
    download a competing consumer communications app in case of subsequent dissatisfaction with the Parties' services, or preference for  multi-
    homing.

112) The Commission also considers that the Transaction is unlikely to give rise to an increase in switching  costs.  None  of  the  Parties  has
    control over the operating system of a smartphone, and therefore none of them could make it more burdensome  for  users  to  switch  between
    different consumer communications apps.

113) Several telecom operators indicated that switching costs for consumers would be represented by the loss of all data and interaction  history
    when changing consumer communications app. In the present case, the Commission has not found any evidence suggesting that  data  portability
    issues would constitute a significant barrier to consumers' switching in the case of consumer communications apps. Indeed, communication via
    apps tends to consist to a significant extent of short, spontaneous chats, which do not necessarily carry long-term value for consumers.  In
    any event, data portability is unlikely to prevent switching  since  the  messaging  history  from  a  consumer  communication  app  remains
    accessible on a user's smartphone even if the user starts using a different consumer communications app, as long as the user does not decide
    to delete such history or to uninstall the app. Finally, the contact list of a WhatsApp user can be  ported:  a  competing  app  would  have
    access to it, subject to a user's authorisation.

114) The market investigation has however revealed that switching providers may be difficult in terms of convenience due  to  the  need  for  the
    users to recreate their network.[66] Such network effects will be analysed in the next Section 5.1.3.5.

115) In light of the above, the Commission considers that, with the exception of network effects, there is no significant  barrier  to  switching
    for users in the market for consumer communications apps.[67]

4 General barriers to entry and expansion

116) The consumer communications apps market has been characterised  by  disruptive  innovation.  For  example,  BlackBerry  launched  the  first
    successful smartphones with integrated consumer communications app and had a very significant market position. However BlackBerry  Messenger
    was available only for BlackBerry smartphones and lost importance with the emergence of multi-platform apps once  Android  and  iOS  devices
    gained a larger part of the smartphone market. Another example of successful entry sustained by the responsiveness to a new customer need is
    Telegram, a consumer communication app that was launched in September 2013 and had over 35 million  monthly  active  users  by  March  2014,
    primarily due to its new feature of message encryption. WhatsApp itself  was  launched  in  2009,  when  the  shift  of  users  of  consumer
    communications services from PC to smartphone started, and today it has approximately 600 million active users. Similar market dynamics  can
    be found with respect to LINE and WeChat, which were both launched in 2011 and each of which has now more  than  400  million  active  users
    worldwide.

117) In this context and in line with the Notifying Party's arguments, the Commission has found in its market investigation  that  there  are  no
    significant "traditional" barriers for a new consumer communications app to enter the market, that is, to be offered to users for download.

118) First, the market for consumer communications apps is dynamic and fast-growing. In 2013, the use of messaging and social apps grew by  203%,
    more than any other type of apps. This growth is expected to continue in the future.[68] New consumer communications apps  are  continuously
    offered for download to customers and are expected to be launched also in the future.[69]

119) Developing and launching a consumer communications app does not require a significant amount  of  time  and  investment.  According  to  the
    information provided by the Notifying Party, the time and cost of launching and operating a new mobile consumer communications  app  can  be
    relatively low, the main cost being server capacity which increases with scale. For example, WhatsApp developed the first version of its app
    over a period of six months and it cost less than USD […] in capital, operational and employee costs. The majority of the respondents to the
    market investigation acknowledged that developing and launching on the market a consumer communications app is fairly easy.[70]

120) Second, there are no known patents, know-how or IPRs that would constitute barriers to entry, and the technologies implemented  in  consumer
    communications apps are increasingly standardised. This has been confirmed by the respondents to the market investigation.[71] In any event,
    WhatsApp does not hold any patents on which messaging technologies may read; whilst Facebook has  some  patents,  none  of  these  has  been
    declared essential to any standard.

121) Third, the Commission considers that the Transaction is unlikely to give rise to an increase in entry barriers, as the Parties do  not  have
    control over any element influencing entry. In the first place, the Parties do not have control over the operating  system  of  smartphones,
    and are not therefore in the position to foreclose access to the final user of the consumer communications service.  In  the  second  place,
    email addresses, phone numbers and other elements which could be used as identifiers to access competing apps are ultimately  controlled  by
    the users. In the third place, the handsets' native address book for phone numbers or email addresses which could be  used  to  build  up  a
    communication network is potentially available to all rival consumer communications apps providers.

122) A few respondents to the market investigation indicated that barriers to entry  would  be  represented  by  lack  of  data  portability  and
    interoperability between different consumer communications apps. Data portability issues are addressed in paragraph (113).  With  regard  to
    interoperability (i.e., the ability of users of an app to reach and communicate with users  of  another  app),  the  Commission  notes  that
    interoperability is not currently offered by any of the Parties' main competitors on smartphones, and in particular it was  not  an  element
    that sustained the entry and expansion of WhatsApp, Facebook Messenger  or  other  popular  consumer  communications  apps.  Only  the  Joyn
    initiative of the GSMA sets certain criteria for telecoms operators in order to provide an  interconnected  IP  communications  platform  to
    customers. The Commission understands that the respondents' concern in this regard relates to the  ability  of  new  entrants  to  challenge
    existing players with an established underlying network of users and therefore to the issue of network effects which is analysed in  Section
    5.1.3.5.

123) In any event, the Commission notes that the Transaction should not have any impact on the interoperability issues  described  above,  unless
    Facebook decided to merge the two platforms or to allow cross-platform communication. As explained further below  (paragraphs  (137)-(140)),
    these forms of integration appear to be significantly more challenging from a technical perspective than what has  been  submitted  by  some
    third parties.

124) As regard expansion, consumer communications apps are also generally characterised by ease of distribution. Once a  consumer  communications
    app is available in an app store, customers wishing to download that app have only to click on it to install it on their  device.  The  fact
    that neither Facebook Messenger nor WhatsApp is pre-installed on a large base of handsets also implies that distribution of  rival  apps  is
    not made more difficult by potential barriers created by a "status quo bias".

125) Consumer communications apps also appear to proliferate through word of mouth. If users  like  a  consumer  communications  app,  they  will
    inform their contacts and usage will spread. Consumer communications apps may therefore grow quickly in terms of  user  base.  For  example,
    WhatsApp reached one million users in a few months after its launch in 2009. Likewise, some of the Parties' competitors gained a significant
    number of new users following WhatsApp's four hour service outage that occurred on 22 February 2014. For example, Telegram[72] and  LINE[73]
    gained 5 million and 2 million new users respectively in the 24 hours following WhatsApp's outage. Finally, Kik Messenger  was  released  in
    2010, had 10 million users in April 2012 and reached 100 million in December 2013.

126) However, a number of competitors who replied to the Commission's market investigation submitted that a  significant  barrier  to  entry  and
    expansion is constituted by the presence of established players with a large user  base  and  network  effects  in  consumer  communications
    apps.[74] A competing consumer communications app would have to build a significant user network in order to become attractive to consumers.
    Network effects are analysed in detail in the Section 5.1.3.5.

5 Network effects

127) Network effects arise when the value of a product/service to its users increases with the number of other users of the  product/service.[75]

128) The Commission notes that, in the present case, both Parties have large networks of users: WhatsApp had  close  to  600  million  users  and
    Facebook Messenger had close to [250-350] million users in July 2014 worldwide.[76]

129) Respondents to the market investigation indicated that the size of the user base and the number of a user's friends/relatives  on  the  same
    consumer communications app is of important or critical value to customers of consumer communications apps.[77]  These  parameters  increase
    the utility of the service for a user since they increase the number of people he or she can reach. Therefore, the Commission considers that
    in the present case network effects exist in the market for consumer communications apps.

130) The existence of network effects as such does not a priori indicate a competition problem in the market affected by a merger.  Such  effects
    may however raise competition concerns in particular if they allow the merged entity to foreclose competitors and make  more  difficult  for
    competing providers to expand their customer base. Network effects have to be assessed on a case-by-case basis.

131) In the present case, there are a number of factors which mitigate the role of network effects in impeding entry or expansion.

132) First, as mentioned in paragraph (118), consumer communications apps  are  a  fast-moving  sector,  where  customers'  switching  costs  and
    barriers to entry/expansion are low. In this market any leading market position even if assisted  by  network  effects  is  unlikely  to  be
    incontestable. The market of consumer communications apps has a long track  record  of  entry  by  new  players.  Also,  competing  consumer
    communications apps are able to grow despite network effects, both over time[78] and following disruptions in the  market.[79]  Such  threat
    from new players constitutes and is likely to keep constituting a significant disciplining factor for the merged entity, regardless  of  the
    size of its network.

133) Second, the use of one consumer communications app (for example, of the merged entity) does  not  exclude  the  use  of  competing  consumer
    communications apps by the same user. A majority of users of consumer communications apps in the EEA have installed and  are  using  two  or
    more consumer communications apps (see paragraph (109)). Multi-homing is facilitated by the ease of downloading  a  consumer  communications
    app, which is generally free, easy to access  and  does  not  take  up  much  capacity  on  a  smartphone.  Also,  using  multiple  consumer
    communications apps is easy, since a user does not have to log in each time, when switching an app, and the messages are "pushed" (that  is,
    delivered automatically) onto a user's device. Hence, the fact that a large number of users will  be  on  the  merged  entity's  network  is
    unlikely to preclude them from using also competing consumer communications apps.

134) Third, as mentioned in paragraph (121), the Parties do not control any essential parts of the network or any mobile operating system.  Users
    of consumer communications apps are not locked-in to any particular physical network, hardware solution or anything else that  needs  to  be
    replaced in order to use competing products. While some third parties noted that the merged entity would control and  limit  portability  of
    data (such as message history), this is unlikely to result in a lock-in of users, who typically retain access to message  history  on  their
    handset even if they start using another consumer communications app. In addition, the  merged  entity  would  have  no  means  to  preclude
    competitors from recreating a user’s network on WhatsApp since it is based on a user’s phone book, which will remain available to any actual
    or potential competitor. Lastly, as mentioned in paragraph (111), neither Facebook Messenger nor WhatsApp are pre-installed on a large  base
    of handsets, and therefore there is no "status quo bias" potentially affecting consumers' choices.

135) Therefore, the Commission considers that, while network effects exist in the market for consumer communications apps, in the  present  case,
    on balance, they are unlikely to shield the merged entity from competition from new and existing consumer communications apps.

136) For the sake of completeness, the Commission has examined whether the Transaction is likely  to  lead  to  any  merger-specific  substantial
    strengthening of network effects. Network effects could be strengthened if the Transaction were to combine the  separate  user  networks  of
    WhatsApp and Facebook into one, substantially larger network. Such a combination would necessarily require some kind of integration  between
    the Parties' services.

137) During the market investigation, several third parties suggested that  some  form  of  integration  of  WhatsApp  with  Facebook  (including
    Facebook Messenger) is likely following the Transaction. For  example,  one  of  the  suggested  forms  of  integration  was  cross-platform
    communication between WhatsApp and Facebook, enabling WhatsApp and Facebook users to communicate with each other. Third parties stated  that
    it would be relatively easy for Facebook to implement such integration from a technical perspective.

138) The Notifying Party submitted that integration between WhatsApp  and  Facebook  would  pose  significant  technical  difficulties.  Notably,
    integration of WhatsApp's and Facebook's networks would require matching WhatsApp users' profiles with their profiles on Facebook  (or  vice
    versa). This would be complicated without the users' involvement since Facebook and WhatsApp use different unique user identifiers: Facebook
    ID and mobile phone number, respectively.[80] Consequently, Facebook would be unable to automatically and reliably associate a  Facebook  ID
    with a valid phone number used by a user on WhatsApp. Matching of WhatsApp profiles with Facebook profiles would most likely have to be done
    manually by users,[81] which in the Notifying Party's view is likely to result in a significant backlash from both  users  of  Facebook  and
    WhatsApp who do not want to match their accounts. Finally, the Notifying Party stated that, beyond the difficulties in  matching  user  IDs,
    significant engineering hurdles would have to be overcome to enable cross-platform communications, reflecting  the  fundamentally  different
    architecture of Facebook and WhatsApp (including the former being cloud-based, the latter not).

139) Based on the above, the Commission considers that technical integration between WhatsApp and Facebook is unlikely to be  as  straightforward
    from a technical perspective as presented by third parties. Moreover, it would pose a business risk for the merged  entity  as  users  could
    switch to competing consumer communications apps.

140) In any event, even if some integration of WhatsApp with Facebook were to take place post-Transaction, it would  be  mitigated  by  the  fact
    that there is already a significant overlap between the networks of WhatsApp and Facebook. Indeed, on the basis of the estimates provided by
    the Notifying Party,[82] in the period between December 2013 and April 2014, between [20-30]% and [50-60]% of WhatsApp  users  already  used
    Facebook Messenger and between [70-80]% and [80-90]% of WhatsApp users were Facebook users and were therefore already within  the  reach  of
    Facebook Messenger. Conversely, over the same period 60% to 70% of Facebook Messenger active users already used WhatsApp. Therefore, the net
    gain in terms of new members to the communications network would be much more limited than the addition of WhatsApp users  to  the  Facebook
    user base would suggest. This means that pre-existing network effects would be unlikely to be substantially strengthened by the Transaction.

4 Conclusion on consumer communications services

141) With only one exception, all competing providers of consumer communications apps considered that the Transaction would not have  a  negative
    impact on competition in the consumer communications market. Only telecoms operators indicated that  the  Transaction  would  give  rise  to
    negative effects in the market for consumer communications apps. For the reasons outlined above, however, these concerns are not  considered
    to be well-grounded.

142) In light of the findings above, the Commission considers that the  Transaction  does  not  give  rise  to  serious  doubts  as  regards  its
    compatibility with the internal market with respect to the market for consumer communications apps.

2 Social networking services

1 Introduction

143) Facebook operates the world's largest social network which connects over 1.3 billion users worldwide and [200-300] million in  the  EEA.  As
    explained in section 4.2, social networking services enable users to connect,  share,  communicate  and  express  themselves  in  a  digital
    environment.

144) During the market investigation, several third parties argued that (i) absent the Transaction WhatsApp would become  a  provider  of  social
    networking services in competition with Facebook; or that (ii) WhatsApp is already a provider of social networking services  competing  with
    Facebook.

145) As regards the first claim concerning potential competition, the Commission collected and assessed relevant  evidence,  […].  No  indication
    was found of WhatsApp's plans to become a social network which would compete with Facebook absent the merger. Indeed, the focus of  WhatsApp
    has traditionally been on offering a light and simple communications service on smartphones only.

146) Concerning the claim regarding actual competition between WhatsApp and the  Facebook  social  network,  as  set  out  in  section  4.2,  the
    Commission does not take a final view on the existence and exact boundaries of the potential market for social  networking  services,  which
    are continuously evolving. Nevertheless, in this section 5.2 the Commission examines the likely competitive effects of the Transaction under
    a broader definition of the potential market for social networking services assuming that both WhatsApp and Facebook were actual competitors
    in that market.

2 Competitive landscape

147) A large number of companies offer online services which include a social networking functionality. These services are highly  differentiated
    in their nature and focus. For example, social networking  services  may  be  designed  for  keeping  in  touch  with  friends  and  family,
    establishing professional contacts, reconnecting with classmates, sharing content (pictures, music, etc.) or pursuing a common interest.

148) The results of the market investigation indicate that the companies which are most clearly perceived by respondents as providers  of  social
    networking services are Facebook, Google+, LinkedIn, Twitter and MySpace.[83] The services of  these  providers  facilitate  a  rich  social
    experience characteristic of a typical social network by enabling users to create their digital identity and to interact  in  a  variety  of
    forms in reflection of their preferences and interests.

149) Some respondents to the market investigation stated that also consumer communications apps such as WhatsApp are active in  providing  social
    networking services, in particular since they enable information and content sharing between users, including groups.

150) If consumer communications apps were included in the potential market for social networking services, the number  of  alternative  providers
    would expand substantially. In particular, it would encompass such market players as WhatsApp,  LINE,  WeChat,  iMessage,  Skype,  Snapchat,
    Viber, and Hangouts. The market would also potentially include other non-consumer communications services providers which enable interaction
    and exchange of content between users, such as YouTube.

151) Given the high degree of differentiation between the above-mentioned providers, they are not used exclusively by consumers but rather  in  a
    complementary manner depending on a specific need.  Indeed,  as  mentioned  in  paragraph  (109),  users  of  consumer  communications  apps
    extensively multi-home. In addition, the respondents to the market investigation confirm that users of consumer  communications  apps  to  a
    large extent also tend to use (other) social networking services.[84] This is corroborated by the considerable overlap existing between  the
    user bases of WhatsApp and Facebook.[85]

152) Consequently, if the potential market for social networking services includes consumer communications apps such as  WhatsApp,  there  are  a
    significant number of alternative service providers, which are used by consumers interchangeably.

3 Closeness of competition

153) Both WhatsApp and Facebook are similar in that they allow interaction and sharing of information and  content  (such  as  pictures)  between
    users. At the same time, both services display significant differences.

154) The Facebook user experience centres around the newsfeed, which is the core feature of a user’s homepage on the Facebook website and  mobile
    app. The newsfeed is a regularly updating dynamic display of stories from friends,  pages,  and  other  entities  to  which  the  person  is
    connected. It includes posts, photos, event updates, group memberships, and other activities. Each user’s newsfeed is personalised based  on
    his or her interests and the sharing activity of his or her friends and connections.

155) Another core feature of the Facebook social network is the timeline that allows users to organise and display the most important events  and
    activities, enabling them to curate their memories in a searchable personal narrative that is organised chronologically.  Users  choose  the
    information to share on their timeline, such as  their  interests,  photos,  education,  work  history,  relationship  status,  and  contact
    information, and users control with whom content is shared on their timeline.

156) In contrast, WhatsApp does not offer homepages, feeds or timelines to its users. Users are not able to  organise  and  curate  memories  and
    create personal narratives. While WhatsApp has a status functionality, it is being used only by  [5-10]%  of  its  EEA-users,  according  to
    WhatsApp's estimates. Indeed, WhatsApp offers a light and simple communications tool built for real-time messaging, which is,  according  to
    the data presented in paragraph (56), predominantly one-to-one.

157) The fact that WhatsApp and Facebook are not  close  substitutes  is  further  evidenced  by  the  Notifying  Party's  data  showing  that  a
    considerable number of users of one service also use the other service.[86] This suggests that the  needs  fulfilled  by  each  service  are
    different.

158) Therefore, given the considerable differences between the functionalities and focus of WhatsApp and Facebook, the Commission concludes  that
    these providers are not close competitors in the potential market for social networking services.

4 Potential integration of WhatsApp and Facebook

159) As described in section 5.1.3.5, during the market investigation third parties expressed concerns regarding  potential  integration  between
    the Parties post-Transaction, including WhatsApp's integration with the Facebook social network. Such integration could, for  example,  take
    the form of cross-platform communication between WhatsApp and Facebook, enabling Facebook posts, status updates  etc.  to  be  delivered  to
    WhatsApp, posting to Facebook from WhatsApp, or merging both services into one single platform. The integration of WhatsApp could strengthen
    Facebook's position in the potential market for social networking services by adding additional users and/or functionalities to the Facebook
    social network.

160) As explained in paragraphs (138)-(139), the Commission takes into account that there are likely  to  be  significant  technical  hurdles  to
    enable the integration of WhatsApp and Facebook. In particular, such integration would likely require involvement of users of both  WhatsApp
    and Facebook to match/create their profiles on both platforms. Any forced transfer of WhatsApp users onto the Facebook social  network  (for
    example, by compelling WhatsApp users to  register  on  Facebook)  may  alienate  users  and  cause  their  outflow  to  competing  consumer
    communications apps. Moreover, enabling cross-platform communication would necessitate substantial re-engineering of the  services  and  re-
    writing of their code, given the differences in their architecture.

161) The current plans of Facebook, as evidenced by its submissions to the Commission, public statements and internal documents, do  not  provide
    support for a future integration of WhatsApp with Facebook of the sort that would strengthen Facebook's position in the potential market for
    social networking services.

162) In any event, even if an integration of WhatsApp with Facebook were to take place, it would be mitigated by the fact that a large number  of
    WhatsApp's active users ([70-90]%) are already users of Facebook. Therefore, potential net gain in  terms  of  new  members  to  the  social
    network would be much more limited than the addition of WhatsApp users to the Facebook user base (also  considering  that  addition  of  all
    users is unlikely).

5 Conclusion on social networking services

163) Based on the results of the investigation and the analysis above, the Commission considers that the  Transaction  would  not  give  rise  to
    serious doubts as to its compatibility with the internal market as regards the potential market  for  the  provision  of  social  networking
    services.

3 Online advertising services

1 Introduction

164) For the purposes of this decision, the Commission has analysed potential data concentration  only  to  the  extent  that  it  is  likely  to
    strengthen Facebook's position in the online advertising market or in any sub-segments thereof. Any privacy-related  concerns  flowing  from
    the increased concentration of data within the control of Facebook as a result of the Transaction do not fall within the  scope  of  the  EU
    competition law rules but within the scope of the EU data protection rules.

165) Since only Facebook, and not WhatsApp, is active in the provision of online advertising services, the Transaction does not give rise to  any
    horizontal overlaps in the market for online advertising or in any sub-segment thereof.

166) Moreover, WhatsApp does not currently collect data about its  users  concerning  age,  verified  name,  gender,  social  group,  activities,
    consuming habits or other characteristics that are valuable for advertising purposes. Also, WhatsApp does not store messages once  they  are
    delivered, and a message is sent only to and from the handsets that are associated with the mobile phone numbers used. Once a user’s message
    has been delivered WhatsApp has no record of the content of that message. Therefore, since WhatsApp does not currently collect any user data
    that are valuable for advertising purposes, the Transaction does not increase the amount of  data  potentially  available  to  Facebook  for
    advertising purposes.

167) However, the Commission has examined whether the Transaction could nevertheless have the effect of strengthening Facebook's position in  the
    online advertising market, thereby raising serious doubts as to its compatibility with the market. For  this  purpose,  the  Commission  has
    analysed two main possible theories of harm,  according  to  which  Facebook  could  strengthen  its  position  in  online  advertising  by:
    (i) introducing advertising on WhatsApp, and/or (ii) using WhatsApp as a potential source of user data for  the  purpose  of  improving  the
    targeting of Facebook's advertising activities outside WhatsApp. Each of these two possible theories of harm is examined below.

2 WhatsApp as a potential provider of online advertising space

168) According to this possible theory of harm, post-Transaction,  the  merged  entity  could  introduce  targeted  advertising  on  WhatsApp  by
    analysing user data collected from WhatsApp's users (and/or from Facebook users who are also WhatsApp users). This would have the effect  of
    reinforcing Facebook's position in the online advertising market or sub-segments thereof.[87]

1 Notifying Party's view

169) According to the Notifying Party, no market for advertising, however defined, would be affected by the Transaction,  because  WhatsApp  does
    not currently sell ads. As explained in its blog, WhatsApp does not allow ads because it believes that they  would  disrupt  the  experience
    that it wants to deliver to its users.[88] […]

170) Moreover, the Notifying Party submits that Facebook has no current plans  to  introduce  advertising  on  WhatsApp  post-Transaction.  While
    WhatsApp is exploring further monetisation avenues for the medium term (in addition to subscription fees), such as  […],[89]  these  do  not
    entail the introduction of advertisements on WhatsApp.

2 Commission's assessment

171) According to data provided by the Notifying Party, Facebook's market shares are equal to or above [20-30]% in a number of Member  States  in
    a potential market for overall online advertising,[90] as well as in potential sub-segments, such as online non-search advertising.[91]

172) A number of respondents to the market investigation stated that they expect the Transaction to materially strengthen Facebook's position  in
    the provision of online advertising services,[92] although only very few claimed that this would happen as a result of Facebook  introducing
    advertising on WhatsApp.[93]

173) As regards the ability of the merged entity to introduce targeted advertising on WhatsApp, this would theoretically be possible, subject  to
    WhatsApp changing its privacy policy. Moreover, in order to collect sufficient data to serve targeted ads, […].

174) However, as regards the incentive of the merged entity to introduce advertising on WhatsApp, many respondents pointed  out  that,  by  doing
    so, WhatsApp would deviate from the "no ads" product strategy that it has followed so far, which may prompt certain users who feel that  the
    ads disrupt their experience to switch to competing apps free of ads (for example, Viber).[94] Moreover, the Commission notes that the  need
    to retract WhatsApp's current plan to introduce […] may reduce Facebook's incentive to introduce ads on WhatsApp, since  abandoning  end-to-
    end encryption could create dissatisfaction among the increasing number of users who significantly value privacy and security. As  mentioned
    in paragraph (116) above, Telegram's success in attracting users (with 35 million monthly active users reached just  six  months  after  the
    launch of the app) is believed to be primarily due to its message […] feature.[95] Privacy concerns also seem to have prompted a high number
    of German users to switch from WhatsApp to Threema in the 24 hours following the announcement of Facebook's acquisition of WhatsApp.[96]

175) Moreover, Facebook's internal documents, which the Commission reviewed for the purpose of assessing the Transaction, […].

176) In any event, even if the merged entity were to introduce advertising on WhatsApp, the Transaction would only raise competition concerns  if
    post-Transaction there were not to be a sufficient number of effective alternatives to Facebook  for  the  purchase  of  online  advertising
    space.

177) In this regard, most of Facebook's advertising customers who took part in the market investigation recognised the importance of  advertising
    on Facebook, due to its large and highly engaged user base, its ad targeting opportunities and the generally high return on  investment.[97]
    However, all of these respondents also considered that there are  (and  will  be,  post-Transaction)  a  sufficient  number  of  alternative
    providers of advertising services that compete with Facebook.[98] These include Google (comprising  Google  Search,  Google+  and  YouTube),
    Yahoo!, MSN and local providers.[99] More in general, customers did not raise any particular concerns with  regard  to  the  effect  of  the
    Transaction on the online advertising market.

178) Similarly, most of the competitors who replied to the market investigation considered that a sufficient number of alternative  providers  of
    advertising space will remain in competition with Facebook post-Transaction.[100]

179) Therefore, the Commission notes that, regardless of whether the merged entity will introduce advertising on WhatsApp,  there  will  continue
    to be a sufficient number of other actual and potential competitors who are equally well placed as Facebook to offer targeted advertising.

3 WhatsApp as a potential source of user data valuable for advertising purposes

180) According to this possible theory of harm, post-Transaction, the merged entity could start collecting data from WhatsApp users with  a  view
    to improving the accuracy of the targeted ads served on Facebook's social networking platform[101] to WhatsApp users that are also  Facebook
    users.

1 Notifying Party's view

181) The Notifying Party submits that the data that WhatsApp has access to is at best of marginal utility  for  Facebook’s  advertising  purposes
    and would not enhance Facebook’s ability to target advertisements on its services.[102] Today, the only data that  WhatsApp  has  about  its
    users is their names and the mobile phone numbers with which the accounts are associated. This data is available to all  suppliers  of  apps
    installed on users’ handsets, including Facebook. […]

182) According to the Notifying Party, the Transaction would not impact the type  of  data  that  WhatsApp  collects  and  stores.  Facebook  has
    publicly made it clear that it has no current plans to modify WhatsApp’s collection  and  use  of  user  data.[103]  As  with  all  Facebook
    services, to the extent an affiliate of Facebook engages in any sharing of data with another affiliate, it will do so in a manner consistent
    with the promises the relevant affiliates have made to users and with notice to the extent required by law.

183) As a result, in the view of the Notifying Party, the Transaction will not have any effect on the data potentially available  for  Facebook’s
    use in targeting ads.

2 Commission's assessment

184) A number of respondents to the market investigation stated that they expect the Transaction to materially strengthen Facebook's position  in
    the provision of online advertising services as a result of the increased amount of data which will come under Facebook's  control.[104]  In
    particular, as explained above (paragraph (137)), certain respondents suggested that post-Transaction Facebook would  integrate  its  social
    networking platform and consumer communications app with WhatsApp and described a number of alternative forms that  such  integration  could
    take. According to these respondents, such integration would allow Facebook to have access to additional data  from  WhatsApp  users  to  be
    monetised through advertising.

185) As regards the ability of the merged entity to collect data from WhatsApp  users  who  also  have  a  Facebook  account  and  use  them  for
    advertising on Facebook, this would require, first, a change in WhatsApp's privacy policy. Second, this would require  Facebook,  regardless
    of whether or not it would carry out some form of integration with WhatsApp, to match each user's WhatsApp  profile  with  her/his  Facebook
    profile, provided she/he has one. While certain respondents argued that such matching  would  be  easily  achievable,  the  Notifying  Party
    submitted that there are major technical obstacles thereto.[105] Third, in order to collect data from WhatsApp text messages, Facebook would
    have to retract WhatsApp's current plan to introduce […].

186) As regards the incentive of the merged entity to start collecting data from WhatsApp users  (for  example,  age,  gender,  country,  message
    content), a number of respondents pointed out that, if the merged entity were to do so, this may prompt some users to  switch  to  different
    consumer communications apps that they perceive as less intrusive.[106] Moreover, the Commission notes that, as explained above  (174),  the
    need to abandon WhatsApp's plan for […] may reduce Facebook's incentive to start collecting data from WhatsApp messages.

187) In any event, even if the merged entity were to start collecting and using data from  WhatsApp  users,  the  Transaction  would  only  raise
    competition concerns if the concentration of data within Facebook's control were to allow it to strengthen its position in advertising.

188) In this regard, the Commission refers to the results of the market investigation presented above (paragraph  (177)),  which  indicate  that,
    post-Transaction, there will remain a sufficient number of alternative providers of online advertising services. In addition, the Commission
    notes that there are currently a significant number of market participants that collect user data alongside Facebook. These  include,  first
    of all Google, which accounts for a significant portion of the Internet user data and, in addition, companies such as Apple,  Amazon,  eBay,
    Microsoft, AOL, Yahoo!, Twitter, IAC, LinkedIn, Adobe and Yelp, among others. The graph below provides an overview of the estimated share of
    data collection across the web:[107]

                                                                      [pic]

189) Therefore, the Commission notes that, regardless of whether the merged entity will start  using  WhatsApp  user  data  to  improve  targeted
    advertising on Facebook's social network, there will continue to be a large amount of Internet user data that are valuable  for  advertising
    purposes and that are not within Facebook's exclusive control.

4 Conclusion on online advertising services

190) Based on the results of the market investigation and the analysis outlined above, the Commission considers that  the  Transaction  does  not
    give rise to serious doubts as to its compatibility with the internal market as regards the market for the provision of  online  advertising
    services, including its potential sub-segments.

       CONCLUSION

191) For the above reasons, the European Commission has decided not to oppose the Transaction and to declare  it  compatible  with  the  internal
    market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

For the Commission
(Signed)
Joaquín ALMUNIA
Vice-President

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
   ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common  market'  by  'internal  market'.  The
   terminology of the TFEU will be used throughout this decision.
[2]   The purchase price comprises: (i) USD 12 billion in Facebook stock shares; (ii) USD 4 billion in cash; (iii)  USD  3  billion  in  Facebook
   restricted stock units after closing of the Transaction. [T]he valuation of WhatsApp on a value-per-user basis is consistent with  valuations
   for other comparable transactions. [Using] Enterprise Value and Monthly Active User data to compare the Transaction with  earlier  comparable
   transactions, such as Rakuten's 2014 acquisition of Viber (for USD 905 million), Facebook's 2012 acquisition of Instagram (for USD 1 billion)
   and Microsoft's acquisition of Skype (for USD 8.5 billion) [, t]he value-per-user ratio for Facebook's acquisition  of  WhatsApp  [would  be]
   calculated to be USD [42] [This is within the range of prior transactions].
      Likewise, in July 2014, it was reported that the consumer communications  app  LINE  filed  for  an  IPO  with  a  potential  valuation  of
   approximately USD 10  billion  (http://www.bloomberg.com/news/2014-07-17/line-is-said-to-pursue-u-s-ipo-with-confidential-filing-to-sec.html,
   visited  on  24  September  2014),  or   between   USD   10   and   20   billion   (http://www.reuters.com/article/2014/07/18/us-line-ipo-us-
   idUSKBN0FN01N20140718, visited on 24 September 2014).
      […].
[3]   Commission decision of 7 October 2011 in Case M.6281 – Microsoft / Skype;  Commission  decision  of  4  December  2013  in  Case  M.7047  –
   Microsoft / Nokia.
[4]   As regards a segmentation by functionality (i.e., instant messaging (IM), voice calls and video calls), in both  decisions  the  Commission
   considered such a sub-segmentation, noted that consumers increasingly demand an integrated range of communications functionalities, and  that
   most providers offer the whole range of functionalities, but ultimately left the precise market definition open. As regards a segmentation by
   platform (PCs, smartphones, tablets, gaming consoles and TVs), the Commission in Microsoft / Skype noted that  differences  existed  at  that
   time in terms of quality of the services on the different types of platforms. Finally, as regards a segmentation by OS, while the  Commission
   in Microsoft / Skype stressed the limited degree of cross-OS availability, in Microsoft / Nokia, it noted that several apps are now available
   for various mobile OS, although a limited number of apps still remains confined to the OS developer's proprietary OS.
[5]   Form CO, paragraph  217, referring to Strategy Analytics, Global Smartphone User Base Forecast by OS  for  88  Countries:  2007-2017,  June
   2013.
[6]   Commission pre-notification questionnaire to competitors,  question  14;  Commission  questionnaire  Q1  -  Questionnaire  to  competitors,
   question 13.
[7]   Commission questionnaire Q1 - Questionnaire to competitors, question 6.
[8]   Commission pre-notification questionnaire to competitors,  question  10;  Commission  questionnaire  Q1  -  Questionnaire  to  competitors,
   question 9.
[9]   See Commission decision of 7 October 2011 in Case M.6281 – Microsoft / Skype, paragraphs 66, 68; Commission decision of 4 December 2013  in
   Case M.7047 – Microsoft / Nokia, paragraph 81.
[10]  See Commission decision of 7 October 2011 in Case M.6281 – Microsoft / Skype, paragraphs 65-66.
[11]  Commission pre-notification questionnaire to competitors,  question  15;  Commission  questionnaire  Q1  -  Questionnaire  to  competitors,
   question 15. One competitor explained that certain factors may vary depending on the  region/country  concerned,  such  as  marketing  costs,
   language, legal and regulatory aspects, communication environment and the differences in specifications of each operating system.
[12]  For example, stickers in consumer apps proved to be particularly popular with the users in Asia.
[13]  On the basis of the market share data provided by the Notifying Party (in this regard see Section 5.1.2), in the  period  between  November
   2013 and May 2014 in Spain WhatsApp was the market leader ([30-40]%), followed by Twitter ([10-20]%), LINE ([10-20]%), Google  Hangouts  ([5-
   10]%) and Facebook Messenger ([5-10]%). In France the market leaders were Android's messaging platform  and  Facebook  Messenger  (both  [10-
   20]%), followed by WhatsApp.
[14]  For example, the market leader is Viber in Croatia and Greece, Android's messaging platform in Denmark and Snapchat in Norway. In  Hungary,
   Poland and Lithuania, Facebook Messenger is the market leader, while WhatsApp is at best the third player. In Ireland and in the Netherlands,
   WhatsApp is the market leader and Facebook Messenger is the third player.
[15]  Users of iPhones and Android phones in Germany and Spain also paid a subscription fee until spring  2014.  Outside  of  the  EEA,  WhatsApp
   currently charges a subscription fee to users in the USA and in Canada.
[16]  For example, LinkedIn, Facebook and Google+ launched their social networking services in 2003, 2004 and 2011, respectively.
[17]  User profile corresponds to the user online identity, providing information on the user's jobs,  school/university  attended,  relationship
   status, birthday, major life events, etc., as well as likes and interests (that is, music, movies, etc.). A  user  can  generally  select  to
   which degree the information in its profile is accessible to the public.
[18]  Newsfeed is a regularly updating personalised display of stories (that is, posts, photos, etc.) from friends, pages, and other entities  to
   which the user is connected.
[19]  Timeline enables users to organise and display the events and activities  that  matter  most  to  them  (for  example,  interests,  photos,
   education, work history, relationship status, and contact information), such that they can curate their memories  in  a  searchable  personal
   narrative that is organised chronologically.
[20]  Commission questionnaire Q1 - Questionnaire to competitors, question 16.
[21]  Since 2013, Facebook also serves ads to users of its photo and video sharing platform, Instagram, in the USA. In September  2014,  Facebook
   began to introduce limited ads on Instagram in the United Kingdom. […].
[22]  In addition, Facebook is active in intermediation in online advertising through  LiveRail  (acquired  on  14  August  2014),  and  Facebook
   Audience Network (currently in beta testing, but which Facebook anticipates launching by year end 2014).  Facebook  is  also  active  in  the
   provision of online display ad serving technology, through Atlas Solutions (acquired on 28 February 2013) and LiveRail.
[23]  Facebook makes available certain non-personally identifiable data (aggregate  or  anonymous  data)  to  advertisers  to  help  measure  the
   effectiveness of their ads. For example, Facebook shares basic ad performance information with advertisers, such as the number of people  who
   saw or clicked on their ads, the cost of those ad placements, and the number  of  people  who  “converted,”  for  example,  by  visiting  the
   advertiser’s website after viewing an ad on Facebook. See  https://www.facebook.com/about/privacy/advertising.  However,  Facebook  does  not
   share personally identifiable information with advertisers absent user consent. Moreover,  Facebook  shares  data  with  third-party  service
   providers that help Facebook and advertisers measure the effectiveness of advertising campaigns on online or offline sales or app  downloads.
   Finally, Facebook complies with requests for access to user data made by law enforcement agencies, courts and other  agencies  with  a  legal
   right to require such access.
[24]  WhatsApp currently only stores limited information about its users (namely, user name, picture, status message, phone number and the  phone
   numbers in the user's phone book).
[25]  See Commission decision of 18 February 2010 in Case M.5727 – Microsoft / Yahoo! Search Business, paragraph 61; Commission  decision  of  11
   March 2008 in Case M. 4731 – Google / DoubleClick, paragraphs 45-46; 56.
[26]  See Commission decision of 18 February 2010 in Case M.5727 – Microsoft / Yahoo! Search Business, paragraphs 71-75; Commission  decision  of
   11 March 2008 in Case M. 4731 – Google / DoubleClick, paragraphs 49-56.
[27]  See Commission decision of 4 September 2012 in Case M.6314 – Telefónica UK / Vodafone UK / Everything Everywhere / JV, paragraphs  153-159;
   Commission decision of 18 February 2010, Case M.5727 – Microsoft / Yahoo! Search Business, paragraphs 77-81.
[28]  See Commission decision of 4 September 2012 in Case M.6314 – Telefónica UK / Vodafone UK / Everything Everywhere / JV, paragraphs 158-159.
[29]  Commission questionnaire Q1 - Questionnaire to competitors, question 30;  Commission  questionnaire  Q2  -  Questionnaire  to  advertisers,
   question 3.
[30]  Commission questionnaire Q2 - Questionnaire to advertisers, question 4.
[31]  Commission questionnaire Q1 - Questionnaire to competitors, question 31.1.
[32]  Commission questionnaire Q1 - Questionnaire to competitors, question 32;  Commission  questionnaire  Q2  -  Questionnaire  to  advertisers,
   question 5.
[33]  Commission questionnaire Q1 - Questionnaire to competitors, question 33.
[34]  See Commission decision of 4 September 2012 in Case M.6314 – Telefónica UK / Vodafone UK / Everything Everywhere / JV, paragraphs  226-229;
   Commission decision of 18 February 2010 in Case M.5727 – Microsoft / Yahoo! Search Business, paragraphs  91-93;  Commission  decision  of  11
   March 2008 in Case M.4731 – Google / DoubleClick, paragraphs 83-84.
[35]  Ibid.
[36]  Commission questionnaire Q1 - Questionnaire to competitors, question 34;  Commission  questionnaire  Q2  -  Questionnaire  to  advertisers,
   question 7.
[37]  Commission questionnaire Q1 - Questionnaire to competitors, question 35;  Commission  questionnaire  Q2  -  Questionnaire  to  advertisers,
   question 8.
[38]  Such services are currently offered in the EEA by Deutsche Telekom, Orange, Vodafone and Telefónica.
[39]  See the replies of the overwhelming majority of respondents to the market investigation - Commission questionnaire Q1  -  Questionnaire  to
   competitors, question 36.
[40]  See paragraph (105) below.
[41]  This has been supported also by a customer survey submitted to the Commission by a competitor in the context of the market investigation.
[42]  For the majority of all other consumer communications apps, monetisation is achieved not through fees  but  through  advertising,  stickers
   and in-app purchases. Facebook Messenger is not currently monetised: it is funded by  the  monetisation  of  Facebook's  networking  platform
   through advertising.
[43]  See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations  between  undertakings
   ('Horizontal Merger Guidelines'), OJ C 31, 5.2.2004, p. 5, paragraph 14.
[44]  First, they are based on Onavo data, an app owned by Facebook which tracks "reach data" (that is, the percentage  of  panelled  users  that
   have used an app over 30 days) only on iOS and Android smartphones. Second, they do not properly measure the effective use of  the  services,
   but rather the penetration rate of an app among users (the so called "reach"). Third,  they  overestimate  the  strength  of  smaller  market
   players since it suffices that a user uses an app one day over a month for a share of usage to be attributed to  an  app  during  that  given
   month. Fourth, they assume that 75% of iPhone users use iMessage since Onavo cannot collect iMessage data. Fifth, the Parties  have  included
   players which offer communications functionalities integrated in their social networking apps, such as LinkedIn and  Twitter,  regardless  of
   whether the app was used for communication purposes or not.
[45]  Certain third parties indicated that the best metric to measure competitive forces would be  monthly  minutes  of  use  (how  long  a  user
   engages with the app), as this metric captures (i) the importance of the application to the end consumer (i.e. consumer engagement) and  (ii)
   its potential value either through direct monetisation from the consumer or indirectly through advertising. However, the Commission,  on  the
   basis of the results of the market investigation, does not consider this metric to  be  particularly  meaningful  to  weigh  relative  market
   positions in the market for consumer communications apps. Indeed, what actually matters for consumer communications apps is not the length of
   the communications itself, which could depend on exogenous factors such as the relationship between the users of the service. User engagement
   with a service is better demonstrated by the fact that the service is actually used every month and day or by the number of messages,  if  it
   did not present the issues indicated in paragraph (98). In any event, the Commission notes that irrespective  of  the  methodology  used  for
   calculating market shares, Facebook Messenger and WhatsApp would still be number 1 and number 2 in the EEA and at worldwide level.
[46]  See Case T-79/12 Cisco Systems Inc v Commission [2013], paragraph 69.
[47]  Facebook Messenger was first released on 9 August 2011 for iOS and Android.
[48]  To enable communication functionalities, consumer communications apps require the creation of an account with  a  unique  user  identifier.
   Depending on the consumer communications app, existing mobile phone numbers or email addresses can serve as user IDs (for example,  WhatsApp,
   Viber); certain consumer communications apps require instead the creation of a new user identifier (for example, Facebook Messenger,  Skype).
   These different technical features affect the whole functioning of the consumer communications app and in particular  the  selection  of  the
   list of contacts with which communication is established: such contacts may derive from the handset's native address  book  (as  in  case  of
   WhatsApp and Viber) or from other users of the related social network (such as on Facebook Messenger) or users of the  messaging  application
   (for example, Skype).
[49]  […].
[50]  […].
[51]  In this regard see Section 5.1.3.5.
[52]  Moreover, the greatest share of the Parties' traffic is constituted by text messages, a functionality offered by all market players.
[53]  See paragraph (140) below.
[54]  When multi-homing, customers choose the consumer communications app to use on  a  communication-by-communication  basis  depending  on  the
   urgency, purpose and nature of the communication, the fact that the addressee of the message uses a certain consumer communications  app  and
   other preference factors.
[55]  Commission questionnaire Q1 - Questionnaire to competitors, question 37.
[56]  Commission questionnaire Q1 - Questionnaire to competitors, question 46, although some questioned their ability  to  recreate  in  a  short
   time the network externalities reached by the Facebook and WhatsApp. In this regard, see Section 5.1.3.5.
[57]  Commission questionnaire Q1 - Questionnaire to competitors, question 42. See also Case T-79/12  Cisco  Systems  Inc  v  Commission  [2013],
   paragraph 79.
[58]  See paragraph (90).
[59]  This is also supported by a customer survey submitted to the Commission by a competitor in the context of the market investigation.
[60]  See paragraph (105).
[61]  Form CO, paragraph 4.
[62]  Commission questionnaire Q1 - Questionnaire to competitors, question 44.
[63]  Commission questionnaire Q1 - Questionnaire to competitors, question 44.
[64]  Facebook estimates that its social networking app is pre-installed in only approximately 10% of the smartphone devices sold in the  EEA  in
   2014, while WhatsApp has only an agreement with Nokia for the pre-installation of its app on some of Nokia's models via a soft-launcher (that
   is, a pre-installed icon which, when tapped, redirects the user to the app store to download the application).
[65]  See Commission decision of 16 December 2009 in Case C-3/39.530 - Microsoft (Tying).
[66]  Commission questionnaire Q1 - Questionnaire to competitors, question 42.
[67]  In this regard the Commission notes that the vast majority of the traffic on the Parties' consumer communications  apps  (about  [90-100]%)
   is represented by one-to-one messages. Group messages constitute a small proportion of the Parties' traffic: [10-20]% for  WhatsApp  and  [5-
   10]% for Facebook Messenger. Moreover, group chats tend to be between a relatively small number of users (on average in the EEA, [0-5]  users
   for WhatsApp and [0-10] users for Facebook Messenger (the larger number of users in group chats on Facebook Messenger  is  likely  to  derive
   from the greater social networking functionalities)). In this context the Commission considers  that  a  potential  migration  of  one-to-one
   traffic is more relevant to constrain the merged entity and therefore there is no  need  to  assess  whether  customers'  switching  is  more
   difficult for group functionalities.
[68]  Report by mobile analytics firm Flurry (https://software.intel.com/en-us/blogs/2014/01/13/mobile-app-growth-continues-to-rise).
[69]  Commission questionnaire Q1 - Questionnaire to competitors, questions 52 and 53.
[70]  Commission questionnaire Q1 - Questionnaire to competitors, question 47, they indicated that attracting users would be difficult given  the
   presence of network effects. In this regard, see Section 5.1.3.5.
[71]  Commission questionnaire Q1 - Questionnaire to competitors, question 50.
[72]  See http://thenextweb.com/facebook/2014/02/21/whatsapp-lost-500000-users-to-telegram-but-most-others-seem-happy-to-stay/.
[73]  See http://thenextweb.com/asia/2014/02/25/line-says-it-added-2m-users-and-saw-record-growth-in-useurope-following-whatsapp-outage/.
[74]  Commission questionnaire Q1 - Questionnaire to competitors, questions 47, 48, 49 and 50.
[75]  A typical example is a telephone network. The more people have a telephone, the more valuable it is for each of them to  have  a  telephone
   since the number of people they can call increases. As the network becomes more attractive, more people join, in a positive feedback loop.
[76]  Facebook's social network users account for approximately 1.3 billion.
[77]  Commission questionnaire Q1 - Questionnaire to competitors, questions 36.3 and 36.4.
[78]  For example, both LINE and WeChat launched in 2011, and today, after three years, each of them counts more than 400  million  active  users
   worldwide.
[79]  See for some examples, paragraph (125). Also, after the  announcement  of  WhatsApp's  acquisition  by  Facebook  and  because  of  privacy
   concerns, thousands of users downloaded different messaging platforms, in particular Telegram which offers increased privacy protection.
[80]  While some Facebook users choose to indicate their mobile phone numbers in their Facebook profiles (around [30-40]% of Facebook users  have
   done so in the EEA and [50-60]% worldwide), Facebook does not validate these numbers. Hence they may be outdated, not be  mobile  numbers  or
   contain other errors.
[81]  In particular, WhatsApp users would either have to indicate their phone number in their Facebook profile (if they have one) or to  register
   on Facebook (if they do not yet have a profile). Similarly, Facebook users would have to introduce and/or validate the  mobile  phone  number
   which they use on WhatsApp.
[82]  Estimates calculated on the basis of Onavo data.
[83]  Commission questionnaire Q1 - Questionnaire to competitors, question 17.
[84]  Commission questionnaire Q1 - Questionnaire to competitors, question 82.
[85]  [70-90]% of WhatsApp active users are also Facebook users (paragraph 220 of the Form CO).
[86]  According to the Notifying Party, [60-70]% of Facebook active users were WhatsApp users and [70-90]% of  WhatsApp  active  users  are  also
   Facebook users (paragraph 220 of the Form CO).
[87]  One respondent also suggested that Facebook could split WhatsApp into two different versions, one operating on the basis of a  subscription
   fee and one to be monetised with ads. The Commission's assessment set out below also applies to this possible scenario.
[88]  See https://blog.whatsapp.com/245/Why-we-dont-sell-ads.
[89]  […].
[90]  Bulgaria ([30-40]%), Croatia ([20-30]%), Romania ([40-50]%) and Slovenia ([20-30]%). Market shares have been calculated  on  the  basis  of
   IAB Europe data.
[91]  Belgium ([20-30]%), Bulgaria ([50-60]%), Croatia ([60-70]%), Finland ([20-30]%),  Germany  ([20-30]%),  Greece  ([20-30]%),  Ireland  ([30-
   40]%), Romania ([40-50]%), Slovakia ([20-30]%) and Slovenia ([40-50]%). Market shares relate to the market for  online  display  advertising.
   Market shares have been calculated on the basis of IAB Europe data.
[92]  Commission questionnaire Q1 - Questionnaire to competitors, question 77;  Commission  questionnaire  Q2  -  Questionnaire  to  advertisers,
   question 10.
[93]  Most of the respondents who expect Facebook's position in advertising to be materially strengthened stated that this would  be  the  result
   of Facebook having access to an increased amount of user data. This claim is addressed below (section 5.3.3).
      In addition, certain respondents suggested that Facebook could increase WhatsApp's subscription fee, as a result of which WhatsApp's  users
   would switch to Facebook, thereby increasing Facebook's subscribers  and,  thus,  Facebook's  advertising  revenues  and/or  power  vis-à-vis
   advertisers. However, respondents did not provide any evidence that users would switch to Facebook in response to  a  potential  increase  in
   WhatsApp's subscription fees. Quite the contrary, as explained above in Section 5.1.3.2, the Commission has found that WhatsApp  is  not  the
   closest competitor to Facebook Messenger (let alone to Facebook's social networking site). In any event, even if such increase in  WhatsApp's
   subscription fee and subsequent user switching were to take place, as will be explained further below,  the  market  investigation  indicated
   that a sufficient number of alternative providers of online advertising will remain active post-Transaction alongside Facebook.
[94]  Commission questionnaire Q1 - Questionnaire to competitors, question 79.1.
[95]    See    https://telegram.org/faq#security;    http://techcrunch.com/2014/03/24/telegram-hits-35m-monthly-users-15m-daily-with-8b-messages-
   received-over-30-days/; http://www.theverge.com/2014/2/25/5445864/telegram-messenger-hottest-app-in-the-world.
[96]                     See                    http://techcrunch.com/2014/02/21/bye-bye-whatsapp-germans-switch-to-threema-for-privacy-reasons/;
   http://www.sueddeutsche.de/digital/seit-facebook-deal-whatsapp-konkurrent-threema-verdoppelt-nutzerzahl-1.1894768.
[97]  Commission questionnaire Q2 - Questionnaire to advertisers, questions 5-6.
[98]  Commission questionnaire Q2 - Questionnaire to advertisers, question 13.
[99]  Commission questionnaire Q2 - Questionnaire to advertisers, questions 9, 13.
[100]       Commission questionnaire Q1 - Questionnaire to competitors, question 78.
[101]       A similar theory could hypothetically apply with respect to Facebook's  photo  and  video  sharing  platform  Instagram,  given  that
   Facebook recently started introducing advertising on Instagram in the EEA (see footnote 21 above).
[102]       WhatsApp users may add public-facing photos, their names and status messages. However, they cannot  add  any  further  data  such  as
   birth date, address, etc. that assist in identifying the user.
[103]       After the announcement of the Transaction, WhatsApp’s CEO Jan Koum stated on WhatsApp's blog that “[r]espect for [users’] privacy  is
   coded into our DNA, and we built WhatsApp around the goal of knowing as little about [users] as possible.” He  added  that  “[i]f  partnering
   with Facebook meant that we had to change our values,  we  wouldn’t  have  done  it.”   See  http://blog.whatsapp.com/529/Setting-the-record-
   straight.
[104]       Commission questionnaire Q1 - Questionnaire to competitors, question 77.
[105]       As explained above (paragraphs (138) and (160)), according to the Notifying Party, the fact that Facebook Messenger and WhatsApp  use
   different identifiers (Facebook ID in the case of Facebook and mobile phone numbers in the case of WhatsApp) makes it impossible to  match  a
   user's WhatsApp account with that user's Facebook account on an automated basis. That matching  would  need  to  be  done  manually  by  each
   WhatsApp user or by each of Facebook Messenger user and would entail a series of steps which, according to the Notifying  Party,  most  users
   would be reluctant to take.
[106]       Commission questionnaire Q1 - Questionnaire to competitors, question 79.2.
[107]       The data in this graph originate from an external market intelligence company and have been produced for purposes  unrelated  to  the
   assessment of the Transaction. Those data are presented here for purely illustrative purposes and  are  without  prejudice  to  any  possible
   market definition as regards the provision of data, which, as explained above paragraph (72) is not covered by the Commission's assessment in
   the present decision.

-----------------------
 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE