The European Commission announced it has opened an in-depth investigation to assess the proposed acquisition of Kustomer by Facebook under the EU Merger Regulation.

The Commission said it is concerned that the proposed transaction would reduce competition in the market for the supply of Customer Relationship Management (CRM) software.

The Commission said it is also concerned that the proposed transaction would further strengthen Facebook’s market position in the online display advertising market by increasing the already significant amount of data available to Facebook for personalisation of the ads it displays.

Commission executive vice-president Margrethe Vestager said: “It is important to closely review potentially problematic acquisitions by companies that are already dominant in certain markets.

“This applies in particular to the digital sector, where Facebook enjoys a leading position in both online display advertising and in over-the-top messaging channels, such as WhatsApp, Messenger or Instagram.

“Our investigation aims to ensure that the transaction will not harm businesses or consumers, and that any data that Facebook gets access to does not distort competition.”

The Commission added: “In particular, the Commission is concerned that, as a result of its combination with Kustomer, Facebook may foreclose access to its business-to-consumer (B2C) over-the-top (OTT) messaging channels, namely WhatsApp, Messenger or Instagram.

“These channels account for a large portion of the B2C OTT messaging market, which is an important input for the supply of CRM software services.

“The preliminary investigation suggests that Facebook may have the ability, as well as a potential economic incentive, to engage in foreclosure strategies vis-à-vis Kustomer’s rivals, such as preventing these companies from using Facebook’s messaging channels or degrading access to these channels.

“Such foreclosure strategies could reduce competition in the market for the supply of CRM software and the market for the supply of customer service and support CRM software, leading to higher prices, lower quality and less innovation for business customers, which may in turn be passed on to consumers.”