Facebook's Kustomer buy could face EU probe after merger referral

Natasha Lomas
·4 min read

The European Union may investigate Facebook's $1 billion acquisition of customer service platform Kustomer after concerns were referred to it under EU merger rules.

A spokeswoman for the Commission confirmed it received a request to refer the proposed acquisition from Austria under Article 22 of the EU's Merger Regulation -- a mechanism which allows Member States to flag a proposed transaction that's not notifiable under national filing thresholds (e.g. because the turnover of one of the companies is too low for a formal notification).

The Commission spokeswoman said the case was notified in Austria on March 31.

"Following the receipt of an Article 22 request for referral, the Commission has to transmit the request for referral to other Member States without delay, who will have the right to join the original referral request within 15 working days of being informed by the Commission of the original request," she told us, adding: "Following the expiry of the deadline for other Member States to join the referral, the Commission will have 10 working days to decide whether to accept or reject the referral."

We'll know in a few weeks whether or not the European Commission will take a look at the acquisition -- an option that could see the transaction stalled for months, delaying Facebook's plans for integrating Kustomer's platform into its empire.

Facebook and Kustomer have been contacted for comment on the development.

The tech giant's planned purchase of the customer relations management platform was announced last November and quickly raised concerns over what Facebook might do with any personal data held by Kustomer -- which could include sensitive information, given sectors served by the platform include healthcare, government and financial services, among others.

Back in February, the Irish Council for Civil Liberties (ICCL) wrote to the Commission and national and EU data protection agencies to raise concerns about the proposed acquisition -- urging scrutiny of the "data processing consequences", and highlighting how Kustomer's terms allow it to process user data for very wide-ranging purposes.

"Facebook is acquiring this company. The scope of 'improving our Services' [in Kustomer's terms] is already broad, but is likely to grow broader after Kustomer is acquired," the ICCL warned. " 'Our Services' may, for example, be taken to mean any Facebook services or systems or projects."

"The settled caselaw of the European Court of Justice, and the European data protection board, that 'improving our services' and similarly vague statements do not qualify as a 'processing purpose'," it added.

The ICCL also said it had written to Facebook asking for confirmation of the post-acquisition processing purposes for which people's data will be used.

Johnny Ryan, senior fellow at the ICCL, confirmed to TechCrunch it has not had any response from Facebook to those questions.

We've also asked Facebook to confirm what it will do with any personal data held on users by Kustomer once it owns the company -- and will update this report with any response.

In a separate (recent) episode -- involving Google -- its acquisition of wearable maker Fitbit went through months of competition scrutiny in the EU and was only cleared by regional regulators after the tech giant made a number of concessions, including committing not to use Fitbit data for ads for 10 years.

Until now Facebook's acquisitions have generally flown under regulators' radar, including, around a decade ago, when it was sewing up the social space by buying up rivals Instagram and WhatsApp.

Several years later it was forced to pay a fine in the EU over a "misleading" filing -- after it combined WhatsApp and Facebook data, despite having told regulators it could not do so.

With so many data scandals now inextricably attached to Facebook, the tech giant is saddled with customer mistrust by default and faces far greater scrutiny of how it operates -- which is now threatening to inject friction into its plans to expand its B2B offering by acquiring a CRM player. So after "move fast and break things", Facebook is having to move slower because of its reputation for breaking stuff.

Update: Facebook has now sent this statement, attributed to a company spokesperson:

This deal will bring more innovation to businesses and consumers in a dynamic and competitive space. More people will benefit from customer service that is faster, richer and available whenever and however they need it. We look forward to demonstrating to regulators that Facebook and Kustomer would offer more choices and better services through this pro-competitive deal.