Google/Waze deal results in probe from the OFT

Steven Loeb · August 27, 2013 · Short URL:

British regulatory agency looking to possible violations of competition laws

(Updated to reflect comment from Google and the OFT)

Google's purchase of Waze two months ago has already begun bearing fruit but that doesn't mean that everything is fine and dandy. In fact, Google is now facing a second anti-trust agency, which is looking into the deal to make sure that the purchase does not have an adverse effect on competition.

The acquisition has attracted the attention of the U.K.'s Office of Fair Trading (OFT), which announced Tuesday that it would be looking into the deal in order to determine whether or not it violated any competition laws in the country.

"The Office of Fair Trading is considering whether this agreement has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services," the agency wrote on its website.

The OFT is seeking any complaints over "any competition or public interest issues" that are to be submitted by September 9th.

As this is a merger review, not an enforcement action, the OFT is not in a position to fine any of the parties, an OFT spokesperon explained to VatorNews. Specifically, the agency is looking to see if the deal results in a substantial lessening of competition in the UK market.

There are several possible outcomes from the OFT investigation: the deal may be cleared and can go through. If, however, some competition problems are found, the OFT can either work with the parties to get undertakings (usually divestments) and the deal goes ahead after being slightly modified, or it will be referred to the Competition Commission for an in-depth review if the problems cannot easily be fixed.

This is not the first time that a regulatory agency has decided to look into Google's $966 million acquisition. Less than two weeks after the deal was officially announced in June, the FTC opened a probe that also was meant to look any potential issues with competition.

Google had been able to close the deal without U.S. regulatory approval due to that fact that Waze's revenue and assets in the U.S. were below the $70.9 million, below the threshold required for an antitrust review. The FTC probe has, so far, not turned into a full investigation.

Despite these potential setbacks, Google and Waze are going full steam ahead with their merger.

The two companies recently announced that they were beginning their integration, with Google getting real time incident reports, while Waze got Google Search and Street View.

Waze, which was founded in 2007 in Israel, is a navigation app with a crowd-sourcing twist: it encourages drivers to get into their cars and share driving conditions and experiences with other members of the online community. In return, Waze provides real-time information on the circulation and short-cuts, while making suggestions for stops along the way.

The app has almost 50 million users and the company has raised $67 million, most recently $30 million in growth funding in October 2011, led by Horizons Ventures Hong Kong, which manages the private venture investments of Li Ka Shing in the technology sector, the Kleiner Perkins Caufield & Byers (KPCB) Digital Growth Fund and iFund.

As per its acquisition, Waze is remaining independent, and continuing to operate in Israel.

A Google declined to comment on the pending investigation.

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