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Facebook's Instagram takeover moves forward with go-ahead from OFT

Four months after Facebook revealed its plans to purchase social photo app Instagram for a mind-boggling $1 billion (£646 million), the Office of Fair Trading has given the deal an official go-ahead.

The OFT said in a regulatory filing that it had reached the decision to not refer the acquisition to the Competition Commission. The regulatory body had been investigating the merger to determine whether it would potentially limit competition by preventing people from using other apps or sites.

In particular, the OFT was concerned that Instagram users would not be allowed to upload their photos to non-Facebook sites and networks and that Facebook users would be forced to use Instagram as their default photo-sharing service.

“We examined this in light of them both offering social networking services, looking at potential competition in social networking services, and in the supply of photo apps and whether the merger might result in the merging parties limiting people from others using other apps or other sites,” an OFT spokesperson told TechCrunch.

“In brief we concluded that there are several relatively strong competitors to Instagram which appear to pose a stronger constraint to Instagram than Facebook does,” he added, without specifying which photo apps were considered “strong competitors.”

If the OFT’s investigation had concluded that the merger was likely to reduce competition, it would have been sent to the Competition Commission for further review. In the US, the Federal Trade Commission is also investigating the deal because of similar concerns.

When Instagram was purchased in April, it had some 50 million users. By July, that figure had ballooned to 80 million.

But in the months that have followed the announcement of the acquisition, Facebook’s glow has dulled considerably. Concerns about its mishandled IPO and a $157 million (£100 million) second quarter loss have added to the chatter about whether the social network will ever be able to monetise its mobile users enough to justify its value.