Facebook Has Another Dirty Little IPO Secret

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The road to Facebook's IPO didn't get any smoother Thursday, when The Financial Times' April Dembowsky reported an impending Federal Trade Commission investigation into the company's Instagram purchase. Citing two anonymous sources "familiar with the matter," Dembowsky explained that the FTC seeks to determine whether or not the $1 billion buy violates fair competition rules and has already begun collecting information from two of Facebook's competitors. Which two? We're dying to know.

These kinds of investigations are standard for acquisitions over $68.2 million, but they throw another wrinkle in Facebook's S-1 filing. There, the social network claimed that the Instagram deal would be done by the second quarter, but according to experts, the FTC probe could last up to a year. "They're going to want to take some months to investigate and understand the market and other players," Stanford Law professor Mark Lemley told FT. "And there may be more parties with an interest in submitting information."

The news comes at a bit of an awkward time for Facebook. On Wednesday, the company had to amend its S-1 filing to point out that it didn't "currently directly generate any meaningful revenue from the use of Facebook mobile products, and [its] ability to do so successfully is unproven." By any measure, the Instagram purchase was meant to provide a quick path to mobile success, but since Facebook isn't allowed to do anything with the popular mobile photo service until the deal is fully closed, that path will remain closed for the foreseeable future. Meanwhile, competitors must be stoked to have a little extra time to mount a mobile counterattack.

This article is from the archive of our partner The Wire.