FTC launches competition probe into Facebook’s acquisition of Instagram

According to the Financial Times, the FTC is launching a “competition probe” into Facebook’s recent acquisition of photo sharing app Instagram.

According to the Financial Times’ sources, such an investigation could take upwards of six to twelve months, which would delay the close of the sale, which Facebook had slated for Q2 of this year.

The acquisition was seen as putting Facebook on a faster track for mobile dominance, but the company must wait until the deal goes through to integrate the service into its own in any way.

The probe, which is standard for a size of this deal, will consist of the FTC gathering information from Facebook’s competitors, as well as looking at the overall impact of the acquisition itself.

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Facebook’s IPO is scheduled for May 18th and it’s unclear if this situation will run any interference for the process.

If the Facebook deal with Instagram doesn’t go through, there is a kill switch in place that would pay $200M out to Instagram.

Here’s the line from Facebook’s S-1 filing that mentions it:

We have agreed to pay Instagram a $200 million termination fee if governmental authorities permanently enjoin or otherwise prevent the completion of the merger or if either party terminates the agreement after December 10, 2012.

Either way, Instagram makes a few bucks.

We have reached out to Facebook and will let you know if we hear anything.

UPDATE: Facebook has declined to comment.