Google acquired Waze just as it was about to make a deal with a smartphone manufacturer

It appears that the U.K. gave a more thorough examination to Google’s acquisition of Waze than U.S. regulators did. While investigating the transaction, the U.K. asked Google to keep Waze separate from the rest of its operations. In December 2013, the final report from the Office of Fair Trading said that with the purchase, Google was eliminating the closest competition to Maps. Waze CEO Noam Bardin agreed; just two months before Google announced the deal to buy Waze, the executive said, “We’re the only reasonable competition to [Google] in this market of creating maps that are really geared for mobile, for real-time, for consumers — for the new world that we’re moving into.”

At the time, many figured that Google would move over some of Waze’s features to Google Maps and shut down Waze since they seemed to compete with each other. Others figured that Google was simply buying Waze to keep it out of the hands of another company. When the deal was announced in 2013, RBC Capital Market analyst Mark Mahaney said that the “move eliminates Waze as a potential acquisition target for competitors who could use the app’s collection of data and 50 million users to bolster their own location-based products.”

There was some truth to the idea that Google was buying Waze to keep it out of the hands of a competitor. Before Google came in with its bid, Waze was reportedly close to a deal to have its app pre-installed on phones made by an unnamed company. In addition, Waze could have worked out a deal with Facebook that would allow users to meet up at certain locations using Waze’s turn-by-turn directions. The U.K. regulator decided to approve the deal noting that with Apple Maps, there already was a strong competitor to Google Maps in the marketplace.

Not everyone believes that the merger should have been allowed to go through. Sally Hubbard, director of enforcement strategy at the Open Markets Institute says, “It was literally Google acquiring its number one competitor in maps. It was a bad deal that should have been blocked.” Google has kept Maps and Waze separate but it has used data collected from Waze to improve the delivery of its ads. As RBC’s Mahaney told clients last September, “New ad formats in Google Maps have clear similarities to existing formats in Waze (coincidence?). Google has now collected enough data through Waze to effectively roll out broader solutions for advertisers in Google Maps and provide them attractive returns on investment without severely impacting the user experience.”

Former Justice Department antitrust official and Yale University economist Fiona Scott Morton believes that the FTC might be interested in the Waze purchase years after the deal closed because the location data Waze collects makes Google’s search advertising more precise. The FTC does have the ability to examine acquisitions made years ago although it isn’t clear what kind of punishment it could impose on Google.