Facebook Inc.’s regulatory issues have gotten in the way of its expansion plans, the New York Times reported today.

Two insiders told the paper that the social network had sought to buy popular video chat service Houseparty, but dropped the bid for fear a deal could draw scrutiny from antitrust authorities. The sources said the reversal came late last year as Facebook was actively engaged in acquisition talks with the startup behind the app.

Launched in 2016 by San Francisco-based Life on Air Inc., Houseparty enables up to eight participants to join a shared video chat session. The app quickly emerged as a hit among young internet users. Ten months after the service became available on the App Store, Life on Air co-founder Sima Sistani said in an interview that the startup’s installed base had passed 1 million daily active users.

Fast forward to December of 2018, and the startup was reportedly in “advanced” buyout negotiations with Facebook. The Times’ sources said that Facebook’s corporate development team put the kibosh on the discussions a few weeks later over concerns it may draw regulatory backlash. Life on Air went on to be acquired by videogame developer Epic Games Inc. earlier this year.

Houseparty would have been a valuable pickup for Facebook because of its young user base. In her 2016 interview, Life on Air’s Sistani disclosed that 60% of the app’s users were under the age of 24, a demographic that Facebook is increasingly struggling to keep on its platform amid competition from newer services.

The company has previously used acquisitions to great effect to consolidate its position in the social media market. Facebook paid $1 billion for Instagram in 2012 and shelled out $19 billion to acquire WhatsApp two years later. As of the second quarter of 2019, more than 2.1 billion people use Facebook, Instagram, WhatsApp or Messenger every day.

Facebook’s dominance of the social media landscape has promoted high-profile calls to break up the company. And the social network’s repeated mishandling of user data led the Federal Trade Commission to slap it with a $5 billion penalty last month. The agency also ordered Facebook to implement a number of organizational changes and subject itself to increased oversight, but critics have argued that the FTC should have gone further.

Facebook continues to face ongoing regulatory pressure in the wake of the $5 billion penalty. The company has been hit by a privacy lawsuit in Canada and is among the tech giants that the U.S. Justice Department is investigating as part of a recently launched antitrust review.

Photo: Facebook