Facebook has been smacked with a €110 million fine by the antitrust wing of the European Commission for providing incorrect or misleading information about its acquisition of WhatsApp.
Three years ago, Facebook claimed that it did not have the technical capabilities to match existing Facebook accounts with the WhatsApp accounts it would acquire—a claim that Brussels’ competition chief Margrethe Vestager strongly disagrees with.
“The commission has found that… the technical possibility of automatically matching Facebook and WhatsApp users’ identities already existed in 2014, and that Facebook staff were aware of such a possibility,” the commission said on Thursday.
Back in 2014, upon the pronouncement of their impending nuptials, WhatsApp promised that “nothing” would change for its hundreds of millions of users after being acquired by Facebook. By August 2016, however, the free content ad network had reneged on that claim: WhatsApp rolled out some new terms of service that explicitly allowed Facebook to hoover up user data, ostensibly to provide targeted advertising.
It was these new terms of service that caught the eye of Vestager and her team, and in December 2016 the European Commission announced it would be investigating whether Facebook had provided incorrect or misleading information.
The commission can impose fines of up to one percent of the turnover of a company when it intentionally or negligently provides incorrect information during a merger or acquisition. The fine imposed on Facebook—€110 million or about £94/$122 million—is about 0.5 percent of the company’s reported $27 billion revenues in 2016.
Vestager said Facebook had committed two separate infringements: once when it provided incorrect or misleading information in its paperwork to acquire WhatsApp in 2014, and again when the EC requested further information from the company. By that rationale, the €110m fine for two breaches under EU competition rules is small: it could have been as large as €480 million.
“In setting the amount of a fine, the commission takes into account the nature, the gravity, and duration of the infringement, as well as any mitigating and aggravating circumstances,” the commission said. It added:
the Commission considers that Facebook staff were aware of the user matching possibility and that Facebook was aware of the relevance of user matching for the commission’s assessment, and of its obligations under the Merger Regulation. Therefore, Facebook’s breach of procedural obligations was at least negligent.
The commission has also considered the existence of mitigating circumstances, notably the fact that Facebook cooperated with the commission during the procedural infringement proceedings. In particular, in its reply to the commission’s Statement of Objections, Facebook acknowledged its infringement of the rules and waived its procedural rights to have access to the file and to an oral hearing. This allowed the commission to conduct the investigation more efficiently. The commission has taken Facebook’s cooperation into account in setting the level of the fine.
On the basis of these factors, the commission has concluded that an overall fine of €110 million is both proportionate and deterrent.
Vestager said the “decision sends a clear signal to companies that they must comply with all aspects of EU merger rules, including the obligation to provide correct information. And it imposes a proportionate and deterrent fine on Facebook. The commission must be able to take decisions about mergers’ effects on competition in full knowledge of accurate facts.”
It’s important to note that the fine has no impact on the commission’s authorisation in 2014 of a Facebook–WhatsApp merger; the commission already knew that automated user matching was a possibility and approved the merger anyway.
Facebook claimed it had “acted in good faith” with Vestager’s office and had “sought to provide accurate information at every turn.” It added: “The errors we made in our 2014 filings were not intentional and the commission has confirmed that they did not impact the outcome of the merger review.”
More Info: arstechnica.co.uk