Facebook/WhatsApp and the perils of misleading the European Commission
As has been widely reported, the European Commission announced on 18 May 2017 the imposition of a €110 million fine on Facebook for the provision of incorrect or misleading information in relation to its 2014 acquisition of WhatsApp. The merger was cleared following investigation by the Commission under the EU Merger Regulation. However in December 2016, following a change in Facebook's privacy policy, the Commission sent Facebook a Statement of Objections alleging that the company provided incorrect or misleading information to the Commission, both in the notification form and in response to queries from the Commission.
The provision of incorrect or misleading information is an infringement under Article 14(1) of the EU Merger Regulation and it can attract penalties of up to 1% of the aggregate group turnover of the companies which intentionally or negligently provide incorrect or misleading information to the Commission.
Although the Commission has previously fined merging parties for the provision of misleading or incorrect information, such cases are rare: this is the first time the Commission has imposed a fine under the current version of the EU Merger Regulation, which came into force in 2004.
During the merger clearance process for its takeover of WhatsApp, Facebook had told the Commission that it would be unable to establish reliable automated matching between Facebook users' accounts and WhatsApp users' accounts. However, in 2016 WhatsApp changed its terms and conditions and privacy policy to allow for the possibility of linking WhatsApp users' phone numbers with Facebook users' identities.
According to the Commission's press release, Facebook staff were well aware that user matching was a possibility and that it was relevant to the merger filing process. Facebook acknowledged its infringement of the rules and cooperated with the Commission's inquiry into the information provided during the merger process. This was taken into account by the Commission in setting the fine.
The Commission has the power to re-open a merger investigation where a clearance decision was "based on" incorrect information which the notifying party was responsible for. In announcing the fine, however, the Commission was at pains to stress that its merger clearance decision was based on a number of elements which went beyond automated user matching and that, albeit relevant, the incorrect or misleading information provided by Facebook did not have an impact on the outcome of the clearance decision, suggesting that the Commission considers that its power to re-open the investigation has not been triggered.
This will no doubt disappoint those, such as BEUC - the European Consumer Organisation, who argue that it is precisely the "Big Data" issue – the combination of Facebook's and WhatsApp's datasets - that give rises to competition concerns in this case and would like to see the merger investigation re-opened. It could even trigger legal challenges over what is meant by a decision being "based on" incorrect information.
More generally, the Commission's fine on Facebook sends the strongest possible message to merging parties that they must ensure that information submitted to the Commission in the course of a merger inquiry is accurate and not misleading. As Competition Commissioner Margrethe Vestager has said in connection with this case: "Companies are obliged to give the Commission accurate information during merger investigations. They must take this obligation seriously. Our timely and effective review of mergers depends on the accuracy of the information provided by the companies involved."