Registered users can save articles to their personal articles list. Login here or sign up here
 Registered users can save articles to their personal articles list. Login here or sign up here

Facebook fined $122m over WhatsApp deal for misleading EU

Approval for WhatsApp deal not affected, won’t be overturned.

Facebook was fined 110 million euros ($122 million) by the European Union for misleading regulators during a 2014 review of the WhatsApp messaging service takeover on the same day the EU threatened to heavily penalise Patrick Drahi’s Altice for implementing for a second time a deal before getting regulatory clearance.

The European Commission won’t overturn approval for the $22 billion WhatsApp purchase as “the incorrect or misleading information provided by Facebook did not have an impact on the outcome of the clearance decision,” the regulator said Thursday in an emailed statement.

The Facebook fine “sends a clear signal to companies that they must comply with all aspects of EU merger rules, including the obligation to provide correct information,” EU Competition Commissioner Margrethe Vestager said. She added in a Bucharest speech that Facebook’s cooperation with EU officials earned it a lower fine.

Altice, which was already fined 80 million euros last year in France for jumping the gun in its takeover of French phone carrier SFR Group, was sent a statement of objections by the EU accusing it of similar misdeeds in relation to the acquisition of telecommunication operator PT Portugal.

The commission suspects Altice may have even implemented the merger prior to its notification to the EU in some instances. Drahi’s company risks a fine of as much as 10 percent of Altice’s annual worldwide sales but the EU’s conditional clearance of the PT Portugal deal in 2015 won’t be affected.

Decisive influence

The commission said it considers that the purchase agreement between the two companies put Altice in a position to exercise decisive influence over PT Portugal before notification or clearance of the transaction, and that in certain instances Altice actually exercised decisive influence over PT Portugal.

Altice doesn’t agree with the commission’s preliminary conclusions and will submit a full response to the EU, the company said in statement.

Vestager targeted Facebook after it announced privacy policy changes in August that would allow the advertising platforms on Facebook and Instagram to draw upon data from WhatsApp. The company informed the EU in 2014 it couldn’t combine WhatsApp data with its other services but moved to do that last year.

The fine from Europe’s powerful antitrust authority caps months of probes from privacy regulators over the WhatsApp data move. Facebook agreed to suspend using data from British users of WhatsApp last year amid UK scrutiny. EU data protection regulators also said Facebook must stop processing user data while they investigate the privacy changes. The US Federal Trade Commission also got a complaint from privacy groups claiming Facebook’s move violates US law on unfair and deceptive practices.

Facebook said the firm “acted in good faith” in its interactions with the commission.

“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,” a Facebook spokesman said. “Today’s announcement brings this matter to a close.”

The social network company said it wouldn’t appeal the EU decision.

The commission’s decision “signals that it means business when it comes to enforcing the merging parties’ obligation to provide accurate information,” said Nelson Jung, an antitrust lawyer at Clifford Chance. “This substantial fine materially exceeds any fine the commission has previously imposed where companies have failed to notify a merger.”

Given the commission didn’t review its merger approval decision “it is not clear whether there could have been anti-competitive aspects to the merger which may be harming consumers,” said Jung.

European consumer group BEUC on Thursday said “it is crucial” that competition authorities look more closely into the possible harm a merger of data-heavy companies could cause.

“It is unacceptable that consumers are continuously exposed to the misuse of their data by Facebook,” said Monique Goyens, the group’s director general. “It is very disappointing that the commission decided not to revise its original decision on the Facebook merger with WhatsApp.”

Vestager, who has the power to levy millions of euros in fines, is proving a tough watchdog over large technology companies and multibillion deals that need to win her approval. She’s weighing three investigations into Google Inc. and ordered the payment of some 13 billion euros in back taxes from Apple Inc. last year. She’s also blocked three mergers and wrested big concessions from others to allay antitrust concerns.

Companies are required to provide accurate information to regulators during a merger probe. Facebook informed regulators in August 2014 that it wouldn’t be able to establish “reliable automated matching between the two companies’ user accounts,” the EU said. The European Commission now says this was technically possible at the time.

The EU’s merger authorities have usually shunned calls for them to examine concerns over data privacy. Their review of the WhatsApp deal only examined how Facebook’s control of data might strengthen its position in online advertising, determining that there was no overlap between the companies and that WhatsApp didn’t collect any user data valuable for advertisers nor would the deal increase the data available to Facebook’s ad services.

Facebook was slapped with France’s maximum privacy fine on Tuesday over other data-protection issues in a concerted clampdown by regulators across Europe. The company agreed under Dutch pressure to stop targeting ads based on users’ sexual orientation, the Dutch privacy authority said.

© 2017 Bloomberg

More stories from Moneyweb
Sonia du Plessis

Sonia du Plessis

Brenthurst Wealth
Moneyweb Click an Advisor
   No comments so far

To comment, you must be registered and logged in.


Don't have an account?
Sign up here

Latest Currencies

ZAR / Euro


Subscribe to our mailing list

* indicates required
Moneyweb newsletters


Moneyweb Investor Issue 25

If the world's best investment managers, who came together at a recent CFA conference, cannot figure whether a crash or correction is looming, ordinary investors can be forgiven for their hesitation. Thus the June issue of The Moneyweb Investor does its best to fill the gaps. With 17 stories and a podcast, you wouldn't want to miss it.

Follow us:

Search Articles:Advanced Search
Click a Company: