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Tuesday, December 20, 2016
EC Alleges Facebook Provided Misleading Information About WhatsApp Takeover


The European Commission (EC) has sent a Statement of Objections to Facebook alleging the company provided incorrect or misleading information during the Commission's 2014 investigation under the EU Merger Regulation of Facebook's planned acquisition of WhatsApp.



The European Commission (EC) has sent a Statement of Objections to Facebook alleging the company provided incorrect or misleading information during the Commission's 2014 investigation under the EU Merger Regulation of Facebook's planned acquisition of WhatsApp.

A Statement of Objections is a formal step in an investigation by which the Commission informs the companies concerned, in writing, of the objections raised against them.

Commissioner Margrethe Vestager, in charge of competition policy, said: "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. In this specific case, the Commission's preliminary view is that Facebook gave us incorrect or misleading information during the investigation into its acquisition of WhatsApp. Facebook now has the opportunity to respond."

When reviewing Facebook's planned acquisition of WhatsApp, the Commission looked at the possibility of Facebook matching its users' accounts with WhatsApp users' accounts. In its notification of the transaction in August 2014 and in a reply to a request of information, Facebook indicated to the Commission that it would be unable to establish reliable automated matching between the two companies' user accounts. While the Commission took this information into account in its review of the transaction, it did not only rely on that information when clearing the transaction

Subsequently, in August 2016, WhatsApp announced, among other updates to its terms of service and privacy policy, the possibility of linking WhatsApp user phone numbers with Facebook user identities. WhatsApp explained that this was done with a view to improving the service by, for example, allowing Facebook to offer better friend suggestions or displaying more relevant ads on WhatsApp users' Facebook accounts.

In today's Statement of Objections, the Commission takes the preliminary view that, contrary to Facebook's statements and reply during the merger review, the technical possibility of automatically matching Facebook users' IDs with WhatsApp users' IDs already existed in 2014. At this stage, the Commission therefore has concerns that Facebook intentionally, or negligently, submitted incorrect or misleading information to the Commission, in breach of its obligations under the EU Merger Regulation.

A company's obligation to provide correct and non-misleading information in a merger investigation is essential for the Commission to review mergers and takeovers effectively.

The current investigation is limited to the assessment of breaches of procedural rules. As the Commission's October 2014 decision to clear Facebook/WhatsApp was based on a variety of factors going beyond the possibility of matching user accounts, the current investigation will not have an impact on that decision which remains effective. The current investigation is also unrelated to neighbouring privacy, data protection or consumer protection issues.

Facebook now has now until 31 January 2017 to respond to the Statement of Objections. If the Commission's preliminary concerns in this case were confirmed, the Commission could, impose a fine of up to 1% of Facebook's turnover of the EU Merger Regulation).

"We respect the Commission's process and are confident that a full review of the facts will confirm Facebook has acted in good faith, a Facebook spokeswoman said.

"We've consistently provided accurate information about our technical capabilities and plans, including in submissions about the WhatsApp acquisition and in voluntary briefings before WhatsApp's privacy policy update this year," she added.

The company will continue to cooperate and give the information officials need to resolve their questions, she said.



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