EU Says Facebook Misled Officials -- WSJ
December 21 2016 - 3:02AM
Dow Jones News
Commission's surprise charge stems from company's purchase of
WhatsApp in 2014
By Sam Schechner
The European Union on Tuesday accused Facebook Inc. of giving
"incorrect or misleading information" to investigators who were
probing its purchase of chat app WhatsApp in 2014, a surprise
charge that exposes the company to a hefty fine.
The European Commission, the bloc's top competition-enforcement
body, said it suspects that Facebook inaccurately claimed during
the 2014 takeover that it was unable to reliably match user
accounts between Facebook and WhatsApp -- something the company
started doing two years later when it began combining user data
across the services.
If it decides Facebook breached EU merger-procedure rules, the
commission could fine the company up to 1% of its world-wide
revenue. That could work out to up to $179 million based on
Facebook's 2015 revenue. The EU made the accusation in a formal
statement of objections.
The charge sheet, to which Facebook must respond by the end of
January, adds a new regulatory battle for the social-media company
over its conduct with WhatsApp, a privacy-centric chat tool it
purchased for $22 billion in cash and stock.
"We've consistently provided accurate information about our
technical capabilities and plans," a Facebook spokesman said. "We
respect the commission's process and are confident that a full
review of the facts will confirm Facebook has acted in good
faith."
It is rare for companies to be charged with making misleading
statements during a merger-approval process in Europe, and the EU
says it hasn't taken such a step since new rules that boosted fines
came into effect in 2004.
"What we're looking at today is a moral stand to say, even to
big tech companies, that you don't lie to the agency," said Nicolas
Petit, a professor of competition law at University of Liège, in
Belgium.
The potential fine is Europe's latest salvo in its aggressive
policing of big U.S. tech companies, including Alphabet Inc. and
Apple Inc., over issues including antitrust, privacy, and
taxes.
The accusation also comes near the end of a year when, amid
soaring revenue and profit, Facebook has faced criticism on several
fronts, resulting from its increasing influence -- and European
authorities have been quick to pounce. Last week, senior German
legislators proposed a new law requiring Facebook and its social
media peers to remove fake news and hate speech from their
platforms within 24 hours.
In September, a German privacy watchdog ordered Facebook to stop
collecting user data from WhatsApp, one of several investigations
by national data-protection regulators, including those in Ireland,
the U.K. and France, about its announcement in August that Facebook
would start merging user data from WhatsApp. Earlier in the year,
Germany's Federal Cartel Office announced it was investigating
whether Facebook abuses its dominance as a social network to
harvest personal information.
Facebook has said it follows European privacy laws, but it has
paused some of the data sharing pending the outcome of those
probes.
A Facebook spokesman said the company initially reached out to
EU antitrust officials earlier this year to inform them of its
intention to start linking up information between WhatsApp and
Facebook after "we figured out a way to reliably match the users
across the two services."
In September, following WhatsApp's announcement that it would
start sharing user data with its parent company, the commission
said it was aware of the changes and was "in touch with Facebook on
the issue." On Tuesday, however, the commission said its objections
were procedural and "unrelated to neighboring privacy,
data-protection or consumer-protection issues."
The next step in the EU case will be Facebook's response, after
which the EU's antitrust arm will decide whether Facebook was
guilty of providing the misleading information and, if so, assess a
fine. Any decision can then be appealed in court.
The commission said the probe "will not have an impact" on its
approval of the WhatsApp deal. The EU approved the WhatsApp
takeover without any conditions.
"A statement of objections is us raising concerns. We haven't
come to a final conclusion," a European Commission spokeswoman said
at a press conference Tuesday. She added that statements by
Facebook and WhatsApp have led the commission "to believe there
could be a deliberate omission of information. Facebook now has its
right to respond and we will take it from there. "
Write to Sam Schechner at sam.schechner@wsj.com
(END) Dow Jones Newswires
December 21, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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