EU: Facebook 'misled' Commission in WhatsApp takeover deal

Several EU flags hoisted outside a building

The European Commission has accused Facebook of providing "misleading information" during its takeover of WhatsApp in 2014, a charge that could fine the company 1% of its turnover.

Following an investigation into the $19 million takeover deal of messaging service WhatsApp, the EU claim Facebook "deliberately or negligently" submitted incorrect information regarding automated matching of user accounts between the services.

Facebook had initially claimed that it was unable to reliably automate services to link account IDs with the messaging service WhatsApp, information that was taken into consideration during the initial review of the deal.

But earlier this year WhatsApp announced proposed changes to its privacy policy to allow the service to share data, including phone numbers, with its parent company Facebook - changes that have raised concerns among a number of EU states, including Germany and the UK, which claim they breach privacy rules.

In a preliminary Statement of Objections, the EU now believes Facebook deliberately mislead authorities in breach of obligations under the EU Merger Regulation, suggesting that the technology for sharing account data already existed in 2014.

"Companies are obliged to give the Commission accurate information during merger investigations," said competition policy commissioner Margrethe Vestager. "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," added Vestager.

As no account sharing deal existed at the time of the merger in 2014, customers and regulators have challenged the change in stance, which allows user data, including phone numbers and device information, to be shared with Facebook even if a user has no account on the social media site.

Facebook has since stated that the company had significant technical limitations that prevented the use of cross-platform services, including the sharing of data to match users in 2014, and has nothing to hide from the EU Commission.

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

"We're pleased that the Commission stands by its clearance decision, and we will continue to cooperate and share information officials need to resolve their questions."

Last month WhatsApp placed a temporary ban on sharing European data with Facebook, following privacy complaints resulting in a complete ban in Germany and a temporary ban in the UK amid an ICO investigation. The company claim data will only be used for the purpose of fighting spam while the investigations are carried out.

The Commission has stated that, as the original decision to clear the takeover of WhatsApp was made based on a number of factors, the 2014 deal will remain unchanged. But by potentially breaching obligations to provide "correct and non-misleading information", Facebook could face a fine of up to 1% of company turnover as per EU Merger Regulation, potentially in the hundreds of millions.

Facebook has until the end of January 2017 to respond to the claim, after which a hearing will be scheduled to assess whether the Silicon Valley-based company deliberately misled the Commission.

Dale Walker

Dale Walker is the Managing Editor of ITPro, and its sibling sites CloudPro and ChannelPro. Dale has a keen interest in IT regulations, data protection, and cyber security. He spent a number of years reporting for ITPro from numerous domestic and international events, including IBM, Red Hat, Google, and has been a regular reporter for Microsoft's various yearly showcases, including Ignite.