Did Facebook mislead regulators?
When the European Commission was scrutinizing the 2014 acquisition for approval, one of the many factors that it looked at was the possibility that Facebook would eventually try to match up WhatsApp accounts with Facebook accounts. At the time, Facebook told the Commission that it would be very challenging from a technical perspective to reliably match user accounts in an automated way. There were many factors that led the Commission to approving the deal, and this reassurance from Facebook contributed. There’s a clear disconnect between what Facebook initially maintained and the changes that WhatsApp implemented a few months ago, since evidently the companies have figured out a way to match user accounts in a scalable and reliable way. Moreover, this capability likely existed in 2014 when Facebook was responding to regulatory inquiries, the Commission alleges. As a result, the Commission now believes that Facebook either intentionally or negligently misled regulators. As you can expect, the Commission is none too happy about it. But the approval of the deal two years ago was predicated on a wide range of factors, with the possibility of account matching being a relatively minor consideration. The Commission is not attempting to overturn its prior decision, or somehow undo the acquisition, which would probably be impossible at this point. It’s not as if the data sharing represents a major antitrust concern; lots of companies share data. Besides, Facebook and WhatsApp already stopped sharing user data throughout the European Union in October following backlash from privacy regulators in different countries. Rather, the Commission is more interested in preserving the integrity of its review process, which requires companies to submit accurate information. If Facebook knowingly provided inaccurate information, that’s cause for concern. The Commission is now investigating, and sent Facebook a strongly worded letter asking it to explain itself. The Commission may impose a fine of 1% of annual revenue (approximately $200 million), if Facebook’s response to the Commission’s concerns prove unsatisfactory.
Here’s Facebook’s statement:
The good news for Facebook is that the Commission is extremely unlikely to impose a fine of this magnitude, at least if you look at the Commission’s history in these types of cases. Worst-case scenario: Facebook gets a slap on the wrist. Best-case scenario: It satisfies the Commission and walks away in the clear. Neither outcome really affects the social network’s long-term prospects.