facebook app
While the fine may not mean much in financial terms for Facebook, it may be a sign of things to come as the EU tightens its data laws PHOTO: Eduardo Woo

European Union regulators have fined Facebook $122 million for providing what it describes as misleading information during the European Commission’s (EC) investigation into Facebook’s 2014 acquisition of messaging service WhatsApp for $19 billion.

The EC is the executive arm of the European Union.

EU Gets Tough

The fine is a clear sign that the EU is toughening up on regulations concerning trans-Atlantic mergers and acquisitions and that deals approved in the US may still fall flat in Europe.

In a statement about the fine, European Commissioner for Competition Margrethe Vestage said:

"Today's decision sends a clear signal to companies that they must comply with all aspects of EU merger rules, including the obligation to provide correct information. And it imposes a proportionate and deterrent fine on Facebook. The Commission must be able to take decisions about mergers' effects on competition in full knowledge of accurate facts."

While $122 million might be considered tough, it was lower than the potential $276 million fine had the EU levied the maximum penalty, which equals 1 percent of turnover for companies that breach merger rules. This is the first time the EC imposed the fine since the 2004 Merger Regulation came into effect. 

It follows another fine imposed on Facebook earlier this week, this time by French regulators, of $165,000 for failing to prevent its users’ data being accessed by advertisers.

While $165,000 is pocket change for the San Francisco-based company, the fact that it was imposed over data privacy concerns in one European country raises the possibility that other EU countries will follow suit.

Dutch regulators, for example, also ruled this week that the company had broken privacy rules, but so far they have not imposed a fine.

'Misleading' Facebook, WhatsApp Promises

The WhatsApp’s issue revolves around the link between Facebook and WhatsApp and whether Facebook, at the time of the deal, could match Facebook accounts with WhatsApp accounts.

Facebook assured the EC then that it could not and would not match the accounts of users of both services. The EC statement added that Facebook had made the assurances to this effect in writing.

However in an update to its terms of service and privacy policy last year, Facebook announced that it would start sharing WhatsApp data with the rest of the company and that it could match WhatsApp phone numbers with Facebook accounts.

On Dec. 20, 2016, the Commission addressed a Statement of Objections to Facebook detailing its concerns about the terms of service changes. The statement adds:

“The Commission has found that, contrary to Facebook's statements in the 2014 merger review process, the technical possibility of automatically matching Facebook and WhatsApp users' identities already existed in 2014, and that Facebook staff were aware of such a possibility.”

The EC stressed the fine would have no impact on its original October 2014 approval of the merger. 

The EC statement added:

“Today’s decision is unrelated to either ongoing national antitrust procedures or privacy, data protection or consumer protection issues, which may arise following the August 2016 update of WhatsApp terms of service and privacy policy.”

For its part Facebook said that it had acted in good faith throughout the entire process. In a statement it posted to its website it said:

“We’ve acted in good faith since our very first interactions with the Commission and we’ve sought to provide accurate information at every turn. 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. Today’s announcement brings this matter to a close.”

Misuse of Consumer Data

For its part, the European Consumer Organization has described the ruling as disappointing.

“It is unacceptable that consumers are continuously exposed to the misuse of their data by Facebook. The acquisition of WhatsApp was just one step to strengthen the market power of the social media company,” it said in a statement.

“It is very disappointing that the Commission decided not to revise its original decision on the Facebook merger with WhatsApp. It is crucial in our data economy that competition bodies more closely scrutinize the potential consumer harm of a merger between data-heavy companies.”

It added that the case underlined the need for antitrust bodies to co-operate more closely with privacy bodies, who are currently looking at how Facebook is using personal data.

Concerns about the change in terms aren't limited to Europe however. Privacy campaigners in the US complained to the Federal Trade Commission (FTC) last year about them as well, but the FTC has yet to respond.