‘Companies are obliged to give the Commission accurate information during merger investigations. They must take this obligation seriously’
Brussels, Belgium – December 20, 2016 — The European Commission 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.
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, among other elements, 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. Notifications and information requests are the primary sources of information for the Commission’s review of such transactions. Under the tight deadlines of a merger investigation, it is particularly important that the Commission can rely on the accuracy and completeness of the information provided, regardless of whether it has an impact on the outcome of the assessment.
Next steps
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 (under Article 14(1) of the EU Merger Regulation).
Facebook/WhatsApp merger case
In August 2014, Facebook notified the Commission its plans to acquire WhatsApp. On 3 October 2014, the Commission cleared the proposed acquisition of the consumer communications services provider WhatsApp by Facebook, active in social networking, consumer communications and online non-search advertising services.
The Commission assessed the impact of the transaction on markets for (i) consumer communications services; (ii) social networking services and (iii) online advertising services.
With respect to consumer communications services, the Commission found that Facebook Messenger and WhatsApp were not close competitors and that consumers would continue to have a wide choice of alternative consumer communications apps post-merger. Although consumer communications apps are characterised by network effects, the investigation showed that a number of factors mitigated the network effects in that case.
As regards social networking services the Commission concluded that, no matter what the precise boundaries of the market for social networking services are and whether or not WhatsApp is considered a social network,the companies are, if anything, distant competitors.
With respect to online advertising, the Commission concluded that, regardless of whether Facebook would introduce advertising on WhatsApp and/or start collecting WhatsApp user data for advertising purposes, the transaction raised no competition concerns. This is because, besides Facebook, a number of alternative providers would continue to offer targeted advertising after the transaction, and a large amount of internet user data that are valuable for advertising purposes are not within Facebook’s exclusive control.
Procedural Background
The sending a Statement of Objections does not prejudge the final outcome of the investigation.
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. The companies can then examine the documents in the Commission’s file, reply in writing and request an oral hearing to present their comments on the case to representatives of the Commission and the national competition authorities.
There is no legal deadline for the Commission to complete such inquiries. Their duration depends on a number of factors, including the complexity of the case, the extent to which the companies concerned co-operate with the Commission and the exercise of the rights of defence.