Facebook is in trouble in Europe, as the European Commission just slapped the company with a hefty 110 million euro fine (roughly $122 million).
The EC is the antitrust watchdog of the European Union and it just fined Facebook for offering misleading information about its $19 billion acquisition of WhatsApp back in 2014.
Facebook Offered Incorrect Or Misleading Info On WhatsApp Deal
The EC hit Facebook with a $122 million fine for providing misleading or incorrect statements when the Commission investigated the WhatsApp deal under the EU Merger Regulation.
"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," says Commissioner Margrethe Vestager, who is in charge of competition policy. "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."
The fine is among the heftiest regulatory penalties Facebook has ever received, and it comes at a time when Facebook already swims in troubled waters in Europe. Just a few days ago, French and Dutch privacy watchdogs ruled that Facebook violated strict rules regarding data protection. An Austrian court also ruled recently that Facebook should do more to counter hate speech.
EU Facebook Fine Explained
The reason for the fine is making misleading statements to regulators, but let's dive a bit deeper. According to the EC, the social networking company said at the time that it could not automatically match Facebook and WhatsApp user accounts. Facebook stated so in the notification form, as well as in a reply to a request for information.
Despite its answer that it cannot create automated matches between Facebook and WhatsApp user accounts, Facebook updated its terms of service and privacy policy in August 2016 and announced the possibility of matching the phone numbers of WhatsApp users with the identities of Facebook users.
The EC sent Facebook a Statement of Objections on Dec. 20, 2016, expressing its concerns. Moreover, the Commission notes that it discovered that Facebook was actually able to automatically match WhatsApp and Facebook user accounts even back in 2014, when it said it couldn't. Facebook employees reportedly knew it was possible, yet the company made misleading statements.
The Commission notes that this decision to fine Facebook doesn't affect its previous decision to authorize the deal under the EU Merger Regulation. The decision to clear the acquisition took several factors into account, which went beyond just user matching.
At the same time, this decision has nothing to do with other ongoing antitrust investigations of procedures, nor other issues related to privacy, data protection or consumer protection, which might stem from WhatsApp's update to privacy policy and terms of service from August 2016.
The Fine Amount
The Commission has the authority to issue fines equaling up to 1 percent of the companies' aggregated turnover if they provided misleading or incorrect statements either by negligence or intentionally. The Commission takes a number of factors into account in determining the amount of a fine, including the nature of the infringement, the gravity, the duration, and any aggravating or mitigating circumstances.
Compared to the tens of billions of dollars Facebook makes each year from online advertising, the $122 million fine is a drop in the ocean. Even if it were otherwise, a fine would arguably be preferable to voiding the deal altogether.
