European Comission applies colossal 110 million euros fine to Facebook for allegedly providing misleading information on the WhatsApp merger review file

The EU Merger Regulation (1) procedural rules oblige companies in a merger investigation to provide correct information that is not misleading as this is essential for the European Commission (“Commission”) to review mergers in a timely and effective manner. This obligation applies, regardless of whether the information has an impact on the ultimate outcome of the merger as¬sessment.

According to the Commission,(2) when Facebook Inc (Facebook) notified the acquisition of WhatsApp Inc. (WhatsApp) in August 2014 (case M.7217),(3) authorised in October 2014, it informed the Commission that it would be unable to establish reliable automated matching between Facebook users’ accounts and WhatsApp users’ accounts. According to the Commission’s findings, Facebook stated this both in the notification form and in a reply to a request for information from the Commission services. Further, as per the Commission’s assessment, in August 2016, WhatsApp announced updates to its terms of service and privacy policy, including the possibility of linking WhatsApp users’ phone numbers with Facebook users’ identities.

Hence the Commission found that, contrary to Facebook’s statements during 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.

In light of the foregoing the Commission applied in May 2017 a 110 million euros fine, albeit with no impact on the merits of the Commission’s 2014 decision to au-thorise the Facebook/WhatsApp transaction under the EU Merger Regulation as, according to the Commission, the 2014 clearance decision was based on a number of elements going beyond automated user matching. The Commission at the time also carried out an “even if” assessment that assumed user matching as a possibility. As such, the Commission considered that the incorrect or misleading information provided by Facebook did not have an adverse impact on the outcome of the non-opposition decision.

According to Article 14(1) of the EU Merger Regulation, the Commission can impose fines of up to 1% of the aggregated turnover of companies that intentionally or negligently provide incorrect or misleading information to the Commission.

This case marks a new era in the exercise of the enforcement powers provided by the EU Merger Regulation by DG COMP, as this is the first case since the inception of the EU Merger Regulation (in 2004) that a sanction is applied for the alleged disclosure of inaccurate or misleading information on a merger review file.

The fine imposed is also colossal and potentially disproportionate if one takes into account the fact that, as recognised by the Commission, the information at stake had no material impact on its assessment of the transaction on the merits. Still, the deterrence effect of the applied fine, potentially with spill-over effects for enforcement by national competition authorities in merger cases, is straightforward: to provide an unambiguous message to companies that all diligence should be applied in assessing the accuracy of information provided to the Commission in merger control procedures or, if not, they will effectively run the risk of heavy fines and, potentially, the reopening of the merger review process.

This case marks a new era in the exercise of the enforcement powers provided by the EU Merger Regulation by DG COMP, as this is the first case since the inception of the EU Merger Regulation (in 2004) that a sanction is applied for the alleged disclosure of inaccurate or misleading information on a merger review file. The fine imposed is, however, colossal and potentially disproportionate if one takes into account the fact that, as recognised by the Commission, the information at stake had no material impact on its assessment of the transaction on the merits.

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(1) Council Regulation (EC) No.139/2004 of 20 January 2004 on the control of concentrations between undertakings. OJ L 24, 29.01.2004, pp. 1-22.

(2) Press release dated 18 May 2017.

(3) Decision can be accessed at http://ec.europa.eu/competition/mergers/cases/decisions/m7217_20141003_20310_3962132_EN.pdf.