Facebook faces charges over deliberately misleading EC during WhatsApp takeover

The EC claims Facebook deliberately misled it over its ability to connect user IDs between the two services in 2014

The European Commission (EC) is bearing its regulatory teeth at another Silicon Valley behemoth, this time charging Facebook with allegedly making misleading claims over its ability to match consumers’ Facebook and WhatsApp accounts, during 2014 investigations into its takeover of the messaging service.

The Brussels-based body has today (December 20) issued a formal Statement of Objections to Facebook making the claim with the social network having been given a January 31, 2017, deadline to respond the charge. If found guilty the commission could then impose a fine of up to 1% of Facebook's annual turnover, a penalty that would amount well over $100m dollars.

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. Facebook claimed it would be “unable to establish reliable automated matching between the two companies' user accounts”, with the EC subsequently giving the takeover the all-clear in October 2014.

However, since then WhatsApp issued a number of updates to its terms of service and privacy policies, with the possibility of linking WhatsApp user phone numbers with Facebook user identities now a distinct possibility. Facebook claims these updates are to improve its service; for instance, making better friend suggestions or displaying more relevant ads on WhatsApp users' Facebook accounts.

However, 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, according to the EC. A statement reads: “At this stage, the commission therefore has concerns that Facebook intentionally, or negligently, submitted incorrect or misleading information to the Commission.”

The statement then goes on to quote EC competition commissioner Margrethe Vestager: “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.”

A Statement of Objections is a formal step in an investigation by which the commission informs the companies concerned of the objections raised against them in writing. They can then reply in writing and/or request an oral hearing to present their comments on the case to representatives of the commission.

Facebook has yet to publicly respond to the charges, although if found guilty it could face a financial penalty of up to 1% of its annual turnover, which were just shy of $16bn in 2015 according to a filing from the social network earlier this year.

A threat to Facebook's 'people-based marketing solutions'?

The ability to connect user IDs across screens is central to Facebook's "people-based marketing" mantra, as this form of deterministic targeting makes it easier for brands to assess the ROI of their spend across screens, a key to winning further marketers' media budgets, especially as consumers' internet consumption goes mobile.

The latest move by the EC is the third time in recent months that US tech giants face regulatory investigation, or sanctions from pan-European political bodies; among the recent developments were Google facing anti-trust charges, and Apple being forced to reorganize its tax affairs in the political zone.

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Sean Larkin

All by Sean