Facebook Fined for WhatsApp Data Linking Fallout

by Alston & Bird
Contact

On 18 May 2017, the European Commission (“Commission”) fined Facebook €110 million ($122 million) for misrepresentations made in its application for competition clearance of the company’s acquisition of WhatsApp. In its merger application, Facebook claimed that it would be unable to automatically match Facebook users’ accounts and WhatsApp users’ accounts for marketing and other purposes. However, in August 2016, WhatsApp introduced functionality enabling the linking of WhatsApp users’ phone numbers with Facebook users’ identities. This is the first time since the new Merger Regulation entered into force in 2004 that the Commission has imposed a fine for the provision of misleading information during a merger clearance.

Back in 2014 Facebook asked the Commission to give it the green light to acquire WhatsApp. The Commission conducted an investigation, under the EU Merger Regulation, to determine whether the acquisition would violate EU competition rules and give Facebook an undue advantage. One question the Commission asked during the investigation was whether Facebook would be able to automatically match the data of its users with and the data of WhatsApp users. Such automatic data matching could substantially enlarge Facebook’s database and enhance use of the data for marketing and other purposes.

During the investigation Facebook informed the Commission that it lacked the technical ability to establish reliable automated data matching. However, the technical possibility of automated matching already existed at the time and was officially introduced on the WhatsApp platform in 2016. The Commission launched an inquiry to investigate the matter. Facebook acknowledged that its provision of incorrect information violated merger procedures and cooperated with the Commission in order to obtain a more lenient fine. This did not prevent the Commission from levying a fine of €110 million Euros, however, which the Commission claimed was both proportionate and deterrent.

The Commission did not state that Facebook’s provision of incorrect information had a material effect in getting the deal through. In giving the green light, the Commission had already considered “what if” scenarios that included automated user matching. In particular, the Commission examined whether the acquisition presented significant risks for three different markets: consumer communication services, social networking services, and online advertising. The Commission’s assessment was that the two companies were distant competitors and the acquisition posed no significant risks. Had the Commission determined otherwise, it might have attached conditions on clearance, in which case the provision of misleading information on automated data matching could have resulted in an even heavier fine.

This is the first time the Commission has imposed a fine on a company for providing incorrect or misleading information under the Merger Regulation. The fine comes at a time when EU stakeholders and consumer organizations are pushing hard for greater accountability from companies in relation to users’ data. The EU competition authorities are also scrutinizing more closely mergers of online companies for potential consumer harms related to data. This development reflects a general call from the EU Commission to antitrust bodies to work more closely with privacy bodies in regulating the data economy. Recently, for instance, a German antitrust official described Amazon’s dual role in collecting data as a reseller and then using it to boost its own retail branch as a “huge issue”.

The WhatsApp case therefore signals that the EU is aggressively monitoring data-heavy companies, and that EU merger clearance will take into account the data-related impacts of corporate deals.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Alston & Bird | Attorney Advertising

Written by:

Alston & Bird
Contact
more
less

Alston & Bird on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.