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EU Alleging Facebook For WhatsApp Deal Misleading

(Credit: Carl Court / Staff) European Officials Accuse Facebook of Misleading Them on WhatsApp DealEU Alleging Facebook For WhatsApp Deal Misleading
December 21
5:53 AM 2016

European competition officials filed charges on Tuesday against Facebook, accusing the social media giant of making misleading statements to receive regulatory approval for its $19 billion purchase of WhatsApp, the internet messaging service.

The accusation, which could lead to a fine of up to 1 percent of Facebook's yearly revenue, meaning a penalty of about $200 million, comes amid growing tension with Europe's policy makers over how the company is able to dominate much of the region's digital world.

The social network is grappling with lengthy investigations into how it uses people's digital data and fears that its perceived inability to clamp down on hate speech and fake news may have a harmful effect on how Europeans use popular internet services like Facebook Messenger and Instagram, which is also owned by the company.

Facebook has faced similar questions in the aftermath of the United States presidential campaign, during which fake news reports were widely shared on the platform.

The company denies all of the allegations, but says it is doing more to remove fake news articles and posts that promote hate speech.

On Tuesday, Margrethe Vestager, Europe's competition chief, said Facebook had misled regulators in 2014 when it bought WhatsApp. She said the company did not outline its plans to match people's Facebook accounts with those on the popular messaging app, which now has more than a billion users worldwide.

In August, Facebook announced that it would start sharing some people's digital information between the two services, allowing the company to send tailored advertising or "friend" suggestions to users. The company said the revamped service would also help to fight spam text messages.

Yet Ms. Vestager said the potential of such linking was not explained when the social network sought regulatory approval for the purchase, despite questioning from European officials.

By subsequently adding the data sharing to its wider digital offerings, she said, Facebook misled officials, since the company already had the ability to match people's accounts when the takeover was first announced.

"Companies are obliged to give the commission accurate information during merger investigations," Ms. Vestager said in a statement on Tuesday. Such information was required to review potential industry-changing acquisitions, she said, and companies "must take this obligation seriously."

Facebook said that it had acted in good faith when seeking approval of the deal from European regulators, and that the company had contacted the European Commission, the executive arm of the European Union, at the start of this year about its new plans to match people's accounts.

"We respect the commission's process," a Facebook spokeswoman, Sally Aldous, said in a statement. "We will continue to cooperate and share information officials need to resolve their questions."

Facebook has until the end of next month to respond to the European competition charges and there is no fixed deadline for the authorities in Brussels to make a decision in the case. Any legal appeal against the potential ruling could take years to resolve.

Twelve years ago, the commission raised the maximum allowable fine to the current level of 1 percent of annual revenue to dissuade companies from misleading regulators during mergers.

Despite having brought similar cases against other companies, the commission has never imposed the potentially higher fines. The previous record in such a case dates to 1999, when the commission fined the German postal operator Deutsche Post 100,000 euros, or about $105,000 at current exchange rates, for two offenses. At the time, the maximum fine for each offense was €50,000.

Despite the new regulatory standoff, Facebook's acquisition of WhatsApp is not in question. Any European decision against Facebook would not restrict the increasing dominance that the social network and WhatsApp have over how people in the Western world communicate.

Facebook's plans to link WhatsApp to its increasingly powerful online advertising business model have come under increasing scrutiny in Europe, which has some of the toughest privacy and competition rules.

A month after Facebook made its August data-sharing announcement, a German privacy regulator ordered the company to stop sharing people's details between WhatsApp and Facebook. The British data protection watchdog quickly followed suit, and by the end of October, Facebook had shut down the data-sharing program across all of the 28-member European Union.

The company still shares people's digital information in the United States and elsewhere, although privacy campaigners have filed legal challenges with the Federal Trade Commission.

Facebook's legal problems in Europe, in part, represent a rite of passage as the company has grown into a global technology behemoth.

Google is fighting three separate charges that it broke the region's antitrust rules, Apple is appealing a demand to repay $13.5 billion in back taxes and Uber has been accused of operating illegally across the bloc. The companies deny the charges.

European policy makers say that they are protecting the region's 500 million people from potential harmful acts by these dominant American companies, though industry executives have often accused the region's lawmakers of unfairly targeting Silicon Valley giants to promote European rivals.

© 2017 VCPOST, All rights reserved. Do not reproduce without permission.
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