Facebook (NASDAQ: FB) was ordered to pay a penalty of €110 million or around $122 million by the European Commission for providing “incorrect and misleading information” regarding its acquisition of WhatsApp during the regulator’s merger inquiry in 2014.
Facebook purchased the mobile messaging service for total of $22 billion, which included the$3 billion in restricted stock units (vested over four years) to the founders and employees of WhatsApp.
According to the European regulator, its findings showed that Facebook was capable of automatically matching WhatsApp users’ identities with its users’ on its platform, contrary to its statement during the time of the merger review process in 2014.
European Commission will not reverse its clearance decision
The European Commission said the penalty will not change its decision approving the social network giant’s takeover of the mobile messaging service. The regulator explained that its approval of the deal was based on a number of factors going beyond automated user matching. At the time, it made an “even if” assessment assuming the possibility of user matching. Therefore, Facebook’s misleading information “did not have an impact on the outcome of the clearance decision,” it said.
Additionally, the regulator explained that under the Merger Regulation, it can impose a penalty of up to 1% of a company’s total turnover in cases of providing misleading information intentionally or negligently.
The European Commission said Facebook committed two separate infringements that are considered serious because it prevented the regulator from having all relevant information for the assessment of the deal.
Facebook says its errors in filing were not intentional
Furthermore, it said that Facebook’s “breach of procedural obligations was at least negligent” since the company acknowledged its infringement of the rules and waives its procedural rights to have access to the file and to an oral hearing—allowing the European Commission to perform its investigation more efficiently. The regulator took into consideration the company’s cooperation.
The fine against Facebook should have been $276 million based on its 2016 revenue if the European Commission imposed the maximum penalty of as much 1% of its total turnover.
“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. 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” said Commissioner Margrethe Vestager.
Facebook also released a statement in response to the penalty. The social network giant admitted committing mistake with its filing with the regulator in 2014. It said, “We’ve acted in good faith since our very first interactions with the Commission and we’ve sought to provide accurate information at every turn. The errors we made in our 2014 filings were not intentional…”
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