Thursday 23 November 2017

Facebook takes €110m hit from the iron lady of Brussels

European Union Competition Commissioner Margrethe Vestager
European Union Competition Commissioner Margrethe Vestager
Adrian Weckler

Adrian Weckler

Once again, EU Competition Commissioner Margrethe Vestager has flexed her legal muscles against an American multinational tech firm.

This time it's Facebook, which has been fined €110m by the European Commission for providing false information when it was applying for regulatory approval to buy Whatsapp in 2014.

The issue at stake is its undisclosed mixing and matching Facebook and Whatsapp accounts. Both services are used by millions of Irish people.

Facebook told the Commission that it wouldn't be able to automatically match up user accounts from Facebook and Whatsapp for the purposes of sharing information and potential advertising. But in 2016, it announced that it was to introduce the automated process after all. Furthermore, it admitted to the Commission that it had been able to do it all along and was wrong to have said it couldn't.

So it has taken its €110m fine without complaint. It may have done this out of relief that the Commission hasn't used the infringement as a basis for reconsidering Facebook's legal clearance to take over Whatsapp. Or it may have felt that a €110m fine, which is roughly equivalent to 0.5pc of its turnover, is better than the maximum allowable fine of €220m, equal to 1pc of its turnover.

Calculation

But Facebook's quick acceptance may also have been down to a calculation that it's not worth taking Ms Vestager on.

Over the last two years, Ms Vestager has demonstrated a strong appetite to confront big US technology companies, many of which have their primary European offices bases in Ireland.

Last year, she caused global headlines with a €13bn fine against Ireland and Apple, holding that Ireland had not collected enough tax from the iPhone maker. Although that ruling is currently being challenged both by Apple and by Ireland, Ms Vestager has shown no signs of backing down.

The EU Competition Commissioner also has three separate investigations underway against Google, Facebook's biggest international advertising rival.

"The 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," Ms Vestager said of the €110m Facebook fine. "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."

Facebook's European battles are far from over. It is currently awaiting a key ruling from Irish authorities over data protection that could significantly affect its business in Europe.

It has also been fined by various national European data regulators in recent months, including a €3m fine in Italy for information-sharing with Whatsapp and a €150,000 fine in France for sharing information unlawfully.

Facebook disputes the findings, partly on the basis that its main regulatory base in Europe is the Irish data protection commissioner, Helen Dixon.

However, it can't push the issue too aggressively for a number of reasons. A tough new Europe-wide law next year called the General Data Protection Regulation (GDPR) allows regulatory authorities to fine companies like Facebook up to 4pc of annual turnover for data-related infractions. In Facebook's case, that would be close to €1bn.

It is also naive not to take into account the political climate at present. On this score, Facebook is under assault on multiple fronts. Across the world, it is currently fighting perceptions that it is a main channel for 'fake news'. It is also increasingly at the sharp end of 'old' media bitterness over the transformation of news consumption habits and consequent advertising businesses. In Europe, it must also take into account a general dislike of US technology multinational companies among continental politicians, both for economic and cultural reasons.

Google and Microsoft both have experience of this sentiment within EU states. Facebook may soon see its share.

Irish Independent

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