On 18 May 2017 the European Commission announced that it has imposed a €110 million fine on Facebook for providing misleading information in relation to its takeover of WhatsApp. On the same day the Commission issued a Statement of Objections to Altice, a Portuguese telecoms company, alleging that it had breached the ‘standstill’ obligation in the EU Merger Regulation (EUMR) by implementing its acquisition of PT Portugal prior to gaining the Commission’s approval.
The Competition Commissioner, Margrethe Vestager, cited these two cases in a speech to the Romanian Competition Council, signalling that the Commission will take a strict approach where it considers that merger parties are not adequately complying with their procedural obligations under the EUMR. The Commission’s Deputy Director General for Mergers, Carles Esteva Mosso, has further commented that “investigating and sanctioning the provision of misleading information and gun-jumping practices are a pre-requisite to effective and timely merger control”, highlighting the need for merger parties to be mindful of their procedural obligations under the EU merger rules when implementing transactions.
Providing false or misleading information
Under the EUMR the negligent or intentional supply of incorrect or misleading information in a merger notification, or in response to subsequent information requests, may expose the parties to fines of up to 1 per cent of their worldwide group turnover and the possibility of a clearance decision being revoked (Article 14 of the EUMR). In his speech, Mr. Mosso emphasised the importance of the merger parties providing “complete, true and timely information” in order for the Commission to conduct an in-depth analysis within the strict deadlines prescribed by the EUMR.
The Commission’s decision to impose a fine on Facebook of €110 million for providing misleading information relates to its 2014 takeover of WhatsApp, and is the first such decision since the entry into force of the 2004 EUMR.1 The Commission considered that Facebook committed two separate infringements: (i) the provision of incorrect and misleading information in the merger notification form and (ii) then again in a reply to a request for information. In both instances, Facebook had stated that it would be unable to establish reliable automated matching between Facebook users’ accounts and WhatsApp users’ accounts. However, in August 2016 WhatsApp announced updates to its terms of services that included the possibility of linking WhatsApp users' phone numbers with Facebook users' identities. Having learnt of this development, the Commission issued a Statement of Objections in December 2016 and has since concluded that, contrary to Facebook's previous statements, the technical possibility of automatically matching Facebook and WhatsApp users' identities already existed in 2014 and that Facebook’s staff had been aware of such a possibility.
The Commission considered that Facebook was at least negligent in breaching its procedural obligations and deemed the infringements to be serious because they prevented the Commission from having all relevant information for the assessment of the transaction. Mitigating factors taken into account by the Commission included Facebook’s cooperation during the investigation and its acknowledgment of the infringement. The Commission has also stressed that the fining decision has no impact on its 2014 clearance decision. Indeed, the clearance decision was based on a number of elements going beyond automated user matching. The Commission at the time also carried out an ‘even if’ assessment that assumed user matching as a possibility. The Commission therefore considers that, although relevant, the incorrect or misleading information provided by Facebook did not have an impact on the outcome of the case.
The Facebook decision is unlikely to be the only case dealing with the provision of inaccurate information in the near future. In a speech given to the American Bar Association in March 2017, Ms. Vestager indicated that the Commission is looking at a number of other recent merger cases where the parties may have provided misleading information. It has been reported in the press that General Electric has recently confirmed that the Commission is investigating the possible provision of misleading information by General Electric in relation to its proposed takeover of LM Wind Power.
Concentrations with an EU dimension must be formally notified to the Commission (Article 4(1) of the EUMR). Transactions cannot be implemented until the Commission has taken a formal clearance decision (Article 7(1) of the EUMR, known as the ‘standstill’ obligation). The Commission can impose fines of up to 10 per cent of worldwide group turnover for intentional or negligent breach of the notification and standstill requirements. The Commission has so far imposed significant fines on parties who have failed to notify a transaction prior to completion.2
On 18 May 2017 the Commission announced that it had issued a Statement of Objections to telecoms company Altice concerning alleged gun-jumping infringements in relation to its acquisition of PT Portugal in 2015. The Commission was notified of the transaction in February 2015 and adopted a conditional clearance decision in April 2015. The Commission is investigating whether the purchase agreement between the companies contained provisions enabling Altice to exert decisive influence over the target, and whether Altice had in fact exercised decisive influence over PT Portugal, before notification and before clearance of the transaction. In her speech to the Romanian Competition Council, Ms. Vestager indicated that the Commission’s suspicions were raised by press reports that Altice’s executives had been visiting PT Portugal. She further suggested that the Commission is investigating whether Altice may have given instructions to PT Portugal regarding how to handle commercial negotiations and the exchange of commercially sensitive information.
Mr. Mosso has also emphasised the importance of the standstill obligation, stating that the Commission “cannot ensure that competition problems will not materialise if the parties do not respect the standstill obligation of the Regulation and do not implement the merger before they have received the final approval from the Commission”. Indeed, gun-jumping has been a hot topic for competition authorities in recent years, both at national level within the EU (for example in France, where the national competition authority imposed a record €80 million fine on Altice in 2016 in relation to its acquisition of SFR), as well as globally, where authorities in the US, Brazil and China have also been active in this area.
The Commission takes these procedural obligations very seriously. According to Ms. Vestager, the Commission does not “see these cases as a distraction from our work reviewing mergers. Quite the opposite. Because these obligations are what makes it possible to do our job”. These cases serve as a reminder that in addition to the substantive analysis and engagement with the Commission entailed by the merger review process, merger parties must properly consider their compliance with the procedural aspects of the merger rules.