Facebook could be hit with a hefty fine in Europe for allegedly misleading the regulators who approved the company's $22 billion acquisition of messaging service WhatsApp.
The potential penalty, which could total 1% of the company's revenue, stems from Facebook's recent decision to draw on WhatsApp data about users for ad purposes. In a statement issued Tuesday, the European Commission accused Facebook of misrepresenting its ability to mesh data with WhatsApp.
The EC alleged that Facebook indicated in 2014, when regulators were considering whether to approve the deal, that it wasn't able to automatically match data about Facebook and WhatsApp users.
"The Commission takes the preliminary view that, contrary to Facebook's statements and reply during the merger review, the technical possibility of automatically matching Facebook users' IDs with WhatsApp users' IDs already existed in 2014," the EC stated today.
Facebook responded by saying that it has "consistently provided accurate information about our technical capabilities and plans."
In August, WhatsApp announced plans to begin sharing users' phone numbers and other information with Facebook. Facebook said it would draw on those numbers to make friend suggestions to WhatsApp users, and also send them ads, based on Facebook data. The company also will use phone numbers for other purposes, including analytics and fighting spam.
WhatsApp promised to let people opt out of receiving targeted ads (and receiving friend suggestions) based on phone numbers. But the company said it wouldn't allow people to opt out of sharing their phone numbers with Facebook.
Before its merger with Facebook, WhatsApp was famous for its stringent privacy policies, including a promise to never share users' personally identifiable information for ad purposes.
European countries have been pushing back against Facebook's move. Last month, regulators in the United Kingdom said Facebook had agreed to stop drawing on WhatsApp data about UK-based users for ad purposes. Earlier, regulators in Germany also told Facebook to stop collecting data about WhatsApp users in that country.
In the U.S., privacy advocates Electronic Privacy Information Center and the Center for Digital Democracy asked the FTC to intervene in Facebook's plan to merge data about users with WhatsApp. The FTC said in September that it is reviewing the advocates' complaint, but hasn't publicly taken action.
Marc Rotenberg, president of EPIC, called the FTC's failure to act "surprising."
"The decision to transfer the verified phone number -- literally the key to the user profile -- from WhatsApp to Facebook contradicts the representations that were made at the time of the acquisition," Rotenberg tells MediaPost. “What is surprising is the silence of the US Federal Trade Commission on this issue. Consumer agencies around the world have criticized Facebook’s broken privacy promises. Yet, the FTC remains strangely silent."