11 April 2016 – Facebook’s blockbuster acquisition of mobile messaging application WhatsApp has got the green light from the Federal Trade Commission, along with a word of caution not to renege on commitments regarding user privacy.
“We’re pleased the FTC has completed its review and cleared our acquisition of WhatsApp,” a Facebook spokesperson said in a statement Thursday. “Naturally, both companies will continue to comply with all applicable laws after the transaction closes,” she added.
Facebook announced its acquisition of the mobile messaging app, which boasts to have hundreds of millions of subscribers across the globe, in late February.
The social network group was represented during the clearance process by its go-to antitrust team at Covington & Burling, including practice co-chair Thomas Barnett, who helped guide the 2012 acquisition of photo-sharing rival Instagram past the FTC.
Commentators are unsurprised the $19 billion deal seemingly did not raise antitrust concerns: there are plenty of free messaging apps other than WhatsApp or Facebook’s own messaging service, including Gchat, Twitter and Snapchat, and Facebook may well have argued that traditional texting services, as well as Apple’s iMessage, put plenty of pressure on the combined group.
I suspect Facebook managed to convince the FTC that all these services are alternatives in the same market, and that there is nothing particularly unique about the start-up WhatsApp when it comes to text messaging services or competing with Facebook.
But the FTC clearly had other concerns about the merger. In a letter to both companies last week, consumer protection bureau director Jessica Rich warned Facebook that it could face a lawsuit if it does not abide by WhatsApp’s strict privacy policy, including its commitment not to use subscribers’ personal data for targeted ads.
In a letter dated 10 April, Rich said WhatsApp has repeatedly promised not to collect and share too much data from users. In its most recent policy statement, it says it does copy contact details from phone books, save information about user location or copy and keep message content:
“We want to make clear that, regardless of the acquisition, WhatsApp must continue to honor these promises to consumers”.
Both companies have said these promises would remain intact after the $19 billion deal, but that did not stop some consumer advocacy groups worrying that the commitment could be scrapped, especially when Facebook makes most of its money selling ads that target users by age, gender and other factors.
In the course of its review, the FTC received a complaint from privacy research group the Electronic Privacy Information Center (EPIC) asking the commission to block the deal outright because of fears Facebook will use WhatsApp data to profile its users.
Rich did not address these complaints directly. Instead, she warned that if WhatsApp uses information for advertising purposes against its own policy, both companies could face a lawsuit under section 5 of the FTC Act, which covers deceptive practices, or could violate an earlier FTC order holding Facebook to privacy commitments.
Rich’s letter, along with the FTC finding no need to challenge the deal, is a clear signal to companies and pro-privacy groups that the commission can take action against an acquisition if a deal is likely to substantially harm competition but not based on other policy concerns such as privacy, or environmental and labor issues.
In previous merger reviews, such as the FTC’s investigation of Google’s acquisition of internet advertising service DoubleClick in 2007, it said its legal authority only extends to identifying and remedying deals that harm competition, despite serious consumer privacy concerns expressed by many at the time.
Moreover, the then-commission said, regulating the privacy policy of one company post-merger could in fact harm competition in a fast-growing industry.
Rich scarcely mentions the antitrust review in her two-page letter, instead reminding Facebook and WhatsApp that under a consent decree settling previous deception charges, Facebook must get users’ consent before changing its privacy settings. The FTC has made clear it is not going to see privacy as a variable in seeking an injunction against a merger. I think this letter confirms this once again.
Rich said the FTC will continue to monitor the two companies’ practices to ensure they honor their promises to consumers, but added they are not banned from changing how they collect, share and use new WhatsApp data after the deal closes.
