​​Facebook’s WhatsApp data claim should prompt regulatory skepticism, top Australian official says

19 October 2018 8:15am

15 October 2018. By James Panichi

Facebook’s 2015 assurances that to merge information contained on its network with data owned by takeover target WhatsApp would have been technically impossible are a reminder that regulators should maintain a “healthy skepticism” about such claims, Australia’s top competition official has said.

In a speech today (see here), Australian Competition & Consumer Commission Chairman Rod Sims said Facebook’s claims, which turned out to be false, showed that competition regulators needed to “take with a grain of salt” any suggestion that a particular conduct isn’t legally or technically possible.

In 2017, the European Union imposed a fine of 110 million euros ($127 million today) on Facebook for supplying misleading information during a review of its 2014 purchase of instant-messaging service WhatsApp by the European Commission, the EU’s executive.

“I am not saying that the ACCC would have reached a different view [on authorizing the deal],” Sims said. “[B]ut we … are now very much alive to the significance of data, the implications of the network effects associated with these platforms and the potentially far-reaching consequences of acquisitions of small rivals.”

Speaking at an event* in Sydney, Sims said the landscape in which data-based tech companies operated was evolving so quickly that regulators could struggle to predict a start-up’s future impact on competition.

Citing as an example Facebook’s purchase of photo-sharing app Instagram in 2012, Sims said it would be “extremely difficult to predict … whether, in the absence of the acquisition by Facebook, Instagram would have grown and become an independent challenger to Facebook.”

When European regulators examined the deal in 2014, Sims said, Instagram had no revenue and only 13 employees, and its potential was difficult to establish.

“We do, however, know where we are now," he said. "Instagram is the second-largest social media platform in Australia, next to Facebook,” Sims said.

As for Google’s 2007 move to acquire Internet advertising technology company DoubleClick for $3.1 billion, Sims said the deal’s key issue was “the magnitude of data that Google was able to collect” — something that may not have been appreciated by regulators at the time.

“[I]t is fair to say that the true significance of such data and the Google-DoubleClick combination has only become apparent recently,” he said.

But Sims also criticized Google for claiming at the time that it would be contractually prevented from using the enlarged database from the DoubleClick acquisition to improve the targeting of advertisements on its website.

“In 2014, Google combined the Google and DoubleClick databases and let users know by virtue of an update to its privacy policy,” Sims said. “Their previous representation was clearly not accurate.”

Referring to Australia’s newly introduced data-portability right — known as the Consumer Data Right  — Sims said he welcomed the ACCC’s new role in enforcing and developing the proposed new measures. The first raft of data-portability rules, affecting the banking industry, will be implemented by mid-2019.

“We are out there talking to banks, consumer groups, fintechs and broader stakeholders,” Sims said, adding that the regulator was considering the option of extending the CDR to social media and other digital platforms. But any move in that direction would require caution, he warned.

“Extending the CDR is clearly not the only option, but any data-sharing obligation runs into the same issue: privacy concerns and, in particular, whether it is in consumers’ interests for their personal information, even if de-identified or aggregated, to be shared with other businesses.

ABA 2019