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Published on May 19th, 2017 | by

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EU Ruling Sets Unreasonable Precedent for Companies to Predict the Future in Merger Cases, Chilling Data-Driven Innovation

BRUSSELS—The Center for Data Innovation released the following statement from Director Daniel Castro in response to the decision by the European Commissioner for Competition, Margrethe Vestager, to sanction Facebook over its acquisition of WhatsApp in 2014:

The European Commission should take action in cases where companies fail to properly disclose important information as part of merger agreements. However, the merger between Facebook and WhatsApp is no such case. The Commissioner has decided to take this action because Facebook failed to predict its future capabilities: namely, the automated integration of Facebook and WhatsApp accounts. Just because Facebook was not able to do this automatically in 2014, and later developed the capability in 2016, does not mean its original statements were in any way false or misleading. The Commissioner’s decision rests on a non-sequitur, that what was possible in 2016 must have been possible in 2014.

Furthermore, at the time when the Commission approved the merger, it explicitly dismissed concerns about data sharing between the two firms as irrelevant to competition law. In other words, it is strange of the Commissioner to assert that Facebook’s remarks misled the European Commission, when the Commission itself said that its decision deliberately did not take into account the substance of those remarks. If the Commission was concerned it should have said so at the time.  If it was not, and has become concerned since, then it should not retroactively apply expectations that were not known about at the time, because this could contribute to an unsettling impression of policymakers as capricious, thereby undermining confidence in future rulings on mergers.  Such loss of confidence could chill data innovation by deterring mergers between data-driven companies that would otherwise lead to the creation of new services.   

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