Why Facebook May Soon Be Facing Big Legal Issues in EU

NEWS ANALYSIS: EU members are laying the groundwork for a  cease-and-desist action that could be a landmark case involving social networks and telecoms.

Mark Zuckerberg may have to get more of his legal "suits" mobilized soon.

It looks like the legal maneuvering has only just begun for Facebook regarding its astonishing $19 billion acquisition of WhatsApp and its ultra-popular mobile app, WhatsApp Messenger.

As eWEEK noted back in March when the deal was announced, the transaction was sure to be challenged in the United States by privacy advocates for several reasons, and that is still in the offing. On the international front, however, The Wall Street Journal reported July 10 that an investigation is being undertaken by members of the 28-country European Union about the potential economic, privacy and monopolistic impacts of the deal in that part of the world.

EU members have begun laying the groundwork for a possible cease-and-desist court action by sending detailed questionnaires to several competing online-messaging companies, asking about how the proposed merger will affect their businesses and the overall marketplace. This clearly is intended to become a test case for how the EU will apply its complicated competition laws to the bold, new world of social media.

The current EU action is the first high-level legal look into the business of storage, security and control of personal data by social networks and how those companies use it to create services and make money across international borders. It certainly won't be the last.

Privacy of Top Concern to U.S. and Europe

When the Federal Trade Commission green-lighted the deal three months ago, it advised both Facebook and WhatsApp to maintain their commitments to the privacy of their users and to abide by their wishes. While WhatsApp hasn't been cited publicly for any problems, Facebook, however, has been under fire on a regular basis. The most recent incident, reported earlier this month, was about how Facebook manipulated users' news streams two years ago to accommodate a social-networking emotion-control study.

Ostensibly, the EU is collecting this information to build a case against the ownership of WhatsApp by Facebook, the world's largest social network with more than 2 billion users. It also is possible that the background work now under way will result in no legal action at all.

Underlying all this is big pressure on the EU from European telecommunications carriers. Influential telecoms, such as Orange, Deutsche Telekom and others, have been adamantly against the merger, contending that so-called "over-the-top" operators such as WhatsApp use telecom companies' infrastructure to get away with little or no taxation by going around standard channels. It's likely that state-side telecoms may yell "me, too" at some point.

Over-the-top content refers to the delivery of audio, video and other media over the Internet without a multiple system operator being involved in the control or distribution of the content. Telecoms make money on their pipelines and services, and they certainly do not enjoy being cut out of so much potential income by upstart Web services like these.

For the record, WhatsApp Messenger—the most popular messaging app in Europe—is a cross-platform mobile app that allows users to exchange messages without having to pay separately for Short Message Service (SMS). The freemium WhatsApp Messenger is available for iPhone (free for first year, $1 annually thereafter), Android, BlackBerry and Nokia phones.

A Lot of Money Flying by the Telecoms

In addition to basic messaging, iPhone, Android and BlackBerry WhatsApp Messenger users can send each other unlimited images, video and audio media messages. Facebook's original on-site messaging app has never been one of its most used features.

WhatsApp, which has about 50 employees, has grown extremely fast since its launch in 2009 and started dominating its market segment in Europe three and a half years ago. As of January 2014, the company claimed 430 million users and is now reportedly up to 470 million.

That's an awful lot of traffic—um, make that income—flying right by telecoms.

Zuck, are those lawyers in the room yet? You probably have a few things to talk about.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...