Competition Authority seeks to fine Facebook NIS 6m

Michal Halperin Rami Zarnegar

The Competition Authority alleges that Facebook failed to report two acquisitions in Israel as required by law.

Competition Commissioner Adv. Michal Halperin announced yesterday that the Competition Authority was considering fining Facebook NIS 6 million for failing to notify it of merger and acquisition deals it had carried out in Israel. The Competition Authority stated that it was considering a finding that the company had carried out mergers that were required to be reported under the Competition Law.

<p>The letter summoning Facebook to a hearing concerns acquisition deals that the company carried out in 2018 and 2019 when it bought two Israeli companies, Redkix and Servicefriend, without reporting the deals to the Competition Authority or obtaining approval from the Competition Commissioner before carrying them out as the Competition Law requires.

<p>The Competition Authority states that a monopoly, whether it has been declared as such or not, must submit notification of a merger for any deal to which it is a party and must obtain approval from the Competition Commissioner before the merger is carried out.

<p>The Competition Authority finds that Facebook, which also owns social network Instagram, is "a prima facie monopoly in the market for social networks for private users in Israel, and the deals should therefore have been reported."

<p>Facebook has 60 days in which to make its case before the Competition Commissioner. Facebook has not yet answered the letter.

<p>Facebook stated in response to the report: "We are in constant touch with the Competition Authority. We shall reply to the Competition Authority's preliminary claims to demonstrate that these claims have no cause or basis. There was no reporting duty in relation to these deals, and we believe that the Competition Authority will reach the correct conclusion on this matter."

<p>In certain circumstances, even foreign companies are required to file a notification to the Competition Authority of deals carried out in Israel or abroad. When a foreign company acquires a first company in Israel, it is not obliged to report the deal or obtain approval. However, after a foreign company has already bought a local company, or at least 25% control of a company in Israel, any future acquisition must be reported.

<p>Facebook has made six acquisitions in Israel over the years. Its first was of Snaptu, which developed a platform for running apps on simple telephones, for $70 million. Following the deal, Snaptu transferred to Facebook's main offices in the US and its activity in Israel was shut down.

<p>A year later, Facebook bought acquired facial-recognition technology company Face.com for $100 million.

<p>In 2013 it bought spyware VPN app Onavo for $130 million. The acquisition of Onavo is the subject of a suit filed by the US Federal Trade Commission against Facebook a few months ago. The Federal Trade Commission claims that Onavo's technology enables Facebook to monitor usage patterns of users of various applications in order to find out whether these applications represent a threat to its business. Only after buying Onavo did Facebook set up an official development center in Israel.

<p>In 2015, Facebook announced the acquisition of Kfar Sava-based company Pebbles Interfaces, which developed technology for operating a computer through hand and finger gestures, for $60 million.

<p>In 2018, Facebook bought Redkix, which developed an email platform that serves as an enterprise application, in a deal worth tens of millions of dollars. In 2019, it bought Servicefriend, which developed a customer service bot for messaging. The company became part of Facebook's digital wallet development project.

<p>The demand from the Competition Authority in Israel comes at the same time as the two huge antitrust claims filed against Facebook by US regulators. The claims filed by the US Federal Trade Commission and 48 state attorneys general relate to two acquisition made by Facebook in the past: the acquisition of Instagram for $1 billion in 2012, and the acquisition of WhatsApp in 2014 for $19 billion.

<p><i>Published by Globes, Israel business news - <a href=http://en.globes.co.il>en.globes.co.il</a> - on May 12, 2021</i>

<p><i>© Copyright of Globes Publisher Itonut (1983) Ltd. 2021</i>

Michal Halperin Rami Zarnegar
Michal Halperin Rami Zarnegar
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