By Sam Schechner, Emily Glazer and Valentina Pop
European Union antitrust investigators have sought internal documents related to Facebook Inc.'s alleged efforts to identify and squash potential rivals, deepening authorities' preliminary probe into the social-media company, according to people familiar with the matter.
The European Commission, the EU's executive arm, has in recent weeks ramped up its pursuit of documents related to allegations by rival companies and politicians that Facebook leveraged access to its users' data to stifle competition, rewarding partners and cutting off rivals, those people said.
Investigators are reviewing changes Facebook made to software interfaces that let app developers access its data, as well as Facebook's use of Onavo, an Israeli virtual-private-network app the tech giant bought in 2013, the people added. Onavo provided Facebook detailed data on its VPN customers' use of rival apps, giving Facebook intelligence on competitors before they became major threats, The Wall Street Journal reported in 2018.
Facebook, which shut down Onavo last year, said it used the app as one of several market intelligence tools and disclosed its data collection to users. It has said it maintained a principled approach to working with app developers, and that changes to its platform were geared toward building a sustainable business.
As part of the preliminary probe, the commission in recent weeks ordered Facebook to produce an array of documents -- including internal emails, chat logs and presentations related to those topics -- using an EU law that allows for daily fines to punish noncompliance, the people familiar with the matter said. Facebook's lawyers pushed back, arguing that the orders initially were so broad that they would produce millions of documents and could surface personal information about Facebook employees, some of those people said.
In response, the commission recently withdrew the order and is issuing a new one that reduces the scope of its document request, some of those people said.
As of Wednesday, Facebook wasn't aware of a narrowed request, one of the other people said.
"We are committed to cooperating with regulators on inquiries about the competitive landscape in which we operate," Timothy Lamb, an associate general counsel at Facebook, said through a spokeswoman.
The European Commission declined to comment.
The EU's interest in how Facebook manages access to user data sheds new light on a preliminary probe that could pose a major challenge to the company. The European Commission disclosed the inquiry in December, saying it was examining how Facebook gathers and monetizes data, but provided little other information.
In the event of a formal probe resulting in a decision against the company, the EU could order Facebook to change its business practices and issue fines of up to 10% of world-wide annual revenue, which for Facebook would amount to more than $7 billion, based on Facebook's revenue in 2019.
The European Commission's decision to make binding requests stemmed in part from authorities' apparent lack of confidence that Facebook would comply fully, according to people familiar with the matter. Some Facebook officials, for their part, thought the requests were too broad and beyond the remit of an antitrust investigation, some of those people said.
In 2017, the commission fined Facebook EUR110 million (nearly $123 million at the time) for providing inaccurate or misleading information when the EU was reviewing its WhatsApp purchase nearly three years earlier. The commission said Facebook had falsely assured EU officials that it wouldn't be possible to automatically match user accounts from both services reliably. Facebook said the errors in its filings were unintentional and that it had acted in good faith.
The recent escalation of the EU's antitrust investigation into Facebook comes ahead of a Brussels trip the company is planning for Chief Executive Mark Zuckerberg, during which he might meet with EU competition chief Margrethe Vestager, according to a person familiar with the matter. Ms. Vestager has a role in shaping new tech-regulation proposals for the bloc.
Under Ms. Vestager, EU competition authorities increasingly have focused on the data practices of tech giants -- including Amazon.com Inc. and Alphabet Inc. as well as Facebook -- in assessing whether such companies are abusing their alleged market dominance.
Antitrust scrutiny of the tech industry is intensifying across the Atlantic as well. The U.S. Federal Trade Commission has been examining Facebook's acquisitions as a central part of its antitrust inquiry, seeking to determine whether they were part of a campaign to consume potential rivals and head off competitive threats, the Journal reported in August.
The Justice Department, which shares antitrust-enforcement authority with the FTC, as well as a group of U.S. states led by New York, are also looking into possible antitrust issues involving Facebook.
Advocacy groups and politicians -- including presidential candidate Sen. Elizabeth Warren (D., Mass.) and one of Facebook's co-founders, Chris Hughes -- in the past year have called to break up the company, which has more than 2.5 billion users world-wide who log on at least monthly, according to its most recent quarterly report.
Antitrust officials are also weighing changes to competition rules to address some large tech companies. The Competition and Markets Authority, the U.K.'s competition enforcer, said in December that it was considering recommending a variety of new regulations, including one that would force Facebook to make some of its services interoperable with rivals' to ease the emergence of competition.
The EU's preliminary probe and document requests have focused in part on allegations in a lawsuit filed against Facebook in 2015 by Six4Three LLC, according to people familiar with the matter. That lawsuit, which has led to continued legal wrangling over the release of documents, stems from Facebook's move in 2014 to restrict certain companies' access to user data while maintaining "whitelist" access for some partners.
The Journal reported on some of the documents related to those allegations in 2018, and a cache was subsequently released by the U.K. Parliament, which is considering tighter regulation of social-media companies.
Facebook hasn't disputed the documents' veracity but has previously described them as old materials that "have been taken out of context by someone with an agenda against Facebook," adding that they "have been distributed publicly with a total disregard for U.S. law."
Another cache of documents from the case released last November, and reviewed by the Journal, included internal Facebook presentations containing Onavo data that showed the competitive threat some Facebook executives perceived from WhatsApp, months before Facebook announced its purchase of the chat app.
Write to Sam Schechner at firstname.lastname@example.org, Emily Glazer at email@example.com and Valentina Pop at firstname.lastname@example.org
(END) Dow Jones Newswires
February 06, 2020 08:14 ET (13:14 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.