As previously reported in our 2021 Annual Report on Form 10-K, in November 2018, Privacy International filed a complaint with certain data protection authorities, including France's CNIL, against Criteo and a number of other advertising technology companies, arguing that certain of these companies' practices were not in compliance with GDPR. In January 2020, CNIL opened a formal investigation, which is still ongoing. On August 3, 2022, the assigned rapporteur issued a report that claimed various GDPR violations and included a proposed financial sanction against Criteo of €60.0 million ($65.4 million).
Under the CNIL sanction procedures, Criteo has the right to respond in writing, both with respect to the GDPR findings and the quantum of the sanction, following which there will be a formal hearing before the CNIL Sanction Committee. After this formal hearing, the CNIL Sanction Committee will issue a draft decision that will then be submitted for consultation with other European data protection authorities concerned as part of the cooperation mechanism mandated by GDPR. A final decision on resolution and potential financial penalties would likely not occur until mid-2023.
“We strongly disagree with the findings in the CNIL investigator’s report, both on the merits relating to the investigator’s assertions of non-compliance with GDPR and the quantum of the proposed sanction. We find the merits of this report to be fundamentally flawed, and the proposed sanctions to be incommensurate with the alleged non-compliant actions. We look forward to further dialogue with the CNIL as well as to defend our case to the ultimate arbitrator of a final decision. Criteo continues to uphold the highest privacy standards, and operates a fully transparent and regulatory-compliant global business. We will not have any further comment until these ongoing proceedings are resolved,” commented Ryan Damon, Chief Legal Officer at Criteo.
Given the receipt of this report, we have accounted for the proposed penalty as a provision for loss contingency, which is reflected in our financial statements for the period ended as of June 30, 2022 as general and administrative expenses in our amended 8-K and 10-Q. These revisions affected the Company’s net income (loss), earnings per share, and liabilities, for the three and six months ended June 30, 2022. The Company’s non-GAAP results remain unchanged. These revisions have no effect on the Company’s previously issued guidance for the third quarter 2022 or the fiscal year 2022.