CLIP of the month: The Bundeskartellamt’s Facebook Decision and the intersection of competition law and data protection

This month’s CLIP is a comment from Assistant Professor John Newman on the German Competition Authority’s (BKA) recent Facebook Decision regarding its use of user data (see here and here). Importantly, he highlights that the harm identified in the Decision seems more like a breach of privacy than a competition law issue. Here at the CLIP Board we wonder if the BKA’s approach will set a trend for other national authorities. 

In February 2019 the BKA found that Facebook had abused its dominant position on the markets for social networks, with a market share of more than 95% (daily active users) and more than 80% (monthly active users).  “According to Facebook's terms and conditions users have so far only been able to use the social network under the precondition that Facebook can collect user data also outside of the Facebook website in the internet or on smartphone apps and assign these data to the user’s Facebook account. All data collected on the Facebook website, by Facebook-owned services such as e.g. WhatsApp and Instagram and on third party websites can be combined and assigned to the Facebook user account” (see here).

The BKA imposed a number of conditions on Facebook’s use of user data:

  • Facebook-owned services like WhatsApp and Instagram can continue to collect data, however assigning the data to Facebook user accounts will only be possible subject to the users’ voluntary consent. Where consent is not given, the data must remain with the respective service and cannot be processed in combination with Facebook data.
  • Collecting data from third party websites and assigning them to a Facebook user account will also only be possible if users give their voluntary consent.

If consent is not given for data from Facebook-owned services and third party websites, Facebook will have to substantially restrict its collection and combining of data. Facebook is to develop proposals for solutions to this effect.

The Decision reflects the importance attributed to non-financial parameters of competition for antitrust enforcement, such as privacy and data protection, in an environment in which many online platforms’ offerings are nominally “free”.  While it is clear that price is not the only parameter of competition, Assistant Professor Newman questions whether antitrust is the most appropriate tool for tackling these issues.

Final credits roll on the Hollywood movies pay-TV saga

The curtain has come down on the long running Hollywood movie/pay-TV licencing saga (see here). 

Plot synopsis

This epic has seen Sky and major Hollywood movie studios do battle with the Commission over exclusive territorial restrictions in copyright licences (see here). 

Midway through, Paramount offered Commitments to the Commission, removing these restrictions in its pay-TV licence agreements (here). The ending was never in doubt once French Film Producer Canal+ lost its challenge before the CJEU (here).

In the final act, the Commission (cast as sheriff of the Digital Single Market), has accepted formal Commitments from Disney, NBCUniversal, Sony Pictures, Warner Bros. and Sky to remove all restrictions on unsolicited (or “passive”) sales.  

Characters and chronology

US film studios typically license films to a single pay-TV broadcaster in each Member State.

In July 2015 the Commission sent a Statement of Objections finding that clauses in film licences for pay-TV between Disney, Fox, NBCUniversal, Paramount Pictures, Sony Pictures, Warner Bros. and Sky UK breached EU competition law. 

These clauses required Sky UK to block access to the studios' films through its online pay-TV services and/or through its satellite pay-TV services to consumers outside its licensed territory (UK and Ireland) (so-called "geo-blocking"); and required some of the studios to ensure that broadcasters outside the UK and Ireland are prevented from making their pay-TV services available in the UK and Ireland.

Crucially, these clauses restrict the ability of broadcasters to accept unsolicited requests (so-called "passive sales") for their pay-TV services from consumers located outside their licensed territory. 

Last stand – the Commitments 

In July 2016 the Commission accepted a series of Commitments from Paramount (see here) to remove all restrictions on passive sales, and in March 2019 the Commission accepted similar Commitments from Disney, NBCUniversal, Sony Pictures, Warner Bros. These specify that: 

  • When licensing its film output for pay-TV to a broadcaster in the EEA, each committing studio will not (re)introduce contractual obligations that prevent such pay-TV broadcasters from providing cross-border passive sales to consumers that are located in the EEA but outside of the broadcasters' licensed territory (no "Broadcaster Obligation");
  • When licensing its film output for pay-TV to a broadcaster in the EEA, each committing studio will not (re)introduce contractual obligations that require the studios to prevent other pay-TV broadcasters located in the EEA from providing passive sales to consumers located in the licensed territory (no "Studio Obligation");
  • Each committing studio will not seek to enforce or bring an action before a court or tribunal for the violation of a Broadcaster Obligation and/or Studio Obligation, as applicable, in an existing agreement licensing its output for pay-TV.
  • Each committing studio will not enforce or honour any Broadcaster Obligation and/or Studio Obligation in an existing agreement licensing its output for pay-TV.

Similarly, Sky will: 

  • neither (re)introduce Broadcaster Obligations nor Studio Obligations in agreements licensing the output for pay-TV of Disney, Fox, NBCUniversal, Paramount Pictures, Sony Pictures and Warner Bros.; and
  • not seek to enforce Studio Obligations or honour Broadcaster Obligations in agreements licensing the output for pay-TV of Disney, Fox, NBCUniversal, Paramount Pictures, Sony Pictures and Warner Bros.

The commitments will apply throughout the EEA for five years and cover online and satellite pay-TV and video on demand services.

The critics’ review

The Commitments have allowed the Commission to reprise its role of as the sheriff of the Digital Single Market and scourge of geo-blocking.  

However, while the Commission is able require the elimination of contractual territorial sales restrictions it cannot alter the fact that copyright law is national, rather than harmonised at the EU level, as illustrated by the copyright carve-out in the Geo-blocking Regulation (see here). 

Therefore, it seems likely that anything other than a pan-EU licence will leave the broadcaster exposed to the risk of infringement proceedings if it sells into countries not covered by the licence. 

Chancellor’s Spring Statement: Digital Advertising Market Study

Presenting his Spring Statement this afternoon, Chancellor Philip Hammond welcomed the Furman review, an independent review of competition in the digital economy. Following its recommendation he has written to the CMA asking it to carry out a market study of the digital advertising market (see here). The Chancellor also announced that the government will respond to calls in the review (and, indeed, from elsewhere) to update the UK’s competition rules for the digital age. This focus on digital and the tech sector is in line with recent  announcements in the UK and other jurisdictions (here and here).

The Furman review found that the major digital platforms have become increasingly dominant and there has been little scrutiny and no blocking of platform acquisitions (Google/YouTube, Facebook/WhatsApp) (see here).

The review recommended:

  • Setting up a digital markets unit (the Unit) tasked with fostering greater competition and consumer choice in digital markets (likely to be based in the CMA). 
  • A digital platform code of conduct, based on a set of core principles, which would apply to conduct by digital platforms that have been designated as having a ‘strategic market’ status.
  • The Unit should pursue personal data mobility and systems with open standards where these will deliver greater competition and innovation.
  • The Unit should be able to impose measures where a company holds a strategic market status and have enduring market power over a strategic bottleneck market (this is akin to ‘significant market power’ test applied to telecoms).
  • Updating merger policy and legislation to ensure that it can be more forward-looking and take better account of technological developments.
  • Clarify the standards for blocking or imposing conditions on a merger. 
  • The CMA undertake a market study into the digital advertising market encompassing the entire value chain, using its investigatory powers to examine whether competition is working effectively and whether consumer harms are arising.

Reflections

The recommendations of the Furman review and the request for a market study into the Digital Advertising Market Study are major developments for the digital economy. The shape of the proposals reflects existing telecoms regulation, particularly the suggestion that conditions might be imposed on incumbents’ ‘significant market power’. As mentioned above, the UK is not the only European jurisdiction grappling with these issues. For example, the EU is still in the process of implementing recommendations and developing policies in pursuit of the ‘Digital Single Market’  (see our previous posts here, herehere and here). The possible review of EU merger thresholds to deal with and review the possible competition consequences of so-called ‘killer acquisitions’ has also been discussed widely in Brussels. The recommendations in the Furman report, and the Chancellor’s embrace of the need for CMA involvement, bring into focus the wider question of how the UK will navigate the imperative of a pan-European approach to the digital economy with the political turbulence created by Brexit…