8 March 2018
At the end of 2017, the German competition authority (BKA) provisionally concluded that certain Facebook polices in relation to users’ data are an abuse of its dominant position in the German market for social networks. It published an accompanying position paper.
The BKA’s provisional dominance finding takes into account Facebook’s 30 million monthly users in Germany (with 23 million using Facebook on a daily basis), as well as the allegedly high barriers to entry for new social networking platforms (a point to which we return below).
It considers the terms and conditions Facebook imposes on its users to be abusive, requiring them to choose between accepting “the whole Facebook package”, including an extensive disclosure of personal data, or not using Facebook at all.
Specifically, the BKA takes issue with the requirement for users to accept Facebook’s right to collect data from third party websites: data which is made available to Facebook by operators that have embedded the Facebook ‘like’ or ‘login’ options. Data is collected by Facebook even where users do not click on such options, and is then associated with the user’s Facebook account. According to Cliqz, Facebook’s reach may stretch to over 25% of all websites.
The BKA considers that users could not meaningfully consent to Facebook’s data processing requirements, as they have no alternative but to consent if they wish to access Facebook’s platform. The BKA characterises this as "exploitative business terms”.
As we have previously noted, the investigation is a test case on the interplay between big data, consumer protection and competition law (here and here). But is this investigation an opening salvo in a new frontier for competition enforcement, or more of a modish dalliance with the hipster zeitgeist?
It certainly concerns an unusual alleged form of abuse, since it does not appear to depend in any meaningful sense on Facebook’s dominance (save perhaps in the extent of the data collection). Nor does it readily seem to fulfil the classical requirement of an abuse which uses “methods different from those governing normal competition [which …] has the effect of hindering the maintenance of the degree of competition existing in the market or the growth of that competition” (Case 85/76, Hoffmann La Roche).
It is not uncommon for investigations which challenge the boundaries of antitrust to be relatively clear about the potential harm to competitors, but much less clear about the harm to consumers or the competitive process. This case is rather the converse – with its most controversial aspect perhaps being the BKA’s theory of consumer harm, which is based on users’ loss of control of their data: “Facebook offers its service for free. Its users therefore do not suffer a direct financial loss from the fact that Facebook uses exploitative business terms. The damage for the users lies in a loss of control: they are no longer able to control how their personal data are used”. This theory necessarily assumes that users are sufficiently tied into the platform to be unwilling or unable to ‘click away’ and select an alternative messaging service. Indeed, in Facebook’s public statement about the recent development in the BKA’s investigation, it strongly emphasised its lack of market power, which is both a pre-condition for any abuse finding and in this case is closely tied to the nature of the abuse itself. The BKA’s position paper seeks to redress this apparent focus on consumers, noting the high economic value of the data gathered by Facebook, and its relevance for targeted advertising which in turn makes Facebook more attractive to advertisers, a concept referred to as “identity-based network effects”. The interest in online advertising is of course not limited to the BKA, but is an increasingly hot topic in competition policy generally – see for example the ongoing French competition authority sector inquiry (see here and here). It is also questionable how the case can be reconciled with the Court of Justice’s more orthodox position in Case 238/05 Asnef-Equifax (here): “any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law”. The BKA’s answer will have to be that its investigation does not relate to the sensitivity of personal data “as such”, but rather to Facebook’s use of the data.
In terms of next steps, Facebook can defend its positon and/or offer solutions. A final decision in expected in the summer.