The German Federal Cartel Office
("FCO") announced today a formal
proceeding against Facebook Inc., USA
("Facebook"). According to the FCO,
there is an initial suspicion that Facebook has abused its dominant
position in the market for social networks with its specific terms
of service on the use of user data.
The FCO has indications that Facebook has a dominant market
position in the market for social networks. It announced to conduct
further market investigations in this respect.
Facebook may abuse this dominant position by imposing unfair
conditions on users. The FCO has the initial suspicion that
Facebook's conditions of use are in violation of data
protection law. According to the FCO, Facebook collects a large
amount of personal user data from various sources. By creating user
profiles the company enables its advertising customers to better
target their advertising activities. In order to access the social
network, users must first accept the terms of service. The FCO
considers that it is difficult for users to understand the scope of
this agreement. The FCO will now examine whether there is a
connection between the possible dominant position of the company
and the use of such terms of service.
The FCO is conducting the proceeding in close contact with the
competent data protection authorities, the European Commission and
competition authorities of other EU member states.
II. Assessment and Implications
The FCO's proceeding has several remarkable aspects.
The background of this development is the FCO's increased
focus on the internet economy. Just recently, the FCO created an
internet taskforce. Big Data is one of the FCO's enforcement
priorities in this area.
With the present proceeding the FCO breaks new grounds by
combining data protection with competition law. According to the
FCO, data may increase market power and advance in knowledge and
result in market foreclosure. This concerns in particular major
internet platforms due to network effects. The FCO will now assess
whether Facebook's collection of personal user data constitutes
abusive conduct. The FCO's focus is not on possible violations
of data protection laws for which the FCO is not the competent
authority. Rather, the main question for the FCO is whether
Facebook, due to its market power, can impose unfair conditions on
its users. The yardstick for whether Facebook's conduct is
abusive is hypothetical competition, i.e., whether
Facebook could also have imposed such conditions on its users if it
were subject to workable competition.
It also not clear whether Facebook holds a dominant market
position. For instance, it is questionable whether Facebook is even
active on a market in this respect, as it offers its services to
its users free of charge. The FCO, and likewise the European
Commission, consider that such services constitute a market
activity. One argument here is the interdependence between the
"free side" (services for users) and the "money
side" (advertising revenue) of internet platforms. This
questions has not been decided yet by German courts. The FCO has
called upon the legislator to provide clarity in this respect.
The FCO's proceeding is another indication of its new focus
on the internet economy. After a series of proceedings in the area
of online distribution and new approaches in merger control, the
FCO now combines data protection with abuse of dominance law.
Data protection will therefore gain further importance for
companies possibly holding a dominant position.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
By 27 December 2016, the Croatian Parliament needs to implement the Directive 2014/104/EU on antitrust damages actions, which is expected to streamline the procedure for private individuals and businesses to sue for damages...
The European Commission recently published its preliminary report on the E-commerce Sector Inquiry, identifying potential competition concerns in cross-border e-commerce of digital content and consumer goods.
The German government has recently published a bill that would significantly amend the criteria for determining whether an M&A transaction is subject to German merger control.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).