On 2 March 2016, the German Federal Cartel Office
("FCO") has initiated proceedings against Facebook to
investigate whether the social network abuses its market position
by infringing data protection law. The FCO considers to assess
Facebook's market position on the basis of the amount of user
data collected by Facebook.
The FCO suspects Facebook to have a dominant market position on
the market for social networks because of the amount of personal
user data which Facebook collects from various sources. The FCO
"For advertising-financed internet services such as
Facebook, user data are hugely important. [...] By creating user
profiles the company enables its advertising customers to better
target their advertising activities."
The FCO states that, due to the significance of user data to
"it is essential to also examine under the aspect of
abuse of market power whether consumers are sufficiently informed
about the type and extent of data collected."
The FCO finds it difficult for users to understand and assess
the scope of Facebook's collection and use of data which users
have to agree to in order to be able to use the social network. The
FCO doubts whether Facebook's terms and conditions as well as
the specific usage of user data are in line with data protection
While not every violation of applicable laws by a dominant
market player is also relevant under competition law, in the case
of Facebook, the FCO will review whether and to what extent the
potential dominant position of Facebook on the market for social
networks and the use of its allegedly unlawful terms and conditions
are interconnected so that such use could represent an abusive
imposition of unfair conditions on the users of Facebook.
DATA-BASED APPROACH ON THE RISE
The data-based approach on assessing Facebook's market power
is in line with the views recently expressed by the president of
the FCO, Andreas Mundt, who stated in an interview that turnover is
not always a suitable means to evaluate the competitive
significance of internet companies. Instead, he suggested
considering the number of users or the amount of user data
collected in order to determine the market power of data-driven
businesses such as social networks. In addition, he mentioned the
idea of introducing a new merger notification threshold based on
transaction volume in connection with internet platforms. Regarding
the latter, he referred to the Facebook/Whatsapp merger in 2014
which nearly escaped merger control despite a transaction volume of
USD 19 billion and a huge number of users because Whatsapp had just
generated enough turnover to meet the merger notification
thresholds of three EU member states.
The move of the German FCO against Facebook is further evidence
of the authority's focus on the internet business and its role
at the forefront of enforcing antitrust laws in the digital sector.
In fact, EU competition chief Margrethe Vestager said that the FCO
is "well-suited" to investigating Facebook. The German
authority had already taken strict views and a firmly
interventionist approach in cases regarding
best-price clauses of internet market
places against digital leaders, such as Amazon and hotel booking
dual-pricing systems regarding online
and offline sales (Gardena, Bosch Siemens Hausgeräte, etc.)
other allegedly restrictive trade
practices in the digital world (Adidas, Asics, Lego, etc.).
Bruno Lasserre, president of the French Autorité de la
Concurrence, announced that the Autorité considers starting
a sector investigation into personal data and competition. It can
be expected that other competition authorities worldwide will also
widen their scrutiny of the digital sector. Companies should
reconcile with the idea that competition authorities will
increasingly investigate the relevance of data when assessing
market power or evaluating certain market conduct under the
applicable antitrust laws.
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