UK: FCO Orders Facebook To Offer Data Unbundling

Concluding a three-year investigation, the German Federal Cartel Office has ordered Facebook to offer German users a data-unbundled version of its social network, which assigns to user accounts only data collected on the social network itself. Facebook may continue its current data processing practice—which is to assign to user accounts also data collected on other Facebook-owned services such as WhatsApp and Instagram and on third-party websites or services—only with regard to those German users who consent voluntarily to this practice.

On February 6, 2019, the German Federal Cartel Office ("FCO") imposed on Facebook far-reaching restrictions in the processing of user data. The FCO's order concluded its investigation into Facebook, which had started in March 2016 and had led to a preliminary assessment that was announced on December 19, 2017. According to the documents published by the FCO, as expected, the FCO did not impose a fine but only ordered Facebook to change its business practices, as described below.

At present, individuals may use the Facebook social network only if they agree to Facebook's terms of service, which stipulate inter alia that Facebook may collect, combine and assign to each user's Facebook account not only user and device-related data obtained from the Facebook website/app but also user data obtained elsewhere. The two most important data sources other than the Facebook social network are other Facebook-owned services such as WhatsApp and Instagram and third-party websites, apps or services featuring embedded Facebook links (e.g. "Like" or "Share" buttons, which trigger data flows even if not clicked) or using "Facebook Analytics" in the background.

The FCO ordered Facebook in essence to offer German users data unbundling for their Facebook user accounts. According to the FCO, Facebook may continue its abovementioned fully-fledged data combination practice only with regard to those German customers who provide their "voluntary consent" to such combination. In addition, Facebook must enable German customers to use the Facebook social network even if they refuse such "voluntary consent." If at all permissible, then the combination of Facebook accounts of users who refuse the "voluntary consent" with data obtained outside of Facebook must be restricted substantially. Facebook has four months to submit to the FCO proposals for suitable substantial restrictions and twelve months to change its business practices. In case of non-compliance, the FCO could impose substantial fines.

The FCO based its order on the finding that Facebook was dominant in the German market for social networks and that Facebook's current practice of excessively collecting, using and merging data in user accounts constituted an abuse of dominance under the German abuse control provisions.

The FCO started by characterizing Facebook's business as involving a multi-sided network market featuring four user groups (private users, advertisers, developers and publishers) but then focused on private users. The FCO delineated a separate German market for social networks for private users, which did not include professional networks, messaging services or other social media. 

The FCO stated that on the thus-defined relevant market, Facebook had a market share exceeding 95 percent in terms of daily active users and was thus dominant. The FCO added that even if YouTube, Snapchat, Twitter, WhatsApp and Instagram were included in the relevant market, Facebook would still be presumed to be dominant. The FCO stated that it saw no specific indications of a dynamic or disruptive process that would call into question Facebook's market power.

To reach the finding that Facebook's data processing conduct constitutes a so-called exploitative abuse, the FCO argued in essence as follows:

  • Under established case law of the German Supreme Court, not only excessive prices but also inappropriate contractual terms and conditions could constitute exploitative abuse. To measure appropriateness, any legal principle could be applied that aimed to protect a contracting party in an imbalanced negotiation position.
  • Data protection law aimed at protecting individuals from having their personal data exploited by the opposite market side and sought to ensure that users can decide freely and without coercion on how their personal data is used. The right to informational self-determination was also a fundamental right under the German Constitution. Therefore, data protection laws were a suitable standard for examining exploitative abuse.
  • Facebook's data collection and processing conduct constituted an exploitative abuse because it violated European data protection rules, in particular the General Data Protection Regulation (GDPR). The combination of Facebook user accounts with data collected outside of Facebook was not justified as it was neither required to fulfil contractual obligations, nor did Facebook's interests in data processing outweigh the users' interests. In addition, the consent to data processing currently given by customers was not effective because it was mandatory rather than voluntary.
  • Facebook's exploitative practice harmed not only users of Facebook, who lost control of their data, but also competing social networks and advertising customers. Facebook could use the data to optimize its own social network and tie more users to it. In addition, Facebook could improve its targeted advertising offering, thus becoming indispensable for advertising customers. Finally, in the advertising market, advertising customers and competitors were faced with a dominant supplier of advertising space in social networks.

This is the first abuse of dominance finding based on data-protection rules, and the first time that data unbundling also within the same group of companies is prescribed as a remedy. Accordingly, the FCO explicitly addressed the relationship between data protection and competition law. The FCO claimed that the GDPR did not aspire to full consistency, as it explicitly stated that data protection law could also be enforced under civil law. The FCO pointed out that the German Competition Act explicitly named access to data as a potential source of market power, above all in the case of online platforms and networks. The FCO concluded that monitoring the data processing activities of dominant companies was an essential task of a competition authority, which could not be fulfilled by data protection authorities. The FCO stated that it liaised closely, in particular in view of the GDPR, with data protection authorities (including that of Ireland, where Facebook has its European headquarters), none of which had considered that they had exclusive competence. Nevertheless, the fact that the FCO has now in one particular case—and only with effect for German users—acted against alleged violations of the GDPR effectively creates EU-wide inconsistencies.

The FCO also stated that the German abuse of dominance provisions were more suitable than Article 102 TFEU to be applied to the present case because so far only the German Supreme Court had established a case-law under which constitutional or other legal principles could be taken into account in assessing abusive practices. The FCO stated that it liaised closely with the European Commission and other competition authorities. However, it remains unclear whether other authorities will follow given the particularities of the German case law.

In a broader sense, the approach of the FCO supports the more recent trend to focus in dominance situations not only on typical price-related abuses like exclusionary rebates, predatory pricing or margin squeeze but also on the abuse of non-price related contractual power. In that respect, the FCO only recently prohibited an event agency from using exclusive contracts, which it concluded with organizers of live entertainment events and advance booking offices. It further started abuse proceedings with respect to the business terms and practices of a large online retailer.

According to the FCO, Facebook has already submitted to the competent Higher Regional Court of Düsseldorf an appeal against the FCO order and an emergency request for suspension of the order including the abovementioned time limits set by the FCO of four months and twelve months, respectively.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions