Out-Law News | 08 Feb 2019 | 2:02 pm | 3 min. read
The Bundeskartellamt, or Federal Cartel Office (FCO), announced on Thursday that it had imposed the conditions on Facebook after determining that the company was dominant in the market for social networks and had abused its market power on the basis of the way it has collected, used and merged data in user accounts.
However, Facebook has said it will appeal the decision. The appeal can be lodged before the Düsseldorf Higher Regional Court.
Facebook said the German regulator had confused the company's "popularity" with the concept of being 'dominant' in the market for the purposes of competition law. It said an FCO survey had found that more than 40% of social media users in Germany do not use Facebook, and that the regulator had underestimated the "fierce competition" it faces in the country from YouTube, Snapchat, Twitter and other apps.
The company also claimed the FCO had misinterpreted its compliance with EU data protection laws and was acting beyond the scope of its powers by interfering in data protection matters.
In a blog post, Yvonne Cunnane, head of data protection at Facebook Ireland and Nikhil Shanbhag, director and associate general counsel at the company, said: "The GDPR specifically empowers data protection regulators – not competition authorities – to determine whether companies are living up to their responsibilities. And data protection regulators certainly have the expertise to make those conclusions. The GDPR also harmonises data protection laws across Europe, so everyone lives by the same rules of the road and regulators can consistently apply the law from country to country. In our case, that’s the Irish Data Protection Commission."
"The Bundeskartellamt’s order threatens to undermine this, providing different rights to people based on the size of the companies they do business with," they said.
The FCO said, though, that Facebook will need to obtain users' voluntary consent to merge their data from their Facebook accounts with that from third party websites or other Facebook-owned services, like WhatsApp and Instagram. Facebook recently announced plans to integrate its Messenger service with WhatsApp and Instagram, although the services are to remain distinct, according to media reports.
Andreas Mundt, FCO president, said: “With regard to Facebook’s future data processing policy, we are carrying out what can be seen as an internal divestiture of Facebook’s data. In future, Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts. The combination of data sources substantially contributed to the fact that Facebook was able to build a unique database for each individual user and thus to gain market power."
The FCO's finding of dominance is the first time a competition regulator has reached such a conclusion in relation to a social network of Facebook's nature.
The regulator said it had not included services such as Snapchat, YouTube or Twitter, and professional networks like LinkedIn and Xing, as being in the market it has considered Facebook to be dominant in because they "only offer parts of the services of a social network and are thus not to be included in the relevant market". The FCO also said Facebook is responsible for an "exploitative abuse" of its market power.
Under the GDPR, where consent to personal data processing is being relied upon and for it to be valid, it must be freely given, specific and informed and an unambiguous indication of the data subject's wishes that is stipulated by a statement or by a clear affirmative action.
The FCO published a background paper containing more details of the decision it reached. It outlined the FCO's views on the value of the data Facebook has access to.
"From Facebook’s perspective, the data are of great economic value," the paper said. "Based on its dominant position, Facebook can use them to optimise its own service and tie more users to its network. With the merging of the data the 'identity-based network effects' and the lock-in effects increase to the benefit of Facebook and to the detriment of other providers of social networks."
"In addition, with the help of the user profiles, Facebook can improve its targeted advertising activities. Facebook is becoming more and more indispensable for advertising customers. This is also reflected in the rapidly increasing turnover Facebook has been able to generate in the past years. Further competitive harm is caused for advertising customers and competitors in the advertising market which are faced with a dominant supplier of advertising space in social networks," it said.