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Facebook under fire as German antitrust cops target ad model
Social networks

Facebook under fire as German antitrust cops target ad model

by Bloomberg 4 min. 19.12.2017 From our online archive
Facebook generates vast revenues from serving targeted advertising to users it knows well.
Home page of social network site Facebook. (Shutterstock)

Facebook is on a collision course with one of Europe’s most powerful regulators as Germany’s Federal Cartel Office (FCO)  attacked the way the social network giant scoops up information on how users surf to drive its advertising revenue.

Users are unaware that Facebook – seen as Germany’s dominant social network – gathers data on how they visit other websites and don’t appear to consent to how that data is used, the Federal Cartel Office, or Bundeskartellamt, said in an emailed statement.

People only have the choice to accept the entire package or stop using the network, it said, attacking "inappropriate" terms of service widely used by internet sites. The FCO says it isn’t investigating how Facebook collects information on how its users act on the social network, only on their internet habits outside of Facebook’s walls.

Facebook generates vast revenues from serving targeted advertising to users it knows well. German regulators may seek changes from the company, saying Facebook could now justify its conduct or "offer possible solutions" to address concerns that its data collection and use may be an abuse of its market power.

A final decision won’t come before mid-2018 and may see the FCO close the case, accept commitments from Facebook or issue an order for Facebook to cease certain behaviour.

No Consent

We are not convinced that users have given their effective consent.

Andreas Mundt

"We are mostly concerned about the collection of data outside Facebook ’s social network and the merging of this data into a user’s Facebook account," FCO President Andreas Mundt said in the statement. "We are not convinced that users have given their effective consent to Facebook ’s data tracking and the merging of data into their Facebook account."

Facebook immediately slammed regulators for painting an "inaccurate picture" of how it operates, honing in on the criticism that it is dominant, an important legal term that might curb future behaviour.

"Although Facebook is popular in Germany, we are not dominant," the company said in an emailed statement. "A dominant company operates in a world where customers don’t have alternatives" whereasFacebook is just one of many sites people use.

The company said it’s working with data protection officials to handle any privacy concerns, a swipe at the FCO which is using its powers as an antitrust authority to examine information concerns usually dealt with by data protection agencies with fewer tools to fine companies or stop their actions. Facebook ’s move to merge data with its messaging app WhatsApp has been criticised repeatedly by data authorities, with France warning the company on Monday over its failure to fully cooperate with a probe.

‘Significant Move’

"This is a significant move to better protect consumers in digital markets. It is encouraging that privacy is being considered an element in antitrust cases," said Agustin Reyna, team leader for digital rights at European consumer association BEUC.

"This was the missing piece in competition policy and this change of practice is good news," he said. "Facebook’s take it or leave it business model means that consumers have no choice but to hand over their data and accept it being used for invasive targeted advertising."

The probe tests the limits of competition law by weighing an Internet platform’s relationship with its users and the value of the data they provide. That may provide a template for more enforcement as other antitrust authorities and politicians seek ways to handle complaints about how Internet platforms have swelled rapidly, attracting hundreds of millions of users and grabbing advertising money that once went to newspapers and broadcasters.

Michael Carrier, co-director at the Rutgers Institute for Information Policy and Law in New Jersey, said there hasn’t been any significant antitrust cases challenging the abuse of data collected on users.

This is a big deal. Data is an uncharted frontier of antitrust enforcement.

Michael Carrier

"This is a big deal," Carrier said. "Data is an uncharted frontier of antitrust enforcement."

If regulators begin looking at the accumulation of data more closely, it could pose challenges for big American tech firms.

"Several large tech companies are valuable because of the data they collect on users," Carrier said. "If their use of data is an antitrust problem, that could have a real effect."

EU Dimension

The German move comes a day after French privacy watchdogs gave Facebook ’s messaging service WhatsApp a one-month ultimatum to stop sharing user data with its parent without getting the necessary consent.

While Google, Apple and Amazon.com have also come under regulatory fire in Europe, their control of personal data has not been in the front line.

Europe’s other powerful antitrust regulator, the European Commission, has largely skirted personal data concerns when it took aim at Google over its search engine, its mobile-phone software and its online advertising contracts. Apple and Amazon have run into EU trouble over their tax affairs.

"This case has a clear European dimension," Reyna at BEUC said. "EU law prohibits the abuse of dominance. The EU’s competition body should carry out its own investigation. Facebook operates throughout the EU and is probably dominant in all European markets."