By a decision of 23 June 2020, the German Federal Supreme Court provisionally upheld the decision German Federal Cartel Office (“Bundeskartellamt”) alleging abuse of a dominant position by Facebook and prohibiting the social network from processing personal data collected outside the Facebook environment without the users’ additional consent.

This decision is based, among others, on the fact  because its users were not given the choice over the level of personalisation of their Facebook experience, which entails the collection of data from sources outside the Facebook network (e.g. Instragram, internet browsing etc.).

The Court considered that Facebook practice may hinder the competition in the social network and online advertising market due to its dominant position.

This decision is interesting as it shows that in certain cases a breach of GDPR provisions may also have consequences on competition law matters.

The Context

Facebook is a free global social network operating in Europe via its subsidiary Facebook Ireland Limited. Its business model is based on online advertising and therefore, accessing a large amount of personal data is a key element to the success of the network and its clients’ advertising campaign.

At the time of their registration to Facebook, the users must accept terms of use including provisions on services relating to users’ personalised experience, which entails the processing of personal data collected from the use of other Facebook group’s services (e.g. Instagram) and other Internet activities of the user outside of facebook.com.

 On this basis, the German Cartel Office ruled that not asking for the users’ further consent for processing their personal data collected outside of the Facebook environment was not compliant with the General Data Protection Regulation (GDPR) and was an abuse of Facebook dominant position in the market. As a result, it ordered Facebook to stop this practice.

For the Federal Court of Justice, the lack of option given to users over the level of personalisation of its service hinders the competition on the social media and online advertising markets

Whilst provisionally upholding the German authorities decision,  the Federal Court recentered the debates on antitrust/competition law and stated that the decisive factor is (not whether Facebook complies with the GDPR but rather,) whether Facebook gives its users a choice on the level of personalisation of their experience on the social network (i.e. personalisation based solely on Facebook data or including user’s browsing information outside of the Facebook environment).

Not providing a choice results in exploitation of users that renders competition ineffective due to Facebook dominant position

Indeed, the Federal Court considered that besides affecting users’ personal autonomy and the protection of their rights under the GDPR, the lack of choice may result in exploitation of the users that may hinder the competition due to Facebook dominant position, in particular, in the backdrop of an already existing lock-in effect (i.e. obstacles to change social network).

The Court recalled that according to Cartel Office’s findings, significant parts of Facebook users want a lower level of disclosure of personal data. Therefore,  in a competitive social network market, a corresponding offer would be expected and used by those users for whom the scope of the data disclosure would be an essential decision criterion.  Therefore by not providing such an option, Facebook may abuse its dominant position.

Access to a larger database may impair the online advertising market

In addition, it considered that access to a larger database is an important competitive parameter in both the advertising and social network markets.

As a result, Facebook’s access to a significantly larger database further strengthens the already pronounced “lock-in effects” and improves the possibilities of financing the social network with the proceeds from advertising contracts, which also depend on the scope and quality of the data available.

Due to the negative effects on competition for advertising contracts, the Federal court stated that an impairment of the market for online advertising cannot be ruled out.

Conclusion

It is interesting to see how data protection malpractice may affect companies on competition law matters and that unlawful access to data may provide undue advantages especially when the company is in a dominant position.

To read the press release (in German), click here

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Germany-Antitrust Law: Facebook’s Wrongful GDPR Practice Hinders Competition
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