Only a few weeks ago, EU Competition Commissioner Vestager said in a speech, “We continue to look carefully at this issue, but we haven’t found a competition [antitrust] problem yet” (see here). She was referring to antitrust issues arising out of big data, in her words “the huge collections of information that companies can use to understand their environment in a way they never could before.”
Finally, there is a case, not from the European Commission (EC; Vestager’s fiefdom, which deals with antitrust issues EU-wide), but from the German antitrust regulator, the Bundeskartellamt or BKA. The BKA, perhaps emboldened by representing the EU’s largest economy, is known for pushing the boundaries of antitrust enforcement, so the source is perhaps not too surprising. The target is also not particularly surprising; a large U.S. technology company, Facebook. However, the type of case, based on infringement of the data protection rules as opposed to “big data” per se, is more surprising.
The BKA, which applies EU and German competition law, announced its investigation into Facebook on March 2, 2016, via a press release, see here. The BKA is investigating suspicions that, due to its terms and conditions (Ts & Cs) relating to users’ data, Facebook has abused its (possibly) dominant position in the market for social networks.
The BKA’s initial view is that certain of the Ts & Cs violate EU data protection rules. It points out that, while not every infringement of the law on the part of a dominant company is also relevant under competition/antitrust law in the EU and Germany, in this case Facebook’s use of unlawful Ts & Cs could represent an abusive imposition of unfair conditions on users.
The imposition of unfair trading conditions is a well-established example of the abuse of a dominant position under EU and therefore German antitrust law. (Indeed, the basic EU Treaty provision on abuse of dominance refers to this as an example of a prohibited activity.)
But is Facebook dominant (in a relevant market or markets in the EU and/or Germany) in the first place? Absent this, there can be no abuse and therefore no antitrust infringement as a result of the alleged activity.
On this issue, the BKA stated that it “has indications” that Facebook has a dominant market position in a market for social networks. This may be difficult for the BKA to establish. In the EU merger case Facebook/WhatsApp (see here), the EC considered the market for social networking services and left open the boundaries of what is included within this.
However, the EC still analyzed this market and concluded that Facebook faced plenty of competition, stating, “A large number of companies offer online services which include a social networking functionality …. The results of the market investigation indicate that the companies which are most clearly perceived by respondents as providers of social networking services are Facebook, Google+, LinkedIn, Twitter and MySpace.”
Assuming the BKA can show dominance, what about part two of the analysis (i.e., assuming Facebook is dominant, what exactly is the alleged abuse)? The BKA explains that, in order to access Facebook, users must first agree to the company’s collection and use of their data by accepting the Ts & Cs. It is (according to the BKA) difficult for users to understand and assess the scope of the agreement they accepted. There is “considerable doubt” that this opacity is acceptable under applicable national data protection law (presumably this means, in Germany).
Therefore, finishing the reasoning according to the BKA, if there is a connection between such infringement of data protection law and market dominance, this could constitute an abusive practice under competition law. Explaining this analysis, Andreas Mundt, president of the Bundeskartellamt, said: “Dominant companies are subject to special obligations. These include the use of adequate terms of service as far as these are relevant to the market. For advertising-financed internet services such as Facebook, user data are hugely important. For this reason it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected.”
In other words, users would not accept the Ts & Cs should Facebook not be dominant. An alleged violation of data protection provisions therefore becomes an abuse of dominance, but there needs to be a connection between that infringement and Facebook’s dominance (if it exists).
This is a novel issue under EU and German competition law. Vestager has strongly backed the BKA, saying that it is “well-suited” for the case and confirming that, in her view, “it cannot be excluded that a [form of] behaviour that violates data protection rules could also be relevant when investigating a possible violation of EU [and German] competition rules.” Nevertheless, she also said that this cannot be assumed; “the mere infringement of data protection rules by a dominant company does not automatically amount to an abuse of a dominant position under EU competition rules.”
So, the BKA is in principle supported by the EC, but still has a long way to go. The case raises many difficult issues. Not the least of these is why use antitrust law at all − if there is an infringement of data protection law (on which the BKA could not opine), why not just allow the data protection regulator to deal with it? Would German data protection law apply anyway? It seems not, according to a ruling from a German appeal court handed down the day after the BKA’s press release came out (see here). If not, the BKA seems to have a basic problem with its case (although it may still say that an infringement of another data protection law − here, Irish − producing effects in Germany, is enough; it’s notable here that the Irish subsidiary of Facebook is named by the BKA as a defendant).
Facebook will fight back hard and this case has a long way to run, but finally the interplay between EU antitrust law and the data protection rules is being investigated. My prediction? A settlement under which Facebook agrees to change its practices or the clarity of its Ts & Cs. So, probably a somewhat unsatisfactory result, but nevertheless a warning shot from the antitrust authorities saying that the application of antitrust law in relation to misuse of data and related issues is not theoretical.