Facebook Facing German Competition Law Probe

Germany’s competition watchdog is investigating whether Facebook adequately discloses to customers the type and extent of the data it collects.
Katie Kuehner-HebertMarch 3, 2016

Germany’s competition watchdog is investigating whether Facebook is abusing its market dominance by failing to adequately inform consumers about the data it collects from them.

The social network’s terms and conditions ask users for permission to use their data for advertising purposes but according to the German Cartel Office, that is not always transparent to users.

“For advertising-financed Internet services such as Facebook, user data are hugely important,” Andreas Mundt, the cartel office president, said in a news release. “For this reason, it is essential to [examine] whether consumers are sufficiently informed about the type and extent of data collected.”

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The office said it was conducting the investigation in close contact with the European Commission, consumer protection groups and other European competition authorities.

Facebook, the world’s biggest social network with 1.6 billion monthly users, earns revenues from advertising based on data it gathers about its users’ social connections, opinions and activities in their postings.

“We are confident that we comply with the law, and we look forward to working with the Federal Cartel Office to answer their questions,” a spokeswoman for Facebook said Wednesday.

The investigation appears to be the first to focus on whether a Internet company’s privacy policy amounts to an abuse of market dominance. “The probe … builds on growing momentum in Europe to tie together questions of competition law and online privacy,” the Wall Street Journal said.

Kai Neuhaus, a competition lawyer at CMS Hasche Sigle, told the WSJ that it may be possible to argue that Facebook forces users to provide more personal information than they would if they could choose from a range of similar services.

“But it will be difficult for the cartel office to determine what is a fair amount of data to demand from customers,” he added.

Facebook owns four of the top eight social network services globally including its core profile service, two separate instant messaging services, WhatsApp and Facebook Messenger, and its photo and video-sharing social network service Instagram.

In January, top EU antitrust enforcer Margrethe Vestager said her agency was looking into whether the collection of vast amounts of consumer data by big Internet companies violates competition rules.

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