German Court’s Antitrust Decision Rules against Data Collection by Facebook

[Ridhi Arora and Hitoishi Sarkar are II Year B.A. LL.B (Hons.) students at Gujarat National Law University]

On 23 June 2020, the Federal Court of Justice (Germany) provisionally confirmed charges of abuse of dominant position against Facebook. The judgment comes a year after the Federal Cartel Office (Germany) found Facebook guilty of exploiting its dominance to force users to share data from other Facebook-owned services like WhatsApp and Instagram. This decision implies that Facebook can no longer combine data collected from users across its social platforms without their consent. In this decision, the Court has analyzed an exciting confluence of data protection and antitrust law, which has widespread implications for tech companies across the globe that collect user data for providing personalized experiences.

Factual Background 

Facebook (Ireland), which operates the tech-giant’s platforms in Europe, provided private users with free access to their platform. However, access to Facebook’s platforms was conditioned on an agreement to let Facebook use the individual’s personal data, which was available to it through any of its group-owned services (Instagram, WhatsApp, Oculus, and Masquerade) from other Internet activities of the user.

The personal data collected from the users are then used to leverage Facebook’s online advertising business. This is because Facebook offers multiple analysis functions and programs to its advertisers to evaluate how “Facebook users interact with the services they offer across various devices, platforms, and websites.” The collection of data by Facebook provides users with personalized ads that are potentially interesting to them based on their personal information such as commercial behavior, relevant interests, and purchasing power. However, Facebook’s only legal justification is that the company processes data to provide better services to its users and to maintain the interests of Facebook.

Analysis of the Decision

Facebook’s terms of use prima facie are in violation of section 19(1) of the German Competition Act (GWB). This is because Facebook’s dominant position in the social media networks market renders it in a position to put forward such terms of use for its users. Furthermore, it presents an apparent contravention of the General Data Protection Regulation (GDPR) as it links user and user device-related data generated outside of facebook.com with personal data coming from Facebook without further consent of its users.

The Court ruled that there was not an iota of doubt regarding Facebook’s dominant position in the German market for social media networks. Previously, the Bundeskartellamt (Federal Cartel Office of Germany) had also opined that Facebook was the dominant company in the market for social networks in lieu of section 18(1) which provides that an undertaking is dominant where it has no competitors, read with section 3 of the German Competition Act (GWB). It is pertinent to note here that the Federal Court of Justice had previously held in the VBL-Gegenwert cases[1] that contract terms are abusive if such terms and conditions are applied as a manifestation of market power or superior power of the party using these terms. Thus, this decision would also have implications from the standpoint of GDPR, as the use of abusive market position to get users to agree to such terms of use would not qualify as free consent pursuant to article 6(1a) of the GDPR.

Further, the Court opined that the lack of choice for Facebook users constitutes a potential violation of the right to informational self-determination, which is protected by the GDPR. This is due to the fact that Facebook users are not provided with a choice to lower the level of disclosure of their personal information. This practice represents an exploitation of the users, which is relevant under antitrust law because “the competition is no longer effective due to the dominant position that Facebook can exercise.”

The Court also considered Facebook’s access to data as a competitive factor not only in advertising practices, but also in the social network sector. Facebook’s dominant position is characterized by the number of people using the network, which also influences the network for private users and advertising companies. Since a social network’s success is measured in terms of daily users, the daily number of active users of Facebook were considered an indicative factor in construing the competitive and market success. Thus, the quality and type of data available on platforms such as Facebook would be a relevant consideration when advertising companies finance social networks.

Implications for the Indian regime

The Competition Commission of India (CCI) is yet to investigate social media giants such as Facebook for abuse of dominant position pursuant to complaints filed before the CCI. However, in Shri Vinod Kumar Gupta, Chartered Accountant v. WhatsApp Inc, the CCI was called upon to adjudicate on a similar matter against WhatsApp Inc. (a Facebook subsidiary) for abusing its dominant position in the relevant market in contravention of the provisions of section 4 of the Competition Act, 2002. It was alleged that WhatsApp was abusing its dominant market position by introducing a privacy policy that compels its users to share their personal data with ‘Facebook.’, which had acquired WhatsApp in 2014.  The CCI could not, however, rule against WhatsApp Inc. as the Supreme Court had by then not authoritatively settled the legal position regarding the existence of the right to privacy as a fundamental right, and the CCI acknowledged the same in its order. Three months later, the Supreme Court in Justice K. S. Puttaswamy (Retd.) v. Union of India held that the right to privacy is a fundamental constitutional right under articles 14, 19 and 21 of the Indian Constitution. Hence, if such a matter were to come up before the CCI today, it is very well possible that Facebook and its subsidiaries may be held liable for abuse of dominant position under the Competition Act, 2002.

Conclusion 

This decision of the German Federal Court of Justice can well be the beginning of a series of antitrust litigations that may fundamentally transform Silicon Valley and may bring other social networks similar to Facebook under scrutiny. For instance, Facebook is currently being investigated by Congress’s antitrust sub-committee for its anti-competitive practices. Likewise, the UK Competition and Markets Authority is also carrying out a market study into online platforms and the digital advertising industry. The weightage given to the right to informational self-determination in the judgment is an essential step towards establishing a regime that gives primacy to data protection laws in an era dominated by social network giants like Facebook.  Overall, the decision seems to signal the beginning of the end of the age of surveillance capitalism, and it will be interesting to see if the Indian courts will take a similar leap.

– Ridhi Arora & Hitoishi Sarkar



[1] FCJ, 6 November 2013, case no KZR 58/11, VBL-Gegenwert I; FCJ, 24 January 2017, case no KZR 47/14, VBL-Gegenwert II.

About the author

Add comment

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Top Posts & Pages

Topics

Recent Comments

Archives

web analytics

Social Media