Andreas Mundt, president of the FCO, stated: “In future, Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts.”

I. Status quo

Currently, users have only one option: accepting the terms and conditions imposed by Facebook or being excluded from the social network entirely. 

According to Facebook’s terms and conditions, users can only be a member of Facebook if Facebook can gather and assign data from Facebook-owned services (such as Instagram and WhatsApp) as well as collecting and assigning data from third party websites (which is done through tools such as “Facebook login”, the “Like” button and “Facebook Analytics”). In addition, Facebook carries out data-mining even where users have disabled web-tracking in their browser settings. 

II. Dominant market position of Facebook

1. Product market

To define the specific product market, the FCO examined other social network platforms such as Google+ (which Google recently indicated it would terminate) and other smaller German social media platforms that fell within its probe. However, the FCO stressed that their exchangeability with regard to their economies of scale and direct network effects are limited compared with those services offered by Facebook.

The FCO found that LinkedIn and Xing, which are professional networks, do not form part of the same product market due to the fact that these providers are not direct competitors of Facebook. In addition, the authority examined YouTube and Snapchat but found that these providers serve totally different functions from Facebook, and therefore are not viable alternatives. Nor do other service providers, such as Twitter, Instagram and Pinterest, offer the comparable functionality expected by users. However, even if Snapchat, WhatsApp and Instagram were to be included in the relevant product market, the outcome would be the same.

2. Geographical market

In determining the geographical market, the FCO stated that the product market has to be defined as domestic due to the fact that users mainly use Facebook to stay in contact with friends in Germany. 

3. Market dominance

The FCO ruled that Facebook has a dominant market position on the German market as regards social networks. The FCO emphasized that Facebook has an estimated 2.3 billion monthly active users worldwide and 32 million private monthly active users in Germany (of which 23 million are daily active users). This gives Facebook a market share of over 90 percent for social networks. 

The FCO assessed Facebook’s dominant market position not solely by its market share but also by the criteria listed in Section 18, para. 3a of the German Act against Restraints of Competition (ARC), such as access to data necessary to ensure effective competition, the parallel use of services from different providers, economies of scale based on direct and indirect network effects, and the power of innovation-driven competitive pressures. 

III. Abuse of dominant market power

The FCO ruled that the extent to which Facebook gathers, assigns and processes data without user consent constitutes an exploitative abuse of Facebook’s dominant market position within the meaning of Section 19, para. 1, para. 2, no. 2 ARC. 

In the view of the FCO, due to the company’s overwhelming market power, an obligatory tick in the acceptance of the terms and conditions of the company is not sufficient to constitute consent to such extensive data processing. The user only has the choice of either accepting extensive data processing or backing away from being a member of the social network. There could be no question of voluntary consent to the data processing conditions in such a coercive situation.

According to the FCO, the significant data-mining activities also constitute an exploitative abuse of dominant market power. , and users should be protected from any form of exploitation that requires them to agree to this kind of data collection. The FCO stated that this is particularly the case if the exploitation also hinders competitors who are unable to gather such a wealth of data.

In addition, the FCO stated that users do not know which data from which websites is combined with data from Facebook accounts, nor for what purposes, and nor to what extent they are subject to user profiles being generated (i.e., profiling). According to the FCO, this practice violates the right to informational self-determination. 

In this regard, the FCO referred to the case law of the German Federal Court of Justice. According to German civil law principles, not only can the imposition of exorbitant prices be considered an exploitative abuse but so can the use of inappropriate contractual terms and conditions. 

The FCO also took into consideration the General Data Protection Regulation (GDPR), which entered into force in May 2018. In the opinion of the FCO, the application of the GDPR demonstrates that Facebook cannot justify its data collecting from Facebook-owned services or third party platforms, or assigning such data to Facebook user accounts, since: 

• the wide-ranging processing of data is not necessary to fulfill Facebook’s contractual obligations; 
• where there needs to be a balancing of interests, Facebook’s interests in data gathering do not outweigh the interests of users; and 
• Facebook did not ask for explicit and voluntary consent for such far-reaching data processing.

IV. Enforcement of the FCO’s decision

Due to the administrative nature of the proceedings, the FCO did not impose a fine but instead requires Facebook to change its terms and conditions within the next 12 months. If Facebook does not cooperate and meet this requirement, the FCO can impose fines (up to €1 million) or periodic penalty payments (each up to €10 million).

The decision of the FCO is not yet final. It can be appealed within one month and Facebook has already indicated that it will submit an appeal to the Higher Regional Court of Düsseldorf.

V. Conclusions

The FCO’s case against Facebook certainly raises interesting questions, most of which will no doubt be clarified by the courts in the coming years as the appeal can be expected to go through several instances. 

However, while the case may appear to be unique in its discussion of market power in social networks, data privacy issues and the requirement to limit the collection and combination of data, this is mostly due to Facebook’s unique positioning in the digital market, which is based entirely on the collecting of user data. 

The FCO’s decision is firmly based on applicable competition laws, and although the FCO took into consideration data privacy and GDPR issues, it did not usurp the position of a data protection authority (with which, by the way, the FCO acted in coordination in its handling of the case). The Facebook case is ultimately all about restoring the balance of negotiating power between individual users and a market-dominant (near-)monopolist by giving users the option of not consenting to the collection and combination of data from outside of Facebook’s social network services without being stopped from using those services.