David against Goliath? The fight of the German Federal Cartel Office against Facebook
The digitalisation of the economy was accelerated by the pandemic. The main beneficiaries were the large internet corporations, which were able to further expand their power and market position. For the German Federal Cartel Office, the digital economy was also an important and central area of work in the last two years.
Andreas Mundt, President of the Federal Cartel Office, said: "We have been very active in this area for more than a decade and have already successfully concluded several proceedings against large Internet groups. Since the beginning of this year, we have a new antitrust instrument at our disposal. We can now act even more effectively against restrictions of competition by large digital corporations and have initiated proceedings against Google, Amazon, Facebook and Apple on this basis in the past five months."
The drumbeat started on 7 February 2019 after a three-year review: the German Federal Cartel Office prohibits Facebook from combining user data from different sources.
The office's decision covers several data sources:
- In future, the services belonging to the Facebook group, such as WhatsApp and Instagram, will still be allowed to collect the data. However, an allocation of the data to the user account at Facebook is now only possible with the voluntary consent of the user. If the consent is not given, the data must remain with the other services and may not be processed in combination with the Facebook data.
- A collection and allocation of data from third-party websites to the Facebook user account will also only be possible in the future if the user voluntarily consents to the allocation to the Facebook user account.
From the point of view of antitrust law, the company's behaviour was considered an abuse of a dominant market position. Facebook, on the other hand, disagrees with the finding, as it sees itself in competition with providers such as YouTube, Snapchat and Twitter, and filed an appeal against the decision. In the Düsseldorf Higher Regional Court case on 24 March 2021, the latter referred the case to the European Court of Justice and asked for an opinion on whether it is permissible for a national antitrust authority to find infringements of the General Data Protection Regulation and to take measures against them. Furthermore, the ECJ has to clarify what constitutes sensitive data in this context.
On 10 December 2020, it was published that the German Federal Cartel Office is investigating the linking of Oculus virtual reality products with the social network and Facebook.
Virtual reality products aim to put the user in a virtual reality when using digital content. Three-dimensional vision, which enables the human eye to perceive the environment spatially, is simulated by appropriate technology. VR glasses are required to use VR technology. The use of the Oculus glasses should only be possible with an existing Facebook account. This link could affect the competition of the social networks as well as the growing VR market and thus constitute a prohibited abuse of a dominant position by Facebook. The 10th GWB amendment came into force on 19 January 2021. A central component of the new provisions of the Act is aimed at companies with a so-called superior cross-market significance for competition. These new provisions are enshrined in Section 19a GWB and are intended to enable the German Federal Cartel Office to impose special conduct obligations on such companies. Therefore, the German Federal Cartel Office expanded its examination to include whether Facebook falls under the new regulations and whether the link should be measured against this.
On 23 July 2021, the German Federal Cartel Office announced that it was examining whether the planned acquisition of the start-up Kustomer by Facebook was subject to a merger control notification obligation.
Kustomer is based in the USA (New York) and is a company that offers a cloud-based customer management platform to corporate customers. Within the scope of the examination, it must be determined whether the transaction has a domestic effect and whether the target company is active to a significant extent in Germany. Both are prerequisites for the applicability of German merger control. With the 9th GWB amendment in 2017, the legislator introduced the so-called transaction value threshold. This makes it possible to examine mergers and acquisitions under competition law if the purchase price exceeds €400 million, even though the company only generates low or even no turnover. The high purchase price results from the expectation or hope in the potential of the company.
The wind is getting rougher.
Parallel proceedings are being brought in Brussels and New York.
EU Commissioner for Competition Margrethe Vestager announced that she will investigate possible competition violations and that formal proceedings have been initiated against Facebook. Both the US government and 46 states are taking the case to court. In December last year, New York Attorney General Letitia James accused the internet company of unfair competition: "Facebook has used its monopoly power to crush smaller rivals and wipe out competition, all at the expense of everyday users". The US Federal Trade Commission (FTC) even explicitly calls for its break-up in its own complaint. The discussion and criticism of the internet giants will certainly not decrease in the face of their ever-increasing power, but rather increase.