Unfair Data Protection Practices May Constitute An Abuse Of Market Power

Author:Mr Alexandre Verheyden, Philipp Werner, Jörg Hladjk and Undine von Diemar
Profession:Jones Day
 
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In Short

The Situation: An investigation launched in 2016 by the German competition authority was meant to determine if Facebook was abusing its market position with its imposition of "misleading" data protection policies.

The Result: It was concluded that Facebook's data processes did abuse its dominant position, thereby justifying "far-reaching restrictions" on the social media giant.

Looking Ahead: Facebook has announced that it will appeal the decision, citing the intense competition in the region, and alleging that the authority had misinterpreted Facebook's compliance with the General Data Protection Regulation ("GDPR"). The German competition authority opened an investigation against Facebook in 2016 to inquire whether Facebook was abusing its dominant position in the market for social networks through the imposition of "misleading" data protection policies to its users. In a decision rendered on February 7, 2019, the German competition authority considered that Facebook's data processing terms, enabling the collection, merger, and use of user data without valid consent, constitute an abuse of a dominant position justifying "far-reaching restrictions" on Facebook.

Data Constitutes the Economic Value of Social Networks

The German competition authority found that the sources of the data collected by the social network are two-fold: (i) data collected through the use of Facebook-owned services, such as WhatsApp or Instagram, and/or (ii) data collected by third party websites embedding Facebook's products, such as websites comprising Facebook's "like" button. Once the data is collected without valid consent from end-users, Facebook allocates them to the users' Facebook accounts and exploits said data in various ways that are financially attractive. The German competition authority considered that such practice allows Facebook to create a unique database associated with each individual user and thus, expands Facebook's market power. Given that social networks are data-driven products, the authority also considered that access to such data is an important factor for competition in the market.

The Prohibition of Exploitative Data Processing Terms

The competition authority held that "Facebook's users are oblivious as to which data from which sources are being merged to develop a detailed profile of them and their online activities. On account of the merging of the data, individual data gain a significance the user cannot foresee." The...

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