Facebook deal hit as German court hits business model

(Bloomberg) – Facebook Inc. suffered a setback in a key challenge to its business model as Germany’s highest civilian court said there is “no doubt” that the social network misuses its dominant position in the market.

Judges at a hearing on Tuesday ruled that Facebook must comply with a strict order restricting the network’s room for maneuver to track users’ browsing applications and smartphones, even when it objects to the original ruling in a first-rate court. instance.

“We have no doubt that Facebook has a dominant position in the social media market and that it misuses its position,” said Chief Justice Peter Meier-Beck of the Karlsruhe Federal Court of Justice.

In February 2019, the Federal Cartel Office carried out a historic attack on Facebook’s advertising model, telling the company to stop “collecting and using without restriction” data and combining it with users’ Facebook accounts without obtaining their consent. “qualified”. One click to accept their bulky terms was not enough for that, since the user had no choice but to accept everything. The regulator was breaking new ground by using antitrust law to address data privacy.

Facebook said Tuesday that it will continue to fight the order in the Dusseldorf court, where the main case is pending. There will be no immediate changes for people or companies using products and services in Germany, the network said.

“Today’s decision refers to the preliminary proceedings on the suspension order,” Facebook said. “The main process, before the appeals court, is ongoing and we will continue to defend our position that there is no antitrust abuse.”

The company initially won a suspension of the antitrust decision in a lower court in August and was asking top judges to keep the order suspended while the parties continue to discuss it. The dispute will now return to court in Dusseldorf.

However, Facebook must now comply with the order despite the ongoing case. The company has four months to develop a plan on how to comply with restrictions on data collection in Germany and then another 10 months to implement the changes.

German judges said Tuesday that it doesn’t matter if Facebook’s terms are in line with the European Union’s data laws. Rather, the terms are unlawful because they do not give users the right to choose between allowing Facebook to track them or limiting data collection to what users post to their accounts.

“As the dominant network, Facebook has a special responsibility to keep competition alive in the social media market,” the court said. “The high economic value of the data must also be taken into account.”

Most users would like to disclose less data, and if the competition worked properly in that market, they would have the opportunity to choose a platform that offered them more privacy, according to the trial.

Andreas Mundt, head of the Federal Cartel Office, said the ruling describes how data and competition interact.

“Data is a crucial factor for economic power and for judging market power on the Internet,” he said. “If the data is collected and used illegally, antitrust law must be able to intervene to prevent the misuse of market power.”

The ruling may encourage further antitrust enforcement targeting Facebook. EU regulators have an initial investigation into the company’s classified ad service and are looking at how it handles the data. Digital advertising is also receiving antitrust attention in France, Germany, and the United Kingdom.

Regulators are looking at how Amazon.com Inc. collects data from retailers through its platform. Apple Inc. and Alphabet Inc.’s Google have also attracted antitrust complaints about how they treat competitors.

(Updates with comments from Facebook in the fifth paragraph, details of the failure)

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