Facebook suffered a setback in Germany after the country’s highest civil court ruled that it must comply with an order from the German antitrust watchdog and fundamentally change the way it handles users’ data.
The ruling by the federal court of justice in Karlsruhe takes aim at the way Facebook merges data from the group’s own services, such as WhatsApp and Instagram, with other data collected on third-party internet sites via its business tools.
In 2019, Germany’s cartel office blocked Facebook from pooling such data without user consent. Facebook later won a suspension of that decision from a court in Düsseldorf and wanted the pause to continue until a ruling on its appeal.
But on Tuesday the Karlsruhe court set aside the Düsseldorf ruling and backed the antitrust authorities, saying Facebook in future had to offer its users a choice when it collects and merges data from websites outside of its own ecosystem.
Andreas Mundt, head of the cartel office, welcomed the decision. He said data was a decisive factor for economic power and for judging market power on the internet. "Today’s ruling gives us important clues as to how we should deal with the issues of data and competition," he said, in comments quoted by DPA agency.
"If data are collected and used in an unlawful way, antitrust authorities must be able to intervene to prevent an abuse of market power," he added.
Facebook noted that the case relates to the preliminary proceedings on the stay order. "The main proceedings . . . are ongoing and we will continue to defend our position that there is no antitrust abuse. There will be no immediate changes for people or businesses who use our products and services in Germany," it said.
Even before Tuesday’s ruling, Germany stood in the vanguard of attempts by European governments to tame the tech giants, after growing public disquiet about the potential threats they pose to competition, privacy and civil liberties.
The presiding judge in Karlsruhe, Peter Meier-Beck, said there were no doubts that Facebook was market-dominant and "abuses" its market power through the "terms of use that were prohibited by the cartel office".
The court said the market abuse consisted in Facebook not giving its users a choice as to whether the platform had potentially unlimited access to all the data they generated outside Facebook, or only to the data that they themselves disclosed on the social media group’s sites.
Facebook’s lawyers had argued that the use of so-called "off-Facebook data" could be advantageous for users, because they improved the quality of the Facebook product. They also emphasised the significant economic consequences for the company that would arise from implementation of the cartel office’s order.
Rupprecht Podszun, head of the Institute for Competition Law at Heinrich Heine University in Düsseldorf, described the ruling as a "spectacular success" for the cartel office, which "can now take action against Facebook and demand a change in the way it handles user data". He said it was also an "important signal for competition on the internet".
He said the cartel office could now demand Facebook submit a plan within four months on how it intended to stop merging data into so-called "super profiles".
Peter Stauber, partner for competition law at the law firm Noerr, said the ruling set a "precedente". It stressed that a platform such as Facebook had a responsibility to maintain competition on the market it dominated. It also treated the access to and use of data as a "parameter of competition and a means of abusive behaviour".
(Published by Financial Times, June 24, 2020)
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