Insights

German Facebook Judgment

Firm Thought Leadership

On 26 August 2019, a German appeal court suspended an order of the German competition authority (the “FCO”) which had found that Facebook’s data processing practices in Germany constituted an abuse of dominance in breach of German antitrust rules (the “decision”). Expressing serious doubts as to the legality of the FCO’s decision, the court clarified in an interim ruling that antitrust cases involving data privacy considerations are subject to traditional antitrust assessment. Indeed, whilst the court did not make any determination on the privacy aspects of the case, it held that a breach of data protection law can only be considered an abuse of dominance if it involves anticompetitive conduct causally linked to the firm’s dominant market position. 

What was the FCO’s decision about?

The FCO had concluded that Facebook (i) held a dominant position in the German market for social networks and (ii) abused that position by making the private use of the network conditional upon Facebook’s ability to collect user data from other sources and combine it with users’ Facebook accounts. Those other sources included Facebook-owned services such as Instagram or WhatsApp and third-party websites (the “additional data”). Unusually, the starting point of the FCO’s finding of abuse of dominance was its parallel finding that Facebook’s processing of the additional data infringed EU data protection rules. The FCO had ordered Facebook to discontinue the practice of combining data in this way if users did not provide separate voluntary consent (and either way, users should still be permitted to use the social network). Facebook appealed the decision, requesting its suspension. 

What did the court say in suspending the FCO’s decision?

The court did not find any indications that Facebook’s processing of the additional data caused relevant harm to competition or an adverse impact on the development of competition. In detailing its serious doubts as to the legality of the FCO’s decision, the court distinguished between (i) potential exploitative abuse and (ii) potential exclusionary abuse. 

No exploitative abuse

No user exploitation: the additional data was replicable, and consumers remained free to provide the same data to other third parties. 

No excessive data disclosure: in particular, there were no meaningful findings in the decision about the type, origin and quantity of the additional data. 

No loss of user control over data: the collection and processing of the additional data occurred on the basis of Facebook’s terms of use and – importantly – with user consent. Those users were able to freely balance the advantages in using Facebook without charge against the use of their additional data. 

Any breach of data protection rules would not in and of itself be sufficient to constitute an abuse of dominance under German antitrust law: a finding of abuse of dominance requires anticompetitive conduct. In particular, an infringement of data protection rules does not automatically result in anticompetitive exploitation. More generally, the illegality of a contractual term – such as a company’s terms of use – cannot, in itself, support the finding of abuse of dominance, which requires anticompetitive conduct causally linked to a firm’s dominant market position. 

No exclusionary abuse

The terms of use relating to the additional data did not hinder actual or potential competitors of Facebook in any of the markets defined in the FCO’s decision:

Failure to substantiate how the use of the additional data would help Facebook to preserve its position against new entrants: the FCO did not demonstrate (i) which concrete additional data was at issue and any influence that the processing of that data would have on competitors’ market entry; and (ii) to what extent the use of the additional data would allow Facebook to substantially increase its advertising revenues and protect its market position against future market entry.

• No evidence of a risk of leveraging market power: the FCO did not define a separate market for online advertising for social media, but merely envisaged that such a market could exist. Further, the processing of the additional data was not shown to have had a relevant impact on the purportedly separate markets in which Facebook participates through WhatsApp (messenger services) and Instagram (photo services). 

Comment: reasserting the boundaries between privacy and antitrust law

For an interim ruling, the language used by the court to describe the legal and factual deficiencies of the FCO’s reasoning from an antitrust perspective is direct and critical. 

The main takeaway is that a breach of privacy law cannot in and of itself amount to a breach of antitrust law, even where any breach is committed by a dominant undertaking. With a specific focus on German antitrust law, the basis for the FCO’s decision is unlikely to alter the course of EU antitrust law, despite the FCO’s position that European data protection provisions provide a “standard for examining exploitative abuse”. In fact, the court clarified that Article 7(4) GDPR on the assessment of whether user consent is freely given represents a pure data protection law provision. It does not relate to antitrust law. 

Any factors relating to data which may be indicative of alleged market power cannot by definition create a presumption of abuse of market power, or automatically equate to a new category of abuse.

Next steps

Interim Proceedings: The ruling means that the FCO’s decision is suspended for now. The FCO has already announced that it will appeal to the Federal Court of Justice in Germany. Facebook does not have to comply with the FCO’s decision pending the outcome of that appeal. 

Proceedings on the merits: In parallel, the court will review the merits of the FCO’s decision. A date for a hearing is yet to be set. 

A link to the court’s press release and judgment (in German) is available here.

 

 

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