Facebook’s small print might be antitrust’s next big target

Bloomberg

Facebook Inc.’s small print may be the next big thing in European antitrust as watchdogs home in on how the world’s biggest social network collects information from users that helps generate vast advertising revenues.
Germany’s Federal Cartel Office is examining whether Facebook essentially takes advantage of its popularity to bully users into agreeing to terms and conditions they might not understand. The details that users provide help generate the targeted ads that make the company so rich.
In the eyes of the Cartel Office, Facebook is “extorting” information from its users, said Frederik Wiemer, a lawyer at Heuking Kuehn Lueer Wojtek in Hamburg. “Whoever doesn’t agree to the data use, gets locked out of the social network community,” he said. “The fear of social isolation is exploited to get access to the complete surfing activities of users.”
The European Union’s antitrust arm has grabbed the limelight with eye-popping penalties for US technology firms it found fell foul of anti-competitive behavior. Last year, it ordered Apple Inc. to pay 13 billion euros ($14.9 billion) in back taxes and last week it fined Google 2.4 billion euros for allegedly skewing search results in its favor. But lawyers say the Cartel Office’s probe is testing the boundaries of antitrust law — with ramifications far beyond Germany and Facebook as all kinds of powerful technology firms seek to find new ways to cash in on their trove of customer information.
It’s “more radical” than the EU’s Google case “because it asserts that privacy concerns can be antitrust concerns” and that consumers have a broader role than buyers of services in an economy, said Alec Burnside, an attorney at Dechert in Brussels.

TWO BILLION
The German probe comes as Facebook, which now has 2 billion members and made more than $27 billion in revenue last year, confronts heightened regulatory scrutiny in Europe. It’s being investigated by numerous privacy authorities over its plans to merge data with the WhatsApp messenger application, faces a court battle over data transfers across the Atlantic and was fined in May for misleading the EU in a merger review of the WhatsApp deal.
Andreas Mundt, the Cartel Office’s president, said last week he’s “eager to present first results” of the Facebook investigation this year. Like the EU’s Google investigation, he said the Facebook case tackles “central questions ensuring competition in the digital world in the future.”
Facebook declined to comment on the possible outcome. The company has insisted it operates within applicable law and that it would cooperate with regulators.
When the German antitrust regulator disclosed the review in March last year, it said Facebook collects a large amount of personal user data from various sources and creates user profiles, allowing its advertising customers to better target their ads. Users must accept the terms while it’s hard for them to understand to what extent they agree to surrender their personal information, according to the Cartel Office.

ECONOMIC POWER
Personal data is a hot topic in Europe where internet companies have been criticized by privacy agencies for how they gather and use people’s details. But in antitrust, it’s still a contentious issue that the European Commission’s competition authority in Brussels has largely so far side-stepped, saying its job is to focus on companies’ economic power.
That could be changing should the German regulator embolden other authorities such as the EU to act. While the Google case focused on how the company abused its power to thwart smaller rivals, last week’s decision also revealed how the EU is starting to dig deeper into what technology companies do with the personal information they gather from their users.
The commission pointed to how data collection creates and cements the power of technology giants.