Facebook suffers German antitrust attack on its business model

Facebook Inc was given 12 months to change its user data policy and the way it combines user data following an unprecedented German probe that combined data protection and competition enforcement.

Germany’s Federal Cartel Office on Thursday banned the social media company from combining user data from various sources, saying its decision gives the power back to people to prevent Facebook from unrestrictedly collecting and using their data. Facebook said it will appeal the order, which it said targeted it unfairly.

“People always ask to break up huge internet companies,” Andreas Mundt, head of the German Federal Cartel Office, told journalists in Bonn. Well what we do here today is really something like internally breaking them up.

Thursday’s order is the result of a three-year probe into how Facebook scoops up data of its customers and whether it illicitly uses its market power to make users agree to give up their information. No fine was issued. The company was given 12 months to comply with the ruling.

Facebook said the decision misapplies German competition law to set different rules that apply to only one company. The company also accused the watchdog of undermining EU data protection rules and underestimating the fierce competition the company faced in Germany.

Facebook has about 30 million users in Germany, where it has hired hundreds of people to scrape the site from fake news, illegal postings such as Holocaust denials and fake accounts.

Europe’s biggest economy has been difficult terrain for social networks after Chancellor Angela Merkels government last year started enforcing the continents toughest law aimed at reducing hate speech and fake news — threatening to fine the likes of Facebook, Twitter Inc., and Google's YouTube as much as 50 million euros ($57 million) if they failed to delete illegal posts.

Facebook was given four months to show how it intends to comply. The regulator said it can levy fines of as much as 10 million euros if the company fails to comply.

'Violating data-protection principles'

The German probe is one of many the Menlo Park, California-based company is facing in Europe and the US over handling personal data. The case goes to the core of how Facebook increases its advertising revenue. The regulator is targeting the network's habit of collecting data about what websites users are visiting and merging the information with their Facebook profiles. That trove of information is sold to businesses, allowing them to tailor ads to individual users.

In a preliminary finding at the end of 2017, the agency said the practice violates European Union data-protection principles. Users are unaware that they are being tracked even if they are not logged in to their Facebook account. Facebook illicitly uses its dominant position to make people consent to its policies instead of giving them choices about how the data is collected, the FCO said at the time.

The agency is relying on a rule developed by Germany's top court that said a dominant company can be judged as misusing its position if it forces customers to accept unfair terms.

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