(Oct. 23, 2019) On August 26, 2019, the Higher Regional Court of Düsseldorf, Germany, temporarily suspended an order (English summary) of the German Federal Cartel Office (FCO), the country’s highest competition authority, which had restricted Facebook’s ability to process user data. Facebook therefore currently does not have to comply with the order. The decision in the main proceedings to determine the legitimacy of the restrictions is still pending. A date for oral arguments has yet to be set. The FCO has announced that it will appeal the temporary injunction to the Federal Court of Justice, the highest civil court.
In February 2019, the FCO issued an order that restricted Facebook’s ability to combine user data collected from Facebook-owned services such as WhatsApp and Instagram and from third party websites and assign it to the user’s Facebook account. Accepting the social network’s terms and conditions, which provide for such additional processing, is a prerequisite to using the service. The FCO prohibited Facebook from processing that data without the user’s explicit consent. It stated that the processing violated section 19, paragraph 1 of the Competition Act, which prohibits the abuse of a dominant market position. In 2018, Facebook had a market share of more than 95% of daily active users in social media and more than 80% of monthly active users in Germany.
The FCO argued that Facebook’s terms and conditions and the manner and extent to which it collects and uses data are in violation of the European data protection rules, in particular the General Data Protection Regulation, to the detriment of users, and therefore constitute an exploitative practice. In the opinion of the FCO, the abuse of its dominant market position in this manner unfairly impedes competitors.
The FCO set a deadline of twelve months for Facebook to amend its terms and conditions or delete the respective provisions and to insert a provision stating that the processing of user data collected from Facebook-owned services and from third party websites requires explicit consent. In addition, it ordered Facebook to submit an implementation plan within four months.
The Higher Regional Court of Düsseldorf disagreed with the assessment of the FCO and stated that it had “serious doubts” regarding the legitimacy of the order. It held that Facebook’s data processing did not constitute a relevant competitive harm and saw no exploitative practice to the detriment of the users or an impediment to competitors. (Oberlandesgericht Düsseldorf para. 25.)
With regard to exploitative business terms, the Court opined that the standard example for exploitative practices codified in section 19, paragraph 2, number 2 of the Competition Act was not fulfilled. The provision states that “[a]n abuse exists in particular if a dominant undertaking … demands payment or other business terms which differ from those which would very likely arise if effective competition existed.” The Court criticized the FCO for not making any determinations regarding a hypothetical competitive market and what kind of terms and conditions would exist in such a market. (Para. 27.)
It also held that Facebook did not abuse its dominant market position according to the general stipulation of section 19, paragraph 1, even though it is generally possible that a violation of consumer protection rules constitutes a relevant competitive harm. The Court pointed to the desired alignment of national competition law with EU competition law, which includes consumer protection aspects, and various national competition rules that protect consumers—for example, the prohibition on abusive pricing. However, in the case at issue, Facebook’s prohibited behavior did not cause any anticompetitive effects, in the opinion of the Court. The data collected from Facebook-owned services and from third party websites are easily duplicated and do not constitute an exploitation of the user, unlike “demanding a payment” as stated in section 19, paragraph 2 of the Competition Act. Users remain free to allow other services—for example, competitors of Facebook—to use their personal data. (Paras. 28–31.)
In addition, the Court held that the FCO did not provide sufficient justification for its claim that Facebook impedes its competitors and abuses its dominant market position. Facebook did not prevent its competitors from entering the market, and the FCO did not prove how the data collection factored into acquiring a dominant market position. (Paras. 92 & 93.) According to the Court, there is no causal relationship between Facebook’s data processing as prohibited in the order and its dominant market position. (Para. 72.) Facebook users are not forced into signing up with the social network, and they provide voluntary consent to the data processing. (Paras. 77 & 83.) The Court concluded that even if Facebook had abused its dominant market position and impeded its competitors, the FCO’s order was not appropriate to rectify the situation as it did not prohibit Facebook from collecting data in general. (Para. 88.)