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The Germany Federal Cartel Office has blocked your Facebook friend request

Image credit: JD Lasica (Wikimedia Commons: Creative Commons)

Like previous years, Mark Zuckerberg began 2019 with a New Year’s resolution. On a Facebook status posted on February 5, Zuckerberg reflected on the last fifteen years in typical self-aggrandizing fashion. He lauded his global community of 2.7 billion users, outlined the website’s role in democratic revolutions, and pledged to step up responsibility and protection for user’s data.

Yet only a week after this, the company was thrown an immediate obstacle with Germany’s national competition regulator, the Federal Cartel Office, issuing a ruling that Facebook would have to cease its unrestricted collection of data not only from its platform but its subsidiaries as well. The decision is profound because it is the first and most significant attempt to bring data regulation under the scope of anti-competition policy. Moreover, this may be the catalyst that halts Facebook’s long-term aspirations.

Anti-trust and Data Regulation

As an anti-trust body adjudicating competition laws, the Federal Cartel Office’s (FCO) legal reasoning, as well as its justification for imposing its jurisdiction, is based on its view that data is a form of market power. The FCO has objected to how Facebook has collected user data virtually unrestricted, not only on its own platform, but also those of its subsidiary companies – WhatsApp and Instagram – and third party websites. This unrestricted collection of data was viewed by the FCO as an abuse of its dominant position that has enforced distinct disadvantages on competitors, created a high barrier to entry for prospective companies and left consumers with little effective choice for social media outlets.

However, because of this focus on data and privacy, the FCO’s reasoning behind Facebook’s status as a monopoly is strangely not premised on its position relative to other current internet companies. Though it does recognise alternative social media outlets – such as Snapchat, LinkedIn and Reddit – it views none, except the now defunct Google+ – as being in ‘direct’ competition with Facebook. Furthermore, the FCO makes no effort to consider that Facebook’s position is a result of the network effects that commonly influence the growth of social media platforms, nor that platforms such as Snapchat and Reddit have only thrived because they are distinctively different to Facebook.

Indeed some have suggested that the FCO has confused anti-trust with privacy concerns, particularly given the extensive jurisdictional expansion that the court has undergone in order to legitimately deliver the decision and the fact that the issue of data is already under the scope of the GDPR.

In response, the FCO has remained resolute in its legal conviction. It has opted to avoid this discrepancy by highlighting how Facebook’s enforcement of powerful and overt Terms & Conditions that permit invasive data extraction are considered anti-competitive under German law.

Facebook’s response

Nevertheless, Facebook has been given a month to respond and is likely to lodge its appeal in the coming weeks. As per the press statement on their newsroom, Facebook’s application will most likely highlight the variety of competition currently operating within German social media, particularly against Youtube and Reddit. However, given how the FCO has already anticipated and dismissed these points in its own findings, this tactic may potentially heed no respite.

Assuming that the ruling stands, Facebook would not only have to hinder its data collection – unless consent is provided – but also make sure that consent was given through a more comprehensive basis than an obligatory tick in a box.

Though this threatens Facebook’s lucrative advertising model, it does not handicap it. Sheryl Sandberg undoubtedly recognises that the introduction of a payment system – either a user pays in coin or in data –would legitimate its data collection and strongarm users into giving their consent. Though no valuation is entirely accurate, data collected by Facebook has been valued at $240 per user per year. Sandberg would only have to introduce a fraction of this under the guise that paying this premium would exclude a user from data collection, knowing full well that most would be unwilling to do so.

Whilst this would be remarkably aggressive, it would not be uncharacteristic. The platform has increasingly begun to flex its political muscle in order to achieve its goals, having used consultancy firms to smear and investigate its critics and more recently, targeting politicians around the world with threats to withhold investments in response to incoming data privacy legislation. Moreover, while some may choose to reflect on Zuckerberg’s promise that Facebook would always be free, his comments from last year’s Senate hearing saw him modify this stance, stating that ‘there will always be a version of Facebook that is free’.

Facebook recognises that its commercial model is under threat. How it responds will not only sharply influence the financial direction of the company but also its reputation and image as the global community builder that Zuckerberg has desperately tried to convey on his New Year’s Resolution status. Yet given the momentum that has built up against the company in the last 36 months, such interventions may already be too late to stem its haemorrhaging legitimacy.

Michael Nguyen is the Cyber Fellow for Young Australians in International Affairs.

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