Report on the IMKR Lecture “Facebook and Antitrust Law – Exploitative Abuse through Data Protection Violations?” by Prof. Ellger
On July 3, 2019, Prof. Dr. Reinhard Ellger, LL.M. (University of Pennsylvania), a research fellow at the Max Planck Institute for Comparative and International Private Law in Hamburg, discussed a decision by the Federal Cartel Office (BKartA) regarding the social media platform Facebook (B6-22/16 dated February 6, 2019), which could hardly be more controversial in terms of its reasoning.
First, Prof. Ellger examined the question of whether and to what extent Facebook, as a free social network, could “exploit” its customers at all, as assumed by the BKartA. In addition, he addressed § 19(1) of the Act against Restraints of Competition (GWB), which was invoked in the decision, as an abuse of contractual terms due to inappropriate data processing. This legal provision then gave rise to a discussion of the extent to which non-antitrust regulations, such as the GDPR, can constitute an abuse of a dominant market position.
The BKartA finds that Facebook has violated Article 6(1)(a) and Article 7 of the GDPR. This violation consists of Facebook requiring its users to grant broad, user- and device-specific consent to the transfer and analysis of data, even when data is generated by third-party providers outside the platform. This data compilation reportedly occurred even when the relevant web tracking had been explicitly disabled in the browser settings. Facebook users could no longer know which data is collected from which websites to be processed for Facebook’s purposes.
Regarding the application of antitrust law and the confirmation of exploitative abuse despite the service being provided free of charge, Prof. Ellger first outlined the key stages of the antitrust authority’s review. Pursuant to § 18(2a) GWB, which was introduced by the 9th GWB Amendment, a market can be defined in the present case even though the service provided by Facebook to users is free of charge, because the paid advertising market and the free user market are closely interrelated and share a common commercial purpose. Furthermore, Prof. Ellger outlined Facebook’s actual market dominance by referring to § 18(1) GWB and the presumption of market dominance under § 18(4) GWB. Given a market share of 95% of daily users of social platforms, the required threshold of 40% is clearly exceeded.
Given the unique nature of the multi-sided market comprising users and advertisers, Prof. Ellger then clarified the criteria for market dominance under § 18(3a) GWB. In the case of Facebook, he sees particular significance in the positive direct and indirect network effects. Particular attention was given to the question of the extent to which the Federal Cartel Office (BKartA) could actually assert a claim of abuse of dominance based on a violation of Article 7(4) of the GDPR in conjunction with Recital 43 of the GDPR. In any case, the Federal Court of Justice (BGH) has already applied non-antitrust provisions in antitrust cases on several occasions (see, e.g., BGH, KZR 6/15 – Pechstein/ISU, KZR 58/11 – VBL-Gegenwert I and KZR 47/17 – VBL-Gegenwert II). Taking these into account, an abuse of contractual terms pursuant to § 19(1) in conjunction with (2) No. 2 GWB could also be affirmed in the present case. However, it would then have to be proven that the enforcement of the unfair data processing clauses is attributable to Facebook’s dominant market position and not to partial market failure caused by information asymmetries on the part of users, which could also occur in competitive markets.
Prof. Ellger then concludes that, under certain circumstances, a partial market failure could exist in the sector of data-processing companies. While the voluntary consent now required for the transfer of user data outside the platform would somewhat curb the volume of data, Facebook’s dominant market position would tend to remain unaffected. In any case, Prof. Ellger doubts that the BKartA’s decision will neutralize the highly relevant direct and indirect network effects that benefit Facebook. If the BKartA’s intervention in the Facebook case was primarily caused by enforcement shortcomings on the part of the federal states’ data protection authorities, this would not constitute a legitimate reason for applying the antitrust prohibition against abuse. Such shortcomings would have to be remedied by providing the data protection authorities with the material and personnel resources commensurate with their responsibilities.
Addendum: In summary proceedings on June 23, 2020 (Case No. KVR 69/19), the Federal Court of Justice (BGH) confirmed the BKartA’s assessment.
Further reading (in German): Ellger, Digitale Herausforderungen für das Kartellrecht, ZWeR 2018, 272.
