On Feb. 7, the German Federal Cartel Office (FCO), the Bundeskartellamt, imposed far-reaching restrictions on Facebook’s processing of user data. The action followed several years of investigations and an announcement earlier in the year that such a decision would be coming. The FCO is Germany’s independent anti-trust regulator.
So what does the FCO’s decision mean in more concrete terms?
Demanding Explicit Opt-In for Data Collection Processes
According to Facebook’s terms and conditions, people can only use the social network if they agree to Facebook tracking their behavior not only on Facebook but also on external websites and apps. Facebook collects this data and assigns it to the user’s account. Facebook maintains it uses this third-party data as well as activity from its own platform, as well as on WhatsApp and Instagram, to create a comprehensive picture of the individual users in order to serve relevant ads.
The FCO ruling is trying to make it mandatory for users to explicitly agree to having their data collected from any site other than Facebook. To be clear: The FCO is not prohibiting the collection of data, rather making it necessary to clearly inform users of the data collection policies and obtain their consent. Under the ruling, Facebook has 12 months to submit a proposal on how it can meet this demand and set it into practice.
In a press release accompanying the ruling, FCO president Andreas Mundt made the case for why these data collection policies make it relevant to anti-trust regulators, “The combination of data sources has played a decisive role in Facebook’s being able to create such a unique overall database about each individual user and achieve its market power.” Mundt argued Facebook should give users the choice whether or not to have their data collected and Facebook should not exclude users who disagree, as it currently does: “If the user does not give their consent, Facebook may not exclude them from its services and must refrain from collecting and merging data from different sources.”
Related Article: Privacy Scandals Don’t Harm Profit: The Case for Regulations
Facebook’s Monopoly in the German Market
According to the FCO press release, Facebook dominates the German market for social networks, with 23 million daily and 32 million monthly users. Facebook has a market share of over 95 percent among daily active users and over 80 percent among monthly active users in the country. Comparisons to other social networks don’t apply, as services such as Snapchat, YouTube, Twitter, as well as professional networks such as LinkedIn and Xing, each offer only a selection of the services Facebook provides. The statement goes on to state that even if other social networks were included in the assessment, the Facebook group, including its subsidiaries Instagram and WhatsApp, would achieve such high market shares as to suggest a monopoly.
The FCO’s decision is not yet final. Facebook has one month to file an appeal, which would then be decided by the Düsseldorf Higher Regional Court. And the company has already announced in a press release that it will do so, arguing that its data collection practices improves the individual services and makes them more secure. In addition, the company contended it does not hold a dominant market position, but rather is in fierce competition for user attention with apps such as YouTube, Snapchat, Twitter and others.
In a rare moment of harmony, the German media, analysts, commentators and the German government and opposition parties agreed that Facebook dominates the market. The only one who still doesn’t find Facebook dominant seems to be Facebook itself.
Related Article: Facebook: A Case Study in Ethics
The FCO Ruling Goes Beyond the GDPR
Facebook further argued in its statement that the FCO is not responsible for reviewing data protection, due to its compliance with the European data protection regulation (GDPR). However, under FCO guidelines, the authority must become active if a company holds a “dominant market position.” Although at first glance it may be about data protection, the real motivation is whether Facebook exploits its database to achieve its dominant market position. Or as has been written before: Because there is no real alternative to Facebook in Germany, users have no choice. The FCO therefore is intervening because its task is to prevent monopolies and maintain competition in the market.
What will happen now? You don’t have to be a prophet to predict it could take years for the case to make its way through the courts. The investigations leading up to last week’s ruling took just under three years. Despite the possibility of a long legal dispute, the signal the antitrust authorities sent is extremely important, because it creates a clear link between data protection and the guarantee of competition.
The relevance of the ruling becomes even clearer in light of recent reports that Facebook was working on integrating WhatsApp, Instagram and Facebook in a common infrastructure. Once again, the official statement from the company was that it was acting in the interests of users, to help them communicate more easily between the three networks. Meanwhile, some in Germany are demanding that Facebook should guarantee communication with other services such as Signal, Telegram and Threema.
Related Article: Will Google’s $57M Fine Finally Push the US Toward Comprehensive Privacy Regulations?
Potential Fallout for Other Companies and the Public
Facebook isn’t alone in being called out for bad data practices or of being a monopoly. In Germany, for example, Google has a monopoly-like position, fielding 95 percent of all search queries made by German users. It also links profile data across multiple services, such as Gmail, Google Maps and YouTube. But if interviews with FCO president Mundt are any indication, it looks as if the FCO has Amazon in its sites next. A call is also being raised for a pan-European approach within the framework of the EU to take action against other providers who collect and share data.
The FCO’s decision has been reported on in all serious media outlets and even was a lead story on German television news outlets. It is not the potential fines that Facebook could face that are important — there is a threat of severe penalties in the form of fines of up to 10 million Euros — but rather the publicity of the ruling and the associated education of users.
Will Facebook users become more sensitive when they hear and see the corresponding reports? Let’s not kid ourselves. The mixture of convenience, sloppiness and lack of education make this unlikely. How many users were and are really aware that Instagram and especially WhatsApp are owned by Facebook? And convenience dominates, especially in light of the few alternatives, when everyone else is on WhatsApp or Facebook. I experience this myself when I want to communicate with friends and acquaintances using another messenger — in my case, Signal.
The Work Ahead
When cases like these come out, we always here the refrain: “I have nothing to hide.” The work ahead is to educate people to the many ways they are handing over their data in every day life, and to share the alternatives readily available, such as DuckDuckGo, Qwant, Ecosia for search or Firefox as a browser.
Of course, the FCO, the government and public administration, schools, universities and educational institutions absolutely must act, educate and enlighten. But at the (bitter) end, however, it is the individual user who will decide on his or her own data.
Stefan Pfeiffer is working in Marketing for IBM in Germany. Prior to his time at IBM he was working for FileNet (which got acquired by IBM) and MIS AG.