Federal Court of Justice demonstrates antitrust law limits to data collection through Facebook

Facts
Decision
Comment

Facts

On 23 June 2020 the Federal Court of Justice (BGH) decided in interim proceedings that Facebook must implement a Federal Cartel Office (BKartA's) order of 15 February 2019 regarding the storage and processing of user data with immediate effect until the decision in the main proceedings.

With this decision, the BGH confirmed the allegation that Facebook had abused a dominant market position. The court essentially stated that Facebook had a dominant position at least in the German market for social media and would abuse this dominant position.

The BGH's cartel senate therefore opposed the Dusseldorf Higher Regional Court's decision of 26 August 2019 (VI – Kart 1/19). The Dusseldorf Higher Regional Court had expressed serious doubts about the legitimacy of the BKartA's decision. The BKartA considers the case to be one of the most important of its kind in relation to the internet industry.

In its 23 June 2020 press release, the BGH attributed Facebook's abusive conduct to the fact that private Facebook users had no choice between using the platform with a more personalised user experience (though which Facebook would have potentially unlimited access to data on users' non-Facebook-related inline activity) or personalisation based only on data which they willingly disclosed on Facebook.com. These statements indicate that Facebook's conduct may have constituted exploitative abuse.

In addition, as the dominant network operator, Facebook would bear a special responsibility for maintaining existing or potential competition in the social networking market. The high barriers preventing users from switching (lock-in effects) and the associated lack of choice for Facebook users would also constitute user exploitation, as competition could no longer exercise its control function due to Facebook's dominant position. The court also referred to the opinion of the BKartA, which found that users generally disclose personal data only to a limited extent. According to the BGH, this possibility would be available to users if competition functioned properly, so that they would be able to evade competition accordingly.

Further, the BGH stated that Facebook had achieved a dominant position in the market through direct network effects. For both Facebook and (potential) competitors, access to data for the affected social networking market was decisive. Thus, the current and considerably larger data base would strengthen further lock-in effects. In this respect, a negative impact on the market for online advertising is also conceivable. The BGH held that such impairment could not only occur on the dominated market, but also on a dominated third market.

The Dusseldorf Higher Regional Court must still decide on Facebook's appeal in the main proceedings.

Decision

In its decision, the BKartA had argued that Facebook was a dominant company in the market for social networks for private users. Accordingly, Section 19ff of the Competition Act applies.

The BKartA considered Facebook's data processing conditions to be abusive within the meaning of Section 19 of the Competition Act, as they violated valuations of the basic EU Data Protection Regulation (2016/679) as a result of market power and are to the detriment of private users and competitors.

After Facebook had appealed against the decision, the Dusseldorf Higher Regional Court expressed serious doubts about the legitimacy of the cartel authority's decision. Among other things, the Dusseldorf Higher Regional Court stated that no causal connection could be assumed between possible data protection regulation violations and Facebook's possible dominant market position.

Comment

The BGH's decision is a milestone with respect to antitrust law limits for data collection through internet platforms for which user data is extremely important. The BGH clarified that it does not matter whether the internet platform violates the DSGVO. Rather, users can be exploited in the antitrust sense (eg, if they have no choice about what happens to their data).

The legislature will provide further clarity in this respect. According to the explanatory memorandum to the Draft Bill for the 10th Amendment to the Act Against Restraints of Competition, it should be clear that a breach of data protection provisions by a market-dominant company can violate antitrust law.

For further information on this topic please contact Sascha Dethof at Fieldfisher (Germany) LLP by telephone (+49 211 950 749 0) or email (sascha.dethof@fieldfisher.com). The Fieldfisher (Germany) LLP website can be accessed at www.fieldfisher.com.