German competition authorities investigate Facebook

German competition authorities have launched proceedings against Facebook to investigate if the social network abused its market power by infringing data protection rules.

A statement by the Bundeskartellamt said there was an initial suspicion that Facebook’s conditions of use were in violation of German data protection provisions.

“Facebook’s use of unlawful terms and conditions could represent an abusive imposition of unfair conditions on users,” the statement said.

The Bundeskartellamt said it would examine a possible connection between Facebook’s dominant position in social networks and the use of such clauses.

The issue of data protection has grown in importance as internet companies such as Facebook and Google have become big, data-driven businesses. How to regulate the industry as it has become more pervasive is a concern for European regulators and data protection authorities.

The Bundeskartellamt said Facebook collected large amounts of personal user data from various sources and, by creating user profiles, enabled its customers to use more targeted advertising. It said users had to first agree to Facebook collecting and using their data when they accepted its terms of service, but it was difficult for them “to understand and assess the scope of the agreement”.

“There is considerable doubt as to the admissibility of this procedure, in particular under applicable national data protection law,” it said. “If there is a connection between such an infringement and market dominance, this could also constitute an abusive practice under competition law.”

Facebook said: “We are confident that we comply with the law and we look forward to working with the federal cartel office to answer their questions.”

The Bundeskartellamt is launching the proceeding in close contact with data protection officers, consumer protection associations as well as the European Commission and the competition authorities of other EU member states. It will target the company’s Irish subsidiary and its German operation.

Andreas Mundt, head of the Bundeskartellamt, said that dominant companies were subject to “special obligations”, such as “the use of adequate terms of service as far as these are relevant to the market”.

“For advertising-financed internet services such as Facebook, user data are hugely important,” he said. “For this reason it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected.”

Unlike its west coast peers, Facebook has so far avoided the gaze of competition authorities in Europe. Google has been wrapped in a lengthy antitrust case brought by Brussels, while both Apple and Amazon have had their tax affairs scrutinised by the European Commission.

The company’s data protection practices have been called into question by regulators in France, Belgium, the Netherlands and Germany. The social network was accused of tracking users across the web without their consent. Facebook insists that its practices were within the rules and common practice for most websites.

In France, Facebook has been given three months to change its practices or face stiff fines.

In January, Margrethe Vestager, EU competition chief, said the regulator was looking at whether the data collection methods of large Internet companies were in breach of antitrust rules.

In addition, Guenther Oettinger, European digital commissioner, said last month that the EU was considering new rules to promote healthier competition among companies whose business models rely on data collection. The initiative came amid growing concern that the huge data sets compiled by companies such as Google and Facebook could give them an unfair advantage by shutting out competition.

- Copyright The Financial Times Ltd