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Archive for March 2nd, 2016

Facebook, Privacy and Article 102- a first comment on the Bundeskartellamt’s investigation

with 15 comments

The German Competition Authority announced this morning that it has opened an abuse of dominance investigation on Facebook “on suspicion of having abused its market power by infringing data protection rules”.

According to its Press Release, the theory of harm is that Facebook may have exploited its arguable dominant position in “the market for social networks” by adopting terms of service on the use of user data “in violation of data protection provisions”.

In order for users to access the social network, users must accept Facebook’s terms of service. To me, this sounds perfectly normal, but the press release underlines that “there is considerable doubt as to the admissibility of this procedure, in particular under applicable national data protection law”. But the authority’s preliminary reasoning seems to be that users would not accept those terms of service should the company enjoy a lesser degree of market power.

The President of the Bundeskartellamt has stated that “Dominant companies are subject to special obligations. These include the use of adequate terms of service as far as these are relevant to the market (….) 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.”

This is a first, and it is a relevant one. A few comments off the top of my head:

-Wasn’t this clear already? This development fits, as you know, within a trend to try to squeeze privacy considerations into the realm of competition law. This is something that we have discussed abundantly (see e.g. here or here) and that I, for one, think has been appropriately settled by both the ECJ (Asnef Equifax, para 63 “any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law, they may be resolved on the basis of the relevant provisions governing data protection”) and the Commission decisions in Google/DoubleClick or Facebook/Whatsapp (para. 164: “privacy-related concerns flowing from the increased concentration of data within the control of Facebook as a result of the Transaction do not fall within the scope of the EU competition law rules but within the scope of the EU data protection rules.”)

-The ever growing responsibility of the dominant firm. It also is part of another tendency, that of extending the “special responsibility” of the dominant firm in order to comply with the law, and not just with competition law, with literally any legal provision. We have discussed this in the past too, in relation to the ECJ’s Judgment in Astra Zeneca (see here) as well as with the “scraping” allegations levied against Google (see here).

-Isn’t the imposition of “unfair trading conditions” expressly mentioned in Article 102. a)?  It is. And it is also widely acknowledged that privacy can be one parameter of competition. So, admittedly, and theoretically, the Bundeskartellamt could build an exploitative case alleging that Facebook sets infra-competitive privacy terms and conditions. However, this does not seem to the reasoning underlying the investigation. Perhaps this has to do with the difficulties in determining which is the “competitive” level of privacy. If it is difficult to determine when a price is ‘excessive’, imagine when it comes to this question. This line of analysis does not sound to be a particularly promising one (without having spent a fortune in expert analysis I suspect that plenty of services with much less market power than Facebook have much lower privacy standards….). Possibly in the light of these difficulties the authority is prepared to take a shortcut, automatically equating an alleged “violation of data protection provisions” by a dominant company with an abuse of dominance.

-Omniscient and omnipotent competition authorities. So essentially, this investigation sends the message that competition authorities can now police any breach of the law by dominant companies. Competition authorities should therefore be not only experts in competition, but in any other branch of the law?  Good luck with that. This may give the Commission equally absurd ideas; it could, for instance, now challenge tax advantages alleging that those were only received because of the economic pre-eminence of some companies….

-If the conduct already breaches other rules, why bother with competition law? Competition authorities have scarce resources. If it is already a given that a conduct breaches other provisions (this seems to be the premise to the investigation), then why bother doing through the hurdles of a 102 case?

 –The challenges of establishing dominance in the face of unhelpful precedents. Leaving wider issues aside, and moving on to dominance, the case seems to be premised on the arguable dominance of Facebook. But, in the light, among others, of the General Court’s Judgment in Case T-79/12 and of the Commission’s decision in Facebook/Whatsapp, the German authority seems poised to have a tough time. Those precedents make it clear that dominance in these markets may be very hard to establish, particularly since social networks are very dynamic, services are provided for free, the role of network effects is mitigated, there are no economic or technical barriers for users to switch, etc. (for my comment on Case T-79/12, see here). [It would also be interesting to see the assessment of the competitive constraints posed by others in these markets (e.g. Google was considered to exert strong pressures in MSFT/Skype despite its 0-5% market share -decision, paras 124 et seq, and para 70 of the Judgment.- )].

-On the connection (or lack thereof) between dominance and the abuse. The Press Release does actually say –or suggest- something which is arguably sensible (albeit contrary to Continental Can and Astra Zeneca) when explaining that it needs to check whether there is “a connection between such an infringement and market dominance”.

 –Wrongly paternalistic competition law? When commenting on the debate on digital platforms (the video of my intervention at the European Parliament is now available here) and on the antitrust/privacy interface, I have always said that in the face of privacy-related concerns what public authorities should do is make sure consumers are in a position to make informed choices. Competition law is there to preserve choices, and here consumers have it. Facebook is not an unavoidable trading partner and consumers are not locked in to it; if consumers don’t think it’s worth giving data in exchange for the service, they won’t join. There may be a market failure, but one that has to do with asymmetries of information, not market power. In other words, whether consumers know or not what terms and conditions they are accepting may be a public policy issue, but one that, in my humble view, is not for competition law to address.

 

P.S. I was supposed to be discussing this precise topic on Saturday at this AIJA conference on media and technology, but I have had to ask my colleague Sam Villiers to replace me. Chillin’Competiiton will nonetheless be represented by Pablo.

 

Written by Alfonso Lamadrid

2 March 2016 at 8:00 pm

Posted in Uncategorized

Access to Digital Content & Open/Closed Systems

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On Friday (4 March) Pablo and I will be coordinating a seminar on competition law in media and technology focused on access to digital content and on the legal issues surrounding open and closed systems. The seminar is part of the wider IEB Course. The programme is the following:

16.00-17.50: Access to digital content and competition law

Ben Van Rompuy  (Senior Researcher , T.M.C. Asser Instituut)

Alexandre de Streel (Professor of European Law, University of Namur; Director, Research
Centre for Information, Law and Society)

Pablo Ibanez Colomo (Associate Professor, London School of Economics; star of the viral Youtube video “Running in [he doesn’t let me say more….]”)

Chair: Jesús Alfaro (Professor, Universidad Autónoma; Counsel, Linklaters)

18.00-19.30 Open and closed systems under competition law

Sebastian Lecou (Economist, Autorité de la Concurrence)

Andrew Leyden (Associate, Cleary Gottlieb Steen & Hamilton)

Juan Delgado (Director, Global Economics Group)

Chair: myself

For more info, click here: Programa IEB 2016 – Seminario III – Competition Law in the Technology Se…  or drop me a line at alfonso.lamadrid@garrigues.com

Written by Alfonso Lamadrid

2 March 2016 at 12:35 pm

Posted in Uncategorized