German competition authority is investigating Facebook for terms of use

The Bundeskartellamt says it has started an investigation into Facebook, because the regulator suspects that the company is abusing its dominant market position. The company would do this by violating privacy legislation with its terms of use.

The German regulator indicates that not every unlawful conduct by a dominant company is a reason for an investigation. In the case of Facebook, however, there could be a link between its dominant position in the market and the application of abusive terms of use, which may be unreasonable and unfair to consumers. It would be difficult for users to estimate exactly what terms they agree to when they create a Facebook account.

The chairman of the Bundeskartellamt, Andreas Mundt, states that dominant companies have special obligations when it comes to appropriate conditions of use that are relevant to the market. Facebook is able to show targeted advertisements to users by collecting personal data and therefore derives its revenue from it. In that case, it would be all the more important that users know exactly what they are agreeing to. If there is a link between the violation of privacy legislation by unlawful terms and a dominant position in the market of social networks, this could mean that competition law is being violated.

In January, European Commissioner Margrethe Vestager already warned that the collection of personal data may violate competition law. The German regulator now seems to actually convert this warning into an investigation. The question is whether supervisors from other member states will follow the German example. A fine for violation of European competition law can in some cases amount to ten percent of a company’s annual turnover.