EU Commission Opens Up Competition Investigation Over Facebook’s Use of Advertiser Data

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On 4 June 2021, the European Commission announced that it had started an investigation into possible anti-competitive conduct by social networking site Facebook about whether Facebook’s use of advertising data gathered from in particular its advertisers amounts to a breach of Article 101 and/or Article 102 of the Treaty of the Functioning of the European Union (TFEU) (see Case AT. 40684 – Facebook leveraging. Commission press release IP/21/2848 https://ec.europa.eu/commission/presscorner/detail/en/IP_21_2848).
 

The UK Competition & Markets Authority has also announced that it had opened a similar inquiry into Facebooks digital advertising practices (https://www.gov.uk/government/news/cma-investigates-facebook-s-use-of-ad-data). This is the first time since the end of the Brexit Transition Period that both Commission and the CMA have simultaneously announced the launch of competition investigations into the same company. This is likely to be a sign of things to come in a post Brexit world. However, both agencies are likely to cooperate closely with each other during their respective investigations.

As readers will know Facebook allows registered users to create profiles, upload photos and videos, send messages and connect with other people. Facebook also offers online classified advertisements service called Facebook Marketplace. This is an online platform where Facebook users can buy and sell goods from each other. So, Facebook is in a situation where it competes with companies that also advertise on its site. When companies place advertising on Facebook, they may also provide it with commercially valuable data. The concern in this case is that Facebook might then use that data to compete against those companies.

Online classified ads providers advertise their services on Facebook's social network. At the same time, they compete with Facebook's own online classified ads service, “Facebook Marketplace”.

The Commission intends to examine in detail whether Facebook's position in social networks and online advertising allows it to harm competition in neighbouring markets, where Facebook is also active due to its social network, and in particular in online classified ads.

As part of its investigation the Commission intends to examine the following concerns that it has identified following a preliminary investigation:

  • Misuse of Data: whether Facebook may be distorting competition for the online classified ads services by making use of the data obtained from competing providers to better target their own advertising on Facebook Marketplace outcompete them.  An example given by the Commission is where for example, Facebook could receive precise information on users' preferences from its competitors' advertisement activities and then use that data to fine tune its own advertising on Facebook Marketplace.
  • Anti-Competitive Tying: whether the way Facebook Marketplace is embedded in the social network constitutes a form of anti-competitive tying which gives the social networking site an advantage in reaching customers and forecloses competing online classified ads services.

The Commission will now conduct its in-depth investigation as a priority to determine whether Facebook has, by its conduct, breached either Article 101 and/or Article 102 of the TFEU.

In announcing this investigation, Executive Vice President Vestager stated that:

"Facebook is used by almost 3 billion people on a monthly basis and almost 7 million firms advertise on Facebook in total. Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups. We will look in detail at whether this data gives Facebook an undue competitive advantage in particular on the online classified ads sector, where people buy and sell goods every day, and where Facebook also competes with companies from which it collects data. In today's digital economy, data should not be used in ways that distort competition.”

The UK Competition and Markets Authority (CMA) has also announced the launch of an investigation into whether Facebook has abused its dominant position contrary to Chapter II of Competition Act 1998. The UK investigation will look into how Facebook gathers and uses data from its digital advertising services to better position and deliver its own advertising.

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