25 June 2020
The Federal Supreme Court has affirmed the decision of the Federal Cartel Office (“FCO”) that Facebook abused its dominant position on the German-wide market for social networks according to Sec. 19 GWB (Act against Restraints of Competition). So far, only a press release of the Federal Supreme Court is available.
On 6 February 2019, the FCO prohibited Facebook from allowing the use of its social network in Germany conditional on the collection of user data from other Facebook networks and communication services (e.g. Instagram and WhatsApp), third parties’ websites and apps and the merging of such data with those of Facebook’s social network (file no. B6-22/16). In a nutshell: The decision of the FCO against Facebook had been based on an alleged infringement of data protection law. The FCO had taken the view that the infringement of data protection law also constituted an abusive market behaviour to the detriment of both consumers and competitors. This raised the question whether competition law is the right instrument to sanction infringements unrelated to competition (such e.g. data protection law). We discussed the FCO’s decision in March 2019.
After Facebook’s request for temporary relief against the decision of the FCO, the Higher Regional Court of Düsseldorf, having serious doubts about the lawfulness of the FCO’s decree, ordered the suspensive effect of Facebook’s appeal. Accordingly, Facebook was not obliged to implement the order of the FCO.
The Higher Regional Court of Düsseldorf argued that Facebook’s data-collection did not cause any relevant harm to competition. Even if the data processing of Facebook infringed data protection regulations, this would not necessarily constitute a violation of competition law at the same time. This harm would also have to constitute competitive harm. In the view of the court, this was not the case. An infringement of the prohibition of abusive practices required a causal link between the market dominant position and the abusive conduct. As regards the alleged exploitative abuse, it would have been necessary for the FCO to establish that the market power of Facebook enabled it to impose its abusive terms and conditions. It would not have been sufficient to merely establish a causal link between the dominant position and any negative competitive consequences of the conduct. The court was also of the opinion that the FCO had not proven an exclusionary abuse either. In particular, the FCO had not proven that the gathering and processing of data would increase barriers to enter the market. We addressed this decision in more detail in September 2019.
The Federal Supreme Court overturned the decision of the Higher Regional Court of Düsseldorf. Important to recognise in this context is the extremely narrow scope of review in interim proceedings before the Federal Supreme Court: It only examined whether the serious doubts of the lower court were justifiable. Somewhat surprisingly, the serious doubts of the Higher Regional Court of Düsseldorf were not justifiable in the view of the Federal Supreme Court.
Regarding the market definition, the Federal Supreme Court assumed a German-wide market for social networks. This is, in principle, in line with the decisional practice of the European Commission in the cases “Facebook/WhatsApp” and “Microsoft/LinkedIn”. In the view of the Federal Supreme Court, Facebook has a dominant position on this market.
With regard to the alleged abusive market conduct, the Federal Supreme Court emphasized that Facebook did not give its users any options regarding the handling of their data. According to the FCO’s findings, a significant number of private Facebook users want less disclosure of their personal data. If there was effective competition on the market for social networks, users would have a choice between a model with very extensive personalization of the user experience and unrestricted access to data on the one hand and less personalization and correspondingly more restricted access to user data on the other hand, the Federal Supreme Court said.
Against this background, the Federal Supreme Court seems to have based its decision solely on competitive considerations and refrained from considering alleged infringements of the General Data Protection Regulation. In this regard, the Federal Supreme Court affirms the view of the Higher Regional Court of Düsseldorf that an abuse requires competitive effects. Contrary to the previous instance, it assumes such competitive effects in the form of a restriction of freedom of choice of the users.
Finally, the Federal Supreme Court also assumes an exclusionary abuse. In the view of the court, Facebook's access to a considerably larger database further strengthens the existing lock-in effects. An impediment of the market for online advertising could not be excluded either.
This was merely a procedure for interim legal protection. It remains to be seen how the Higher Regional Court of Düsseldorf will decide in the main proceedings. The dispute may well be brought to the Federal Supreme Court again. An order for reference to the European Court of Justice seems also possible. Hence, a final judgment is not yet in sight.