Competition law and data protection

Facebook’s success before the Higher Regional Court Düsseldorf

On 26 August 2019, the Higher Regional Court Düsseldorf issued its order on Facebook’s request for temporary relief against the decision of the German Federal Cartel Office (“

FCO”). The FCO had previously decided that Facebook infringed Sec. 19 ARC [Act against Restraints of Competition = GWB] by making the use of its social network 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 (Datenschutzrecht und Kartellrecht – eine Einschätzung zur Facebook-Entscheidung des Bundeskartellamts). The FCO thus prohibited Facebook from processing and implementing such data in accordance with its terms and conditions without the explicit consent of the user.

The Higher Regional Court Düsseldorf has granted Facebook’s request to suspend the effect of the decision. As a result, Facebook will not have to implement the orders of the FCO. The court has found that the decision of the FCO raised serious concerns with respect to both the alleged exploitative and the alleged exclusionary abuse. The court has also permitted the filing of an appeal with the German Federal Court of Justice. The FCO has already announced its intention to appeal.

The decision of the FCO against Facebook had been based on an alleged infringement of data protection law. It had taken the view that this infringement thus constituted an infringement of competition law. The Higher Regional Court Düsseldorf has clearly rejected this view.

The reasoning for the decision of the court can be summed up as follows:

No exploitative abuse

The court did not question Facebook’s market dominant position on the relevant market for social networks as assumed by the FCO. The court, however, did not find any basis for an abuse of a dominant market position.

The court stated that it cannot be per se excluded that any harm of consumer protection could also constitute an abuse of a dominant position. However, this harm would also have to constitute competitive harm. In the view of the court, this was not the case:

• The transfer of data had not caused any economic harm to the users because the data were replicable.
• Any possible competitive harm was, moreover, not a result of a loss of control of the users as the collection and processing of their data was based on the terms and conditions of Facebook and, therefore, upon consent of the user.
• An infringement of data protection law did not per se constitute an abuse of a dominant position. It would have been necessary to establish that the conduct of the dominant undertaking harmed competition. The use of terms and conditions that infringe data protection law (or other areas of law) did not necessarily indicate a threat of the goals of competition law. The proper legal test would have been to evaluate whether the terms and conditions could not have been imposed by the dominant undertaking on the basis of a hypothetical scenario with effective competition (counterfactual).
• 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 to establish that the market power of the undertaking enabled this undertaking to impose its abusive terms and conditions. It was not sufficient to establish a causal link between the dominant position and the negative competitive consequences of the conduct.
• The court insisted that the assessment of the causal link between the dominant position and the abusive conduct must be based exclusively on the principles of competition law (and not data protection law). The question at hand was whether the users’ consent to Facebook’s terms and conditions cannot be perceived as an autonomous decision due to Facebook’s dominant position. In the view of the court, the FCO was unable to prove that this was the case. The court argued that user’s granting of consent was, rather, the result of his/her individual weighing of the advantages and drawbacks of using the network.

No exclusionary abuse

The court was also of the opinion that the FCO had not proven an exclusionary abuse either:

• The order by the FCO was not adequate in putting an end to the alleged infringement. The FCO did not per se prohibit the gathering and processing of data but only with the fact that the user did not grant his/her explicit consent. The court took the position that any alleged impediment of competition between Facebook and other social network providers could not be based on the issue of the granting of consent by the users of Facebook’s network.
• The FCO had also not proven that the gathering and processing of data would increase barriers to enter the market. Whether this is the case, required a detailed analysis. The reason is that Facebook’s market position depended on positive direct network effects of the private users and that these network effects constituted the actual market barrier.