In its decision, the authority argued that Facebook had a dominant position in the German market for social networking services. This fact is probably beyond dispute and was also confirmed by the German Federal Court of Justice in the ruling under discussion.
Competition authority claim based on GDPR violation
In its ruling of 23 June 2020, the higher court, the German Federal Court of Justice, set aside Düsseldorf Higher Regional Court’s ruling, however, thereby reinstating the immediate enforcement of the authority’s decision. The Federal Court of Justice ruled that any potential violation of the GDPR was irrelevant to the decision as to whether or not Facebook was abusing its dominant market position (Maßgeblich hierfür ist nicht die vom Kartellamt in der angefochtenen Verfügung in den Vordergrund gerückte Frage, ob die Verarbeitung und Nutzung von personenbezogenen Daten […] mit den Vorschriften der Datenschutz-Grundverordnung in Einklang steht).
Federal Court of Justice: users need more choice
1) to use the network with a user experience that is more personalised, which includes unrestricted access by Facebook to data resulting from their “off-Facebook” internet use; or
2) to use the network on the basis of a personalised user experience that only uses data disclosed on facebook.com by the users themselves.
Facebook was abusing its dominant market position by only offering the first of these options.
In its reasoning, the court stated that Facebook served two markets. On the one hand, the company enabled private users to use the platform to present themselves and their social relationships to other people, and to communicate. On the other, it enabled companies to distribute advertising via the Facebook network, with the online advertising market serving to finance the user platform, for which users did not have to pay (at any rate, not money).
(Facebook ist als Betreiber eines sozialen Netzwerks auf zwei Märkten tätig. Es bietet zum einen privaten Nutzern die Plattform als Medium zur Darstellung der Person des Nutzers in ihren sozialen Beziehungen und zur Kommunikation an. Es ermöglicht zum anderen Unternehmen Werbung im Netzwerk und finanziert damit auch die Nutzerplattform, für deren Nutzung die Nutzer kein (monetäres) Entgelt zahlen.)
Anti-competitive behaviour on two markets
Facebook was abusing its market position in both markets (social networking services for private users, and online advertising), the court ruled.
On the market for social networking services for private users, Facebook was using the platform effect, or rather the great obstacles that prevented users from switching to other social networking services (hohe Wechselhürden), to “lock in” users. Based on this “lock-in effect”, users were being “exploited” (ausgebeutet), i.e. practically forced to give away their personal data and give up their “informational self-determination” (informationelle Selbstbestimmung). “Informational self-determination” is a term coined by the German Federal Constitutional Court (Bundesverfassungsgericht) and is defined as “the authority of the individual to decide himself, on the basis of the idea of self-determination, when and within what limits information about his private life should be communicated to others”.
The lock-in effect was relevant to issues of competition law because, due to Facebook’s dominant market position, competitors were unable to provide any checks on Facebook’s market behaviour (der Wettbewerb kann wegen der marktbeherrschenden Stellung von Facebook seine Kontrollfunktion nicht mehr wirksam ausüben). According to the court, the German competition authority stated that many private Facebook users actually wanted to disclose less of their personal data. If effective competition were in place in the market for social networking services, the court opined, one would therefore expect a competitor to emerge who offered a service to match this demand.
(Nach den Feststellungen des Bundeskartellamts wünschen erhebliche Teile der privaten Facebook-Nutzer einen geringeren Umfang der Preisgabe persönlicher Daten. Bei funktionierendem Wettbewerb auf dem Markt sozialer Netzwerke wäre ein entsprechendes Angebot zu erwarten.)
Added revenue being used to strengthen a dominant position
(Wegen der negativen Auswirkungen auf den Wettbewerb um Werbeverträge lässt sich schließlich auch eine Beeinträchtigung des Marktes für Online-Werbung nicht ausschließen. Entgegen der Auffassung des Beschwerdegerichts bedarf es insoweit keiner Feststellung, dass es einen eigenständigen Markt für Online-Werbung für soziale Medien gibt und Facebook auch auf diesem Markt über eine marktbeherrschende Stellung verfügt. Die Beeinträchtigung muss nicht auf dem beherrschten Markt eintreten, sondern kann auch auf einem nicht beherrschten Drittmarkt eintreten.)
Please note: in order to improve readability of this article, when quoting from German texts in the original German, I have often shortened phrases or adapted them to the present English-language text without indicating such changes. If in doubt, please refer to the original sources provided as links.