Facebook suffers German antitrust attack on business model

Register now

(Bloomberg) --Facebook Inc.’s advertising model came under attack in a landmark ruling from German antitrust regulators who ordered the social network to halt how it currently tracks its users’ internet browsing and smartphone apps.

Germany’s Federal Cartel Office gave the company 12 months to stop “unrestrictedly collecting and using” such data and combining it with users’ Facebook accounts without their voluntary consent. Facebook said it is being unfairly singled out by the regulator, which has broken new ground by using antitrust law to pounce on internet data gathering.

"People always ask to break up huge internet companies,” Andreas Mundt, head of the German Federal Cartel Office, told journalists in Bonn. “Well what we do here today is really something like internally breaking them up.”

Thursday’s order is the result of a three-year probe into how Facebook scoops up data of its customers and whether it illicitly leverages its market power to make users agree to give up their information. No fine was issued. The company was given 12 months to comply with the ruling.

Facebook said the decision “misapplies German competition law to set different rules that apply to only one company.” The company also accused the watchdog of undermining European Union data protection rules and underestimating “the fierce competition we face in Germany.”

Facebook has about 30 million users in Germany, where it has hired hundreds of people to remove fake news, illegal postings such as Holocaust denials, and fake accounts from the site.

Europe’s biggest economy has been difficult terrain for social networks after Chancellor Angela Merkel’s government last year started enforcing the continent’s toughest law aimed at reducing hate speech and fake news -- threatening to fine the likes of Facebook, Twitter Inc., and Google’s YouTube as much as 50 million euros ($57 million) if they failed to delete illegal posts.

Facebook was given four months to show how it intends to comply. The regulator said it can levy fines of as much as 10 million euros if the company fails to follow the order.

The German probe is one of many the Menlo Park, California-based company is facing in Europe and the U.S. over handling personal data. The case goes to the core of how Facebook increases its advertising revenue. The regulator is targeting the network’s habit of collecting data about what websites users are visiting and merging the information with their Facebook profiles. That trove of information allows ads to be tailored to individual users.

Mundt said Thursday that he had never met Facebook founder Mark Zuckerberg but does have an account with the social network.

He said the way his agency had combined data privacy with antitrust faced no resistance from data protection authorities, such as the Irish agency which takes the lead on overseeing the company’s adherence to tough new EU rules.

“I am pretty sure we did the privacy part very right,” he said.

The agency is relying on a rule developed by Germany’s top court that said a dominant company can be judged as misusing its position if it forces customers to accept unfair terms.

Bloomberg News