EU initiates antitrust proceedings against Facebook

The Commission suspects that Facebook is abusing its power to the detriment of its competitors in the online classifieds business. In the end, there could be a ban on the previous practice and high fines.

Facebook is also under surveillance.

NThe American digital company Facebook was also caught: the EU Commission opened antitrust proceedings against the company on Friday. The Brussels competition authority suspects that Facebook has abused its market power to gain anti-competitive advantages in the market for online classified advertising services. It is possible that Facebook is violating EU competition rules by embedding its own classified ad service Facebook Marketplace in its social network, the commission said.

The opening of the procedure is a first step. In the end, there could be a ban on the previous practice and high fines. The British competition authority opened similar proceedings against Facebook on Friday.

Competition Commissioner Margrethe Vestager pointed out that Facebook collects huge amounts of data on the activities of its users on its social network. The group is therefore able to target specific customer groups. “We will investigate in detail whether Facebook has an unjustified competitive advantage thanks to this data,” said the Dane.

Two potential competition violations are being examined

In the market for online classified ads, Facebook competes with other companies from which it also collects data. “We need to ensure that data is not used to distort competition in today’s digital economy,” she said. Facebook is used by nearly three billion people every month and has nearly seven million advertisers. Specifically, the commission is examining two potential competition violations.

On the one hand, she suspects that the group is using the data it receives through advertising from other online classified advertising services in its own social network for its market place in an anti-competitive manner. The data provided Facebook with extensive information about both customer preferences and the activities of competitors. So the company can adjust the settings of the market place in its own favor, said the authority.

A Facebook spokesman said it was normal for the company to keep adapting its product. In addition to the allegation linked to Facebook’s specific behavior, the authority is also examining the basic structure of Facebook’s business model: The embedding of the market place in the social network could represent a coupling that would make it unfairly easier for Facebook to reach customers and to exclude competing online classified advertising services .

Several proceedings are ongoing against Apple

It is not the first EU antitrust proceedings of this type against digital platform groups: In 2017, the authority imposed a fine of 2.4 billion euros on Google for improper use of the online shopping portal Google Shopping and ordered the change to the business model.

There are several proceedings against Apple, including the streaming service Apple Music and the payment service Apple Pay. Here, too, the accusation is that the giant corporations are misusing their power in a market (with Google the one for search engines, with Apple the digital “ecosystem” downstream for iPhones and iPads) in order to distort competition in sub-markets and thus displace competitors.

Half a year ago, the finding that the large digital platform groups act as “bouncers” in these submarkets prompted the EU Commission to propose a new regulation of the platform economy in the “Digital Markets Act” (DMA) and to prohibit certain types of behavior from the outset. One of the main reasons was Vestager’s realization that intervention by the competition authority often comes too late and that the balance of power in the markets has long since shifted irretrievably in favor of the gatekeepers.

In the specific Facebook case, it became known in December 2019 that the commission was investigating the suspicion, which it had now substantiated by opening the procedure. Another two years can pass before it is completed. The CDU member responsible for the DMA in the European Parliament, Andreas Schwab, said that the Facebook case shows that the DMA “is almost too late”.