Monday, March 21, 2016
Companies that use personal data as an asset are becoming subject to more scrutiny under Competition Law, in particular use of Big Data by companies, such as Facebook, that may hold market power or be dominant in the market.
The Bundeskartellamt (The German Federal Cartel Office) has initiated proceedings against Facebook and recent comments by the European Commissioner for Competition, Margrethe Vestager in her speeches of 17th January and 10th March, indicate a possible further move by the Commission on competition law in the context of Big Data.
This comes at a time when the Commission is focusing on the tax practices of multinationals such as Apple in Ireland, Fiat, Amazon and Mc Donald’s in Luxembourg and Starbucks in the Netherlands and has also sent a Statement of Objections to Google regarding possible abuse of dominance.
The European Commission appears to be moving towards using competition law as a tool to keep those companies in check. It has recognised the need for rules that can cope with new ways of doing business.
President Juncker insisted that the digital economy would be a priority and it has also been confirmed that it is a key sector for competition law focus.
The Commissioner for Competition stated in January that “Successful enforcement is all about focusing on the things that matter” and “having the power to act when you need to”.
“Sometimes data can be the most valuable asset a company owns”.
Competition can be affected even when a service is offered free of charge. The things that matter can be assets such as a companies’ customer base, its’ data or ability to innovate.
The Commissioner stated that competition rules allow these issues to be taken into account in the review of a merger. However, Facebook’s purchase of Whatsapp in 2014, for 19 billion dollars would have been outside the scope of Commission merger review had it not been referred to the Commission by national authorities. That referral allowed the Commission to review the merger even though Whatsapp did not have a high enough turnover to meet the thresholds set out in EU competition law.
The Commission ultimately found that the merger would not hamper competition as Facebook Messenger and Whatsapp were not close competitors, consumers would continue to have a wide choice, and the merged entity would continue to face sufficient competition post-merger.
The Commissioner considered the possibility of a move away from the turnover thresholds, which could take away the Commission’s power to act in important circumstances. She mentioned, as possible substitutes to those thresholds, using the value of a merger, or relying on the referral of cases by national authorities.
When the Commissioner discussed the possible competition law implications of Big Data in January, the Commission had not yet found a competition problem with the use of such data, despite scrutiny. The Commission had looked at this issue in two merger cases, Google’s acquisition of Doubleclick and Facebook’s purchase of Whatsapp and found no serious cause for concern as other companies would still have access to many sources of data.
She confirmed that the Commission would be paying close attention to those markets and would take action when the need arose. At that time, this was classified as more suited to regulation by privacy rules than competition enforcement.
She did, however, refer to the need to ensure that powerful companies did not abuse their power and drive out rivals or prevent new ideas from having a chance of success. She saw a role for competition law, in ensuring a level playing field, but was careful to emphasise that “data doesn’t automatically equal power”.
National Competition authorities in the EU have also begun to look at Big Data in the context of competition law and data protection.
“For advertising-financed internet services such as Facebook, user data are hugely important. For this reason it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected.” Andreas Mundt, President of the German Federal Cartel Office.
On the 2nd March, the Bundeskartellamt initiated proceedings against Facebook on suspicion of abusing its market power by infringing data protection rules in the market for social networks. It is investigating suspicions that with its specific terms of service on the use of user data, Facebook has abused a dominant position in the market for social networks.
The Bundeskartellamt has been careful to point out that not every infringement on the part of a dominant company is relevant under competition law. It will investigate whether there is a connection between Facebook’s possibly dominant position and the use of such terms of service.
Facebook users must agree to the company’s collection and use of their data, by accepting the terms of service, before they can access the social network. The Bundeskartellamt has stated that it is difficult for users to understand and assess the scope of that agreement and that there is considerable doubt as to the admissibility of this procedure, in particular under national data protection law.
The French and German competition authorities are also conducting a joint study into how companies can gain market power by accumulating large sets of personal information and the French Competition Authority may open a sector inquiry regarding the competition law implications of Big Data.