Germany Punishing Facebook for Social Media Dominance

Big problem
Facebook under fire in Germany (Photo: Reuters)

Germany has declared illegal Facebook's practice of demanding user information in exchange for the right to use its services. It has now prohibited this practice, which it says exploits Facebook users.

This stunning verdict by the Federal Cartel Office (Bundeskartellamt) also means that Facebook's business model, which is based on amassing massive amounts of user information, is also illegal and must be changed. Bundeskartellamt, the national competition regulator, further ruled that Facebook is abusing its virtual monopoly in social media by combining data from Instagram, WhatsApp and third party websites.

It said Facebook is using this illegally obtained data to build a unique profile about each user to gain more market power. The office demanded Facebook has to seek German users' explicit consent to collect and combine this kind of data, according to CNN.

It ordered Facebook to craft proposals for how to do attain this aim. If Facebook doesn't comply, the office can impose fines of up to 10% of the company's annual turnover, which comes to $5.5 billion in this case.

"We are carrying out what can be seen as an internal divestiture of Facebook's data," said Andreas Mundt, president of Bundeskartellamt. "Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts."

Facebook has 32 million monthly active users in Germany, which gives it a market share of more than 80 percent. The regulator contends this dominance gives it jurisdiction to oversee the company's data collection practices. Bundeskartellamt confirms Germany is moving to break up Facebook's practice of gathering data about social media users.

Facebook strongly disagrees with the decision and will appeal against it.

"We disagree with their conclusions and intend to appeal so that people in Germany continue to benefit fully from all our services," wrote Facebook in a blog post responding to the ruling.

Facebook has one month to appeal the Bundeskartellamt decision. If it fails, Facebook will have to change how it processes data internally for German users. It will only be allowed to combine the data into a single profile for a Facebook account with a user's explicit consent.

When there is a lack of competition, users accepting terms of service are often not truly consenting. The consent is a fiction, according to the regulator.

Tech pundits said Germany's decision will be huge hit to Facebook. The social media giant generates billions of dollars by tracking its more than one billion users, plus billions of others on WhatsApp and Instagram. Along the way, Facebook track which sites and apps its users visit; where they shop and what they like, among other data. It then combines this extensive information into comprehensive user profiles.

"As a dominant company Facebook is subject to special obligations under competition law. In the operation of its business model the company must take into account that Facebook users practically cannot switch to other social networks," said Mundt. "The only choice the user has is either to accept the comprehensive combination of data or to refrain from using the social network. In such a difficult situation the user's choice cannot be referred to as voluntary consent."

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