German Authorities to Examine Facebook’s Data Practices

The GermanCartel Office on Wednesday announced the launch of an investigation into Facebook over allegations that it abused its market position by infringing data protection rules, specifically in connection with the terms of service governing user data.

The investigation is aimed at Facebook Inc. USA, the company’s Irish subsidiary, and Facebook Germany GmbH in Hamburg. The office, or Bundeskartellamt, is looking into whether Facebook’s terms of service violate data protection provisions.

“Dominant companies are subject to special obligations,” said Andreas Mundt, president of the Bundeskartellamt. “These include the use of adequate terms of service as far as these are relevant to the market.”

User data is hugely important at advertising-financed Internet services such as Facebook, Mundt added. The investigation will look into whether users are adequately informed about the type and extent of data collected.

Questionable ToS

Facebook’s terms of service could be imposing unfair conditions on users, the office said.

The company collects a large amount of personal user data, and users are required to agree to the terms of service, which often are difficult to understand, the Bundeskartellamt said.

The company has complied with the law and will work with the Bundeskartellamt to answer its questions, a Facebook spokesperson said.

The office is conducting the investigation with the cooperation of data protection officers, consumer protection offices, the European Commission and authorities in other EU member states.

The Working Group on Competition Law met at the Bundeskartellamt in October and to discuss dominant digital and social media platforms such as Facebook, Google and Amazon.

Rules of Competition

Germany’s investigation may not be about Facebook violating any rules regarding data protection, but rather about competition, said Susan Schreiner, an analyst atC4 Trends.

“This is the first time that a company has amassed the sheer volume of data,” she told the E-Commerce Times. “In today’s world, where data is the new currency, is this about user data ultimately translating into market power and giving Facebook an advantage over German and other EU Internet companies?”

German regulators are focusing on two central issues, said Charles King, principal analyst at Pund-IT.

“First is the way Facebook dominates social markets via four of the eight most popular social apps/services,” including Facebook, Facebook Messenger, WhatsApp and Instagram, he told the E-Commerce Times. “The second is the company’s business model, which is largely based on selling advertising informed by information about Facebook users.”

If Facebook’s business is as clean as the company claims, then it shouldn’t be a problem, King said. However, rival companies have faced similar allegations and defended their practices, facing “months of painful inquiries and eventual penalties.”

French Investigation

Facebook has come under scrutiny in various European countries in recent months, as officials have examined issues including the security of data that could be transferred to the U.S. and be subject to U.S. government surveillance.

The French data protection authority, the CNIL, last month sent a formal notice to Facebook requiring it to comply with the French Data Protection Act within three months, specifically regarding the browsing data of Internet users who do not have a Facebook account.

The company has 30 million users in France, according to the office.

The office also found that Facebook collects information on the sexual orientation and religious and political views of users without their explicit consent and sets cookies that have an advertising purpose without proper consent.

If Facebook fails to comply in the French case, the chair could appoint a “rapporteur” who might refer the matter to the CNIL select committee regarding sanctions.

“Protecting the privacy of the people who use Facebook is at the heart of everything we do” a Facebook spokesperson said in a statement provided to the E-Commerce Times by media rep Arielle Aryah. “We are confident that we comply with European data protection law and look forward to engaging with the CNIL to respond to their concerns.”

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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