Excessive Data Collection as a Form of Anticompetitive Conduct: The German Facebook Case

• DOI: 10.1177/0003603X21997028
• Date: 01 June 2021
• Author: Anne C. Witt
• Published date: 01 June 2021
• Subject Matter: Articles

Article

Excessive Data Collection

as a Form of Anticompetitive

Conduct: The German

Facebook Case

Anne C. Witt*

Abstract

In a high-profile decision of February 6, 2019, the German Federal Cartel Office prohibited Facebook’s

data collection policy as an abuse of dominance for infringing its users’ constitutional right to privacy.

The case triggered a remarkable interinstitutional dispute between the key players in German com-

petition law. Conflicting rulings by the Du¨sseldorf Higher Regional Court and the German Federal

Court of Justice further illustrate how deeply divided the antitrust community is on the role of

competition law in regulating excessive data collection and other novel types of harm caused by

dominant digital platforms. This contribution discusses the original prohibition decision, the ensuing

court orders, and legislative reform proposals in the broader context of European Union and U.S.

competition law.

Keywords

competition law, excessiv e data collection, abuse of domi nance, consumer harm, GDPR, pr ivacy

paradox, digital platforms

I. Introduction

For the past few years, digital platforms have been firmly on the radar of the European competition

agencies. U.S. mega platforms such as Google, Amazon, Facebook, and Apple (GAFA) have attracted

particular scrutiny. The European Commission and national competition agencies have not only

examined GAFA’s acquisitions and contractual agreements but, unlike their U.S. counterparts, have

also vigorously enforced Article 102 TF EU and the equivalent national prohibiti ons on abuse of

dominance against these digital giants.

1

The great majority of these unilateral conduct cases have

* EDHEC Business School, Augmented Law Institute, Lille, France

Corresponding Author:

Anne C. Witt, EDHEC Business School, Augmented Law Institute, 24 Avenue Gustave Delory, 59100 Roubaix, France.

Email: anne-christine.witt@edhec.edu

1. For example, Commission decision of Jun. 27, 2017, in Case AT.39740—Google Search (Shopping); Commission decision

of Jul. 18, 2018, in Case AT.40099—Google Android; European Commission, Commission fines Google €1.49 billion for

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DOI: 10.1177/0003603X21997028

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concerned exclusionary abuses, that is, business practice s through which a dominant undertaking

excludes competitors from the market and thus acquires market power, which gives them the ability

to reduce consumer welfare.

However, there are many other ways in which dominant platforms can cause or at least contribute to

inflicting harm upon society. For example, individual citizens’ ability to distribute untrue or harmful

content in real time via worldwide digital platforms, which are not subject to the ethical standards and

editorial control of the traditional media, can create serious problems for society by endangering public

health,

2

social stability, the democratic system,

3

or the rule of law.

4

Platforms have also been accused

of harming individuals more directly by invading their privacy through extensive data collection and

profiling.

5

Even the platforms do not dispute that these are serious dangers.

6

This raises the question

whether these novel types of harm are a matter for competition law.

This article critically examines the German Federal Cartel Office’s (FCO) both pioneering and

controversial decision to prohibit U.S. social media giant Facebook’s data collection policy under

German competition law.

7

Part II sets the scene by explaining the concept of exploitative abuse and its

treatment under European Union (EU) competition law. Part III briefly looks at the position of U.S.

antitrust law. Part IV discusses the German competition agency’s Facebook decision, as well as the

interim order by Du

¨sseldorf Higher Regional Court, the follow-up order by the Federal Court of

Justice, and the legislative aftermath. Part V provides a critical analysis of the decision, and Part VI

concludes with a few thoughts on whether the German FCO should also have applied EU in addition to

German competition law.

II. The Concept of Exploitative Abuse in EU Competition Law

EU competition law is no stranger to the concept of exploitative abuse. It is well-established that

Article 102 TFEU not only prohibits anticompetitive exclusionary conduct through which the domi-

nant undertaking restricts competition by excluding rivals from the market, thereby potentially acquir-

ing sufficient market power to reduce consumer welfare. It also outlaws so-called exploitative abuses

by means of which the dominant undertaking reduces consumer welfare directly without further

restricting competition. Article 102(a) TFEU thus prohibits “directly or indirectly imposing unfair

purchase or selling prices or other unfair trading conditions,” and Article 102(b) TFEU bans a domi-

nant undertaking from “limiting production, markets or technical development to the prejudice of

consumers.” Neither Article 102 (a) nor (b) TFEU requires that the harm to consumers result from

exclusionary or collusive cond uct. Rather, the wording of these provisions implies that once the

undertaking in question has acquired a position of dominance, it must refrain from exploiting this

position to the detriment of consumers.

To date, the European Court of Justice’s case law on exploitative abuses has focused on consumer

exploitation in the form of excessive pricing. It established the key principles on excessive pricing in

abusive practices in online advertising, Press Release, (Mar. 20, 2019). The final decision in Case AT.40411—Google Search

(AdSense) has not yet been published.

2. Przemyslaw M. Waszak, et al., The Spread of Medical Fake News in Social Media—The Pilot Quantitative Study,7H

EALTH

POLICY TECHNOL. 115 (2018).

3. Nathaniel Persily, Can Democracy Survive the Internet?,28J.DEMOCRACY 63 (2017).

4. Oren Gruenbaum, Commonwealth Update, India—Death by Social Media, 107 THE ROUND TABLE 389, 392–94 (2018); Kevin

Roose, “Shut the Site Down,”Says the Creator of 8chan, a Megaphone for Gunmen,T

HE NEW YORK TIMES (Aug. 4, 2019).

5. Roger McNamee, A Brief History of How Your Privacy Was Stolen,THE NEW YORK TIMES (June 3, 2019).

6. Facebook is currently trying to address the issue of harmful content through self-regulation: Facebook, Oversight Board

Charter (Sept. 2019), fbnewsroomus.files.wordpress.com/2019/09/oversight_board_charter.pdf. Microsoft’s President, by

contrast, argues in favor of more public regulation: BRAD SMITH &CAROL ANN BROWNE,TOOLS AND WEAPONS (2019).

7. Bundeskartellamt, decision no. B6-22/16 of Feb. 6, 2019.

Witt 277

United Brands.

8

In this seminal case from 1978, the Court was asked to review a decision by the

European Commission, finding United Brands, a Dutch company, guilty of engaging in several anti-

competitive business practices in the market for bananas. Among others, the Commission had accused

United Brands of abusing its dominant position in this market by charging distributors in various EU

Member States different pric es despite similar market con ditions. In addition to consi dering this

practice discriminative, the Commission held that United Brands had charged a number of distributors

excessive prices. On review, the Co urt ruled that a price should be con sidered unfair within the

meaning of Article 102(a) TFEU if the dominant undertaking had taken advantage of its position of

dominance in such a way as to reap trading benefits which it could not have achieved if there had been

normal and sufficiently effective competition. It further held that a price should be considered exces-

sive if it had no reasonable relation to the economic value of the product. While recognizing that other

tests might also be appropriate, the Court suggested the following two-step test for assessing the

excessiveness of a price: (1) the difference between the costs incurred and the price charged had to

be excessive and (2) the price had to be either unfair in itself or when compared to that of competing

products.

9

To this day, this remains the standard test for assessing whether a price is excessive within

the meaning of Article 102(a) TFEU.

10

The concept of exploitative abuse generally, and excessive pricing in particular, is highly contro-

versial, and the arguments against intervening against excessive prices by means of competition law

are well known.

11

A particular economic concern is that prohibiting an undertaking from reaping the

rewards of a position of dominance, which it acquired on the merits of a superior product or greater

efficiency, may discourage undertakings from striving to develop superior products or cost savings in

the first place. In other words, it mig ht discourage innovation and aggress ive competition to the

detriment of consumers. Article 102 TFEU, like the other EU competition rules, however, aims to

enhance competition, and insofar, prohibiting excessive pricing could result in the very situation that

competition law seeks to prevent. Some economists warn that, even in cases where the dominant

position was not the result of superior business acumen but of state intervention or historic accident,

the long-term welfare effects of a competition agency intervening against excessive prices are far from

certain.

12

In their view, Article 102 TFEU should not be enforced against high prices, and that, in the

rare cases, in which the market would not eventually self-correct, ex ante price regulation might be a

more sensible approach than applying Article 102 TFEU.

13

They also find the idea of competition

agencies or courts deciding on what is an appropriate price incompatible with the fundamental premise

of a market economy, in which the market and not the State determines the conditions of supply. From

a legal point of view, finally, the concept of an unfair or excessive price is notoriously difficult to

define. Even the Court of Justice’s 2-step test from United Brands is hardly a model of precision and

predictability.

8. Case 27/76 United Brands v Commission, ECLI:EU:C:1978:22.

9. Supra, paras. 249–52. In United Brands, the Court found that the Commission had failed to provide adequate proof that

United Brands’ prices were excessive (para. 267).

10. C-52/07 Kanal 5 and TV 4, EU:C:2008:703, para. 28. In AKKA/LAA, the Court held that another valid way of establishing

whether the price was excessive would be to compare the prices applied in the Member State concerned with those applied

in the other Member States (C-177/16 AKKA/LAA, ECLI:EU:C:2017:689, para. 38).

11. See, e.g., RICHARD WHISH &DAVID BAILEY,COMPETITION LAW (9th edn, 2018), 735 et seq.

12. David S. Evans & A. Jorge Padilla, Excessive Prices: Using Economics to Define Administrable Legal Rules,1J.C

OMPET.

LAW ECON 97, 120 (2005).

13. David S. Evans & A. Jorge Padilla (supra); Claudio Calcagno, et al., Economics of Excessive Pricing: An Application to the

Pharmaceutical Industry,10J.E

UR.COMPETITION LAW &PRAC. 166 (2019); R. O’DONOGHUE &A.J.PADILLA,THELAW AND

ECONOMICS OF ARTICLE 102 TFEU (2012), Chapter 14; S. BISHOP &M.WALKER,THE ECONOMICS OF EC COMPETITION LAW:

CONCEPTS,APPLICATION AND MEASUREMENT (2010), Chapter 6.

278 The Antitrust Bulletin 66(2)