The Interaction of EU Competition, Consumer, and Data Protection Law in the Digital Economy: The Regulatory Dilemma in the Facebook Odyssey*

• Date: 01 September 2019
• Published date: 01 September 2019
• Author: Klaus Wiedemann,Marco Botta
• DOI: 10.1177/0003603X19863590
• Subject Matter: Articles

Article

The Interaction of EU Competition,

Consumer, and Data Protection

LawintheDigitalEconomy:

The Regulatory Dilemma

intheFacebookOdyssey*

Marco Botta** and Klaus Wiedemann**

Abstract

This article analyzes the interaction of EU competition, consumer and data protection law in the

digital economy. We compare the objectives, rules and enforcement structures of these legal

regimes, and we discuss market failures that justify regulatory intervention in digital markets. In

particular, the Facebook investigations in Germany and Italy are selected as a case study. The

Bundeskartellamt’s investigations are remarkable, being the first in whi ch an exploitativ e abuse of

dominance involving a digital platform has been decided under competition law. These we

compare with their Italian counterpart, where the AGCM has recently sanctioned Facebook for

behavior similar to that investigated in Germany. Yet, the Italian case has been decided under

consumer, rather than competition law. This shows the regulatory dilemma faced by European

antitrust authorities, which are currently struggling to find a solution to the market failures arising

in digital markets.

Keywords

Digital economy, EU competition law, EU data protection law, EU consumer law, privacy paradox,

exploitative abuse of dominance, market failure

I. Introduction

The digital economy is characterized by rapid technological developments and the combination of

economic and digital power. The corresponding unprecedented magnitude of data collection and the

indispensability of online platforms for markets and citizens raise challenges for both society and

legislators. Currently, the law is struggling to find appropriate answers.

*This article completes the March 2019 issue’s symposium on The Parameters of Innovation: New Approaches in EU competition law.

The article was edited under the supervision of Cristina Volpin, a guest editor of the symposium.

**Max Planck Institute for Innovation and Competition, Munich, Germany

Corresponding Author:

Marco Botta, Max Planck Institute for Innovation and Competition, 80539 Munich, Germany.

Email: marco.botta@ip.mpg.de

The Antitrust Bulletin

2019, Vol. 64(3) 428-446

ªThe Author(s) 2019

Article reuse guidelines:

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DOI: 10.1177/0003603X19863590

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As further discussed in Section II, digital markets are characterized by a number of “market

failures.” The lack of informed consent by platform users in combination with the so-called “privacy

paradox” leads to a lack of transparency in the termsofuseusedbyonlineplatformsandtothe

inability of online markets to cater for the privacy preferences users have. These are two examples of

market failures that characterize digital markets. In this article, we will—from a European perspec-

tive—analyze and discuss the available regulatory tools to tackle these market failures and we will

try to find the most suitable one.

Following the entry into force of the General Data Protection Regulation (GDPR),

1

the degree

and uniformity of privacy protection has further increased in Europe. A number of provisions

contained in the GDPR aim at tackling a number of market failures in digital markets, such as those

requiring the data subject’s “informed” consent. In addition, by sanctioning misleading and aggres-

sive commercial practices, consumer law also safeguards the final consumer’s “informed” choice.

The provisions of the Unfair Commercial Practices Directive, as transposed by the EU Member

States at the national level, are thus applicable to online transactions involving final consumers.

2

Last but not least, in the European Union, market failures in digital markets can also be tackled via

antitrust law. Contrary to the situation in the United States,

3

Art. 102(a) of the Treaty on the

Functioning of the European Union (TFEU)

4

sanctions “unfair trading conditions” imposed by

dominant firms on their customers. Therefore, unfair contractual clauses imposed by dominant

online platforms on their users could also, in principle, be sanctioned as an exploitative abuse of

dominant position.

In this article, we discuss the interaction of EU competition, consumer, and data protection law

in digital markets by looking at the Facebook “odyssey.” In particular, after a discussion of the

main market failures that characterize digital markets (Section II) and an overview of the objec-

tives, rules, and enforcement structures of these three areas of EU law (Section III), we discuss

the investigations by the German Competition Authority (Bundeskartellamt)intheFacebook case

(Section IV). The 2019 Facebook decision is interesting because it is the first case in which an

exploitative abuse of dominance involving a digital platform has been sanctioned under compe-

tition law. The case is compared with the recent Italian Facebook case, where the Italian Com-

petition Authority (Autorita

`Garante della Concorrenza e del Mercato) has sanctioned Facebook

due to behavior similar to that investigated by the German Competition Authority. Nevertheless,

the Italian case was decided under consumer, rather than competition law. The Facebook odyssey

thus represents a good example of the “regulatory dilemma” currently faced by a number of

National Competition Authorities (NCAs) in Europe, as they are struggling to find a solution to

the market failures arising in digital markets. In Section V, we conclude by advancing some ideas

on how enforcers could solve this regulatory dilemma.

1. Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016, on the Protection of Natural

Persons with Regard to the Processing of Personal Data and on the Free Movement of Such Data, and Repealing Directive 95/

46/EC (General Data Protection Regulation), 2016 O.J. (L 119) 1–88.

2. Directive 2005/29/EC of the European Parliament and of the Council of May 11, 2005, Concerning Unfair Business-to-

Consumer Commercial Practices in the Internal Market and Amending Council Directive 84/450/EEC, Directives 97/7/EC,

98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regul ation (EC) No. 2006/2004 of the

European Parliament and of the Council (‘Unfair Commercial Practices Directive’), 2005 O.J. (L 149) 22–39 [hereinafter

Unfair Commercial Practices Directive].

3. In Trinko, the U.S. Supreme Court ruled that exploitative conduct, such as the imposition of excessive pricing, is not a

violation of Section 2 Sherman Act, and thus falls outside the scope of antitrust law (Verizon Communications Inc. v. Law

Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004)). For a comparison of the EU and the U.S. approach to sanctioning

exploitative conduct under competition rules, see Michal S. Gal, Monopoly Pricing as an Antitrust Offense in the U.S. and the

EC: Two Systems of Belief about Monopoly?,49A

NTITRUST BULL. 343 (2004).

4. Consolidated Version of the Treaty on the Functioning of the European Union, Oct. 26, 2012, 2012 O.J. (C 326) 47–390.

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