Legal eagles

Could the EU really break up Facebook’s monopoly?

Belgium EU Facebook
Brussels’ frowny face. Source: AP

The farcical questioning of Mark Zuckerberg in Brussels this week didn’t provide many answers. The session’s format meant politicians got to pose questions for an hour but Facebook’s boss only had 20 minutes to answer them.

But Mr. Zuckerberg should be worried by a suggestion made by several lawmakers.

“I think it’s time to discuss breaking up Facebook’s monopoly,” German member of the European Parliament, Manfred Weber, told the Facebook CEO, after asking him to name a single European alternative to Facebook. Later, Belgian politician Guy Verhofstadt tweeted that “EU competition authorities must be activated.”

Their calls coincided with a similar campaign launched in the US on Monday, Freedom from Facebook. It also wants antitrust authorities to dismantle the social media giant.

Could that really happen? The EU has been more successful in the past than the US at taking down tech behemoths, thanks to laws that make it easier to prove antitrust violations. Last year, Brussels fined Google €2.4 billion for prioritizing its own services over those of others. The European Commission has also won cases against Apple, Microsoft and IBM, even if they sometimes took years.

Berlin now has new laws tough enough: The new government’s coalition agreement includes an update on anti-trust laws called “Competition 4.0.” It makes Germany one of the first countries to have its own competition rules for the digital economy, says Andreas Mundt, who heads Germany’s Federal Cartel Office.

Online it is often data, not money, offered as payment. Germany's new rules take that into account.

Those new laws are more effective because they acknowledge that, online, it’s often data, not cash, that changes hands. And they’re important because they establish how data translates to monopolistic dominance. In the past, anti-trust cases were usually based on pricing and whether buyers suffered from a lack of competition. But by those standards, it can be hard to define how Facebook, Google or Amazon hurt consumers, unless you consider what happens to users’ personal information.

Facebook knows that. In a post on its own site after the Brussels session, Facebook gave more detailed answers to the anti-trust questions, repeating again that EU consumers have plenty of alternatives when it comes to messaging or posting pictures and that there are many benefits to its ownership of would-be competitors. “We are happy to address any questions the European competition authorities may have,” the company said.

Which is good because late last year, Germany became the first country in the world to look into Facebook’s data-gathering supremacy. The Federal Cartel Office’s “preliminary administrative proceeding” called Facebook “legally dominant” in German social media and said that “Facebook is abusing this dominant position by using its social network … to limitlessly amass every kind of data.”

Germany’s monopoly police noted that Facebook gathers its users’ data from all its products, including messaging service WhatsApp and photo-sharing platform Instagram. It also uses information that it gathers from Facebook-related software on other websites, known as Facebook APIs. If you visit your favorite coffee shop’s website, for example, and the website has a Facebook button, then Facebook knows you were there. Now Facebook knows what kind of coffee you like and matches that to your profile — even though you didn’t go anywhere near the site.

The antitrust concerns arise where privacy infringements plus data-gathering result in abuse, “a crucial factor for the economic dominance of a company,” Mr. Mundt said. That’s where regulators will focus, especially on Facebook, he noted. The European Commission’s own competition authority concurs.

Facebook-Chef Zuckerberg im EU-Parlarlament
Face booked. Source: DPA

However it would be unprecedented for European regulators to go after an American company and try to break it up, said Mirko Hohmann, a researcher and project manager at the Global Public Policy Institute in Berlin. “They might like that idea — but I don’t think they will go that far.” He believes the talk of breaking the company up is meant to put pressure on Facebook and to force it to cooperate.

There are other ways to do that, Mr Hohmann points out. One is be to block future acquisitions. For example, at one stage Google was buying one start-up each week. If Facebook had been prevented from buying WhatsApp and Instagram, those platforms could be competing with Facebook today, say analysts at the US-based Open Markets Institute.

Facebook and Google could be treated more like power companies or railways in the future.

Regulators could also categorise Facebook as a utility. If European governments defined Facebook and Google as essential services, they could be governed the same way as power companies or railways. That could include everything from capping profits, making internal workings more transparent, requiring more public responsibility or obliging companies to ensure data portability.

If data portability was required of Facebook, users could move all their pictures, messages and links to another social media platform. It’s impossible right now, but would be a way to increase competition, Mr. Hohmann said.

The EU and Germany could certainly prosecute Facebook for an abuse of dominance, if they find one, said Sebastian Janka, a lawyer specializing in anti-trust legislation at Noerr, a pan-European law firm based in Munich. They could force Facebook to change its terms of service or fine the company up to 10 percent of its global turnover. That could eventually lead to civil cases too.

So while Facebook might not face a breakup immediately, one thing’s for sure: Regulators will be looking at the company much more closely from now on.

Cathrin Schaer is an editor with Handelsblatt Global. To contact the author:

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