Facebook Dealt Huge Blow by German Courts, More Countries Could Follow Suit
As Facebook celebrates its 15th anniversary, Germany is certainly not joining in on the celebration but is instead ruling that Facebook is actually exploiting its customers.
The Federal Cartel Office (FCO) in Germany is the country’s antitrust regulator, and they say that requiring Facebook users to agree to their special form of “data collection” in exchange for an account amounts to exploitation. As such, the FCO has prohibited further use of that practice in Germany.
How does a company with a nearly $500 billion valuation make money when they don’t charge their users anything? Facebook is giving users a free account, but there is no telling how much money they are making off each person. The company has a slick advertising model that relies on tracking a user’s every move – a very, very lucrative model at that. The company has stood by its model, too, describing it as merely collecting user interests and passing it off as mere unobtrusive data collection that allows them to run ads to better serve their customers.
Looking at the situation quantitatively paints a much different picture. Facebook has billions of users and counts billions more from its Instagram and WhatsApp acquisitions. The company collects data on everyone on every platform, from smartphones to desktops.
Facebook Knows More About You Than Even You Do
Facebook likely knows more about you than even you do; the company has amassed user profiles galore. They know what you eat, who you know and where you like to shop.
FCO president Andreas Mundt had this to say: “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.”
Privacy advocates are rejoicing, having long argued that Facebook lacks transparency regarding not only the type of data they collect, but also what they do with that data. The FCO and privacy advocates have concluded that most people do not understand how much they are giving away to Facebook in the process.
Facebook responded to the FCO, saying that they disagreed with the ruling and planned to appeal it within the allowable month-long period “so that people in Germany continue to benefit fully from all our services.”
What if Facebook loses? The company would have to change its internal data processes for German users, basically having to seek the user’s explicit consent to use the data in the single user profile that is central to Facebook’s core business.
Many citizens around the world do not understand why privacy is an antitrust matter. Antitrust matters have traditionally been concerned with price gouging, so free products like Facebook have been out of consideration. The FCO ruling basically says that antitrust matters don’t just involve harm from pricing, but now harm from loss of control of your own data. Once the data is in Facebook’s domain, users have no control over their personal data and cannot perceive all the future uses by which their data may be combined and used.
Do You Know What Facebook Does With Your Data?
Most people have no idea what Facebook is doing with your data or even what data it collects. WIRED Magazine reported that 75 percent of Americans didn’t know that Facebook built profiles about their interests, according to a Pew Charitable Trust survey. Once they knew, 51 percent were not comfortable with Facebook’s practice.
WIRED interviewed antitrust expert Lina Khan, who is affiliated with both Columbia Law School and the Open Markets think tank. Khan explained that Facebook lacks competition, and as such, a user who accepts terms is really not consenting.
FCO echoed Khan, stating that Facebook’s sheer market dominance is what allows it free reign to impose its contractual terms onto users. FCO data shows that Facebook has 32 million active German users, amounting to a market share of over 80 percent. The company gained dominance by using the data it collected on everyone.
Basically, the FCO says that Facebook is so dominant, that users cannot switch to another social network, so they just accept the terms because they have to. By definition, Khan and the FCO say that giving the user only two choices – don’t use Facebook or sign up to their terms – cannot be considered voluntary consent.
Facebook disagrees that they have a near-monopoly. The company says that Snapchat, YouTube and Twitter offer fierce competition. Facebook also says that they are in compliance with the European GDPR law. “Popularity is not dominance,” they explained. The company says that user tracking creates safer and better services that benefit the user.
Khan agrees that the FCO ruling is significant. It is an icebreaker to break through the ice to lead the path for other vessels. If Germany wins this, other countries will likely want the same, and that is probably what Facebook worries about most.