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February 7, 2019
German regulator Bundeskartellamt has made a fresh attempt to curb the powers of the internet giants, this time targeting the data processing capabilities of Facebook.
The case built by Bundeskartellamt is based on what it has deemed market abuses by the dominant social media player in Germany. With Google+ shutting down, the regulator believes Facebook has a dominant position in the market, though it has not effectively informed users about the process of combing third-party data sets with information taken from the core Facebook platform to improve the detail of user profiles for advertising purposes.
This has been deemed inappropriate and Facebook has been ordered to shut down the process. This is not the first time this practise has been criticised by the regulator, but this is the first concrete ruling to for Facebook to desist.
“With regard to Facebook’s future data processing policy, we are carrying out what can be seen as an internal divestiture of Facebook’s data,” said Andreas Mundt, President of the Bundeskartellamt. “In future, 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.
“In future, consumers can prevent Facebook from unrestrictedly collecting and using their data. The previous practice of combining all data in a Facebook user account, practically without any restriction, will now be subject to the voluntary consent given by the users. If users do not consent, Facebook may not exclude them from its services and must refrain from collecting and merging data from different sources.”
Facebook has already stated it will appeal the decision with the Düsseldorf Higher Regional Court, though this should come as little surprise considering the attack on the foundations of the social media giants business model. The reason companies like Facebook and Google have been so successful in the early days of the data-sharing economy is because of the accuracy of advertising. This ruling could have a notable impact.
Not only does Facebook collect information about you from its core platform, but by supplementing this picture with more detail from third-party sources, a hyper-targeted advertising platform can be created. It’s seemingly one of the reasons advertisers have stuck by Facebook despite numerous scandals over the last couple of years; there are very few other platforms or businesses which can offer advertising services on par.
Although it is now common knowledge platforms such as Facebook sell ‘you’ to advertisers to fuel the spreadsheets, Bundeskartellamt believes the firm should obtain consent from the user should it want to use additional information to create a more detailed user profile. This data could be taken from sister platforms such as Instagram or WhatsApp, or third-party websites and applications which have ‘like’ or ‘share’ buttons embedded.
“By combining data from its own website, company-owned services and the analysis of third-party websites, Facebook obtains very detailed profiles of its users and knows what they are doing online,” said Mundt.
The practise becomes a bit more nefarious however. Even if there is no Facebook symbols or embedded buttons on the page or application a user is viewing, data might still be flowing back to the social media giant. This is not what anyone would consider transparent and should be addressed in all markets, not just Germany.
Overall, the Bundeskartellamt believes Facebook is abusing its dominant market position to the detriment of the other side of the equation, the user. While this will be escalated to higher courts, should the regulator win favour from the judges Facebook would have to obtain consent from every single one of its 32 million German users. It certainly will be able to obtain consent from many, but it would be a dent to the increasing under-fire advertising machine.
This is of course not the first time Germany has taken a run up at the internet giants. Germany has consistently been one of the leading nations attempting to tackle the power and influence of the internet players, creating a more tightknit regulatory framework which you would naturally expect in business. However, the social giants and their slippery lawyers are doing their best to resist.
Back in 2016, Facebook was told to stop collecting WhatsApp data from users and delete all the information it has already collected, due to the fact proper consent had not been obtained. It has also been investigating whether the Google+ data breach during the latter months of 2018 violates GDPR. Germany has also been one of the leading voices in the prolonged battle to ensure the internet giants pay fair and reasonable taxes across the European bloc.
What we are seeing in this case is another example of a regulator cracking down on the freedoms granted to Silicon Valley. For years, the internet players have been sliding between rules designed to parallel industries, exposing the grey and unregulated areas, as rule makers consistently struggle to keep pace with technological progress. There are numerous governments attempting to create more accountability, though it has been an uphill struggle so far.
The next couple of months will certainly be an interesting period in Germany. With judges considering the Facebook appeal, a win for the Bundeskartellamt could at as a springboard to wrap up the OTTs in more red-tape. We hope there is enough wiggle room left to innovate, but the last two years of scandals have shown the dire need to more strictly regulate Silicon Valley.
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