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 The watchdog said it suspected that Facebook's terms of service with
its users regarding how the company makes use of their data may
abuse the company's possibly dominant position in the social
networking market.
Facebook, the world's biggest social network with 1.6 billion
monthly users, earns revenues from advertising based on data it
gathers about its users' social connections, opinions and activities
in their postings.
"For advertising-financed internet services such as Facebook, user
data are hugely important," Federal Cartel Office President Andreas
Mundt said.
The cartel office said it had considerable doubts about whether
Facebook users had been properly informed about how their data were
used, which it said could violate stringent German data protection
laws.
"There is an initial suspicion that Facebook's conditions of use are
in violation of data protection provisions," the regulator said in a
statement announcing the probe.
Facebook is nearly the twice the size of the world's second largest
social network, Tencent's <0700.HK> QQ of China. Nearly 84 percent
of Facebook's members are outside the United States and Canada.
The company has faced strong criticism from politicians and
regulators in Germany, where data protection is strongly regulated,
over its privacy practices.
Co-founder and Chief Executive Mark Zuckerberg visited Berlin on a
charm offensive last week.
A Facebook spokeswoman said on Wednesday: "We are confident that we
comply with the law and we look forward to working with the Federal
Cartel Office to answer their questions."
The regulator said it was investigating whether Facebook abused its
market power by failing to adequately inform its users of the scope
and nature of data collection on their Internet surfing habits.
Facebook owns four of the top eight social network services globally
including its core profile service, two separate instant messaging
services, WhatsApp and Facebook Messenger, and its picture-sharing
service Instagram.
"This is certainly an unusual case," Mark Watts, head of data
protection at London-based law firm Bristows, said of how the
investigation marks the first time that data protection issues have
become a significant factor in a competition case.
TAKING EUROPEAN LEAD
The German cartel office is taking the lead in the case while
advising the European Commission and competition regulators in other
EU states.
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The cartel office said it was working closely on its probe with the
European Commission, competition authorities in other European Union
states, data protection authorities in Germany and consumer rights
groups.
European Commission spokesman Ricardo Cardoso said the EU executive
shared the view of the German cartel office that the mere
infringement of data protection rules by a dominant company did not
automatically amount to a competition violation.
"However, it cannot be excluded that a behavior that violates data
protection rules could also be relevant when investigating a
possible violation of EU competition rules," he added, while
declining specific comment on the new case.
Speaking in Germany in January, top EU antitrust enforcer Margrethe
Vestager said her agency was taking a harder look at whether the
collection of vast amounts of consumer data by big Internet
companies violates competition rules.
A spokesman for the Belgian competition authority declined to
comment on whether it was cooperating with the German probe. The
French and Irish competition regulators were not immediately
available to comment.
The EU has accused Facebook rival Google, a unit of Alphabet Inc, of
favoring its own shopping services in search results at the expense
of rivals, and is weighing possible sanctions against the world's
most popular search engine.
However, the commission previously considered and rejected big data
issues when it approved Google's acquisition of online advertising
firm DoubleClick in 2008 and Facebook's purchase of WhatsApp in
2014.
(Additional reporting by Georgina Prodhan and Harro ten Wolde in
Frankfurt, Conor Humphries in Dublin, Phil Blenkinsop and Foo Yun
Chee in Brussels, Mathieu Rosemain in Paris and Paul Sandle in
London; editing by Louise Heavens and Giles Elgood)
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