German Regulators Outlaw Facebook’s Ad Business

By April 11, 2019PPC Advertising
top of mind marketing germans outlaw FB ads

Things keep getting worse for Mark Zuckerberg. Facebook’s lucrative advertising model ($1B/quarter) relies on tracking its 1 billion users across the online space. Facebook collects data about where we shop and what we buy. But now Germany has outlawed Facebook ads.

Privacy advocates argue that Facebook isn’t transparent enough about what it does with the data.

Germany’s antitrust regulator has ruled that Facebook is exploiting consumers

In an important move that has implications for Facebook ad users worldwide, Germany agrees. Its antitrust regulator, the Federal Cartel Office (FCO), has ruled that Facebook is exploiting consumers by requiring them to agree to the current data collection practice as part of having a Facebook account. It has now prohibited the practice going forward.

“Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection of non-Facebook data to their Facebook user accounts,” FCO president Andreas Mundt said in a statement.

Consumer “consent” is a misrepresentation

Lina Khan, Columbia Law School antitrust expert, believes that authorities haven’t done a good job of articulating why privacy is an antitrust issue. But the German regulator clarifies it. They believe that Facebook’s dominance is what allows it to impose contractual terms on users that require them to allow Facebook to track them.

The harm to users is the loss of control

“When there is a lack of competition, accepting terms of service isn’t truly “consenting”. Users are not presented with choices. They either accept the data collection or stop using Facebook.According to German regulators, the harm to Facebook’s users is the “loss of control.”

With an 80% market share, Facebook dominates the social space in Germany

Facebook had 32M monthly active users in Germany at the end of 2018, a market share of more than 80%. “As a dominant company, Facebook is subject to special obligations under competition law. Facebook users cannot switch to other social networks,” said Mundt.

Privacy and competition are intertwined

The ruling makes clear that privacy and competition are inextricably intertwined. If Facebook loses, Germany will become a test case in whether the surveillance economy is fundamental to the operation of social media.

Facebook insists that tracking makes services safer and better

The FCO believes Facebook hasn’t proven that data collection and bundling are in the best interest of every consumer and that its sites couldn’t function without it.

Facebook’s response: “We disagree with their conclusions and intend to appeal so that people in Germany continue to benefit fully from all our services.” What’s at stake? Facebook would potentially have to change how it processes data for German users. If Facebook loses the appeal, Germany will have successfully challenged the relationship between the collection of user data and the social media accounts from which that information comes.

Other Europeans and Americans well may demand they be given the same option, and there would be implications for all of us. Only the very naïve believe that it’s only Facebook that is guilty of sharing user data. Facebook’s the one that got caught.

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