Facebook’s exploitative and exclusionary abuses in the two-sided market for social networks and display advertising

Abstract

The German Facebook case has directly addressed the contentious interplay between data protection and competition law for the first time. The Bundeskartellamt’s theory of harm, which directly linked privacy violations to the strengthening of Facebook’s market power, proved controversial: it elicited strong criticism from the appeals court, but then was partially endorsed by the Bundesgerichtshof (German Federal Supreme Court). This article shows that an enforcement action against Facebook under Article 102 TFEU need not be controversial. We present empirical evidence confirming that Facebook’s ‘envelopment by privacy policy tying’ strategy exploits consumers, as it causes clear consumer harm on the market for social networks in the form of lack of choice and degradation of quality. In turn, such consumer harm on the ‘free’ side leads to a weakening of the competitive market structure and foreclosure of competitors on the ‘paid’ market for display advertising and other adjacent markets. This strategy falls neatly within the scope of Article 102 TFEU, irrespective of whether it also violates EU data protection law. In addition, the enveloping by privacy policy tying forms part of an overall anti-competitive strategy over which the Commission can assert jurisdiction and prosecute as a single and continuous infringement.