German anti-trust regulators restrict Facebook’s expansive data collection policy

Last week, Germany’s anti-trust regulatory agency, the Federal Cartel Office (the “FCO”) issued a decision intended to sharply curtail Facebook’s ability to collect and aggregate data about its users. The decision was the culmination of an investigation that began in March 2016. In its ruling, the agency stated that Facebook’s take-it-or-leave-it terms of use, which allowed the company to compile detailed profiles of its users, abused the company’s position in the German market. Because the alternative would be not to use Facebook services at all, the FCO argued that Facebook effectively coerced users into giving up personal data.

Facebook’s terms of use required users to consent to the company’s collection of personal data across all Facebook-owned services, including Instagram and WhatsApp, and on millions of third-party websites with embedded Facebook features and analytics. These data collection practices allowed Facebook to bundle numerous data points into comprehensive user profiles, which are the cornerstone of the company’s lucrative advertising model.

The FCO advanced a novel argument to establish that Facebook’s activities violated anti-trust principles. Regulators argued that Facebook’s overwhelming market power coerced users into accepting the website’s terms of use. Instead of a financial harm, Facebook users suffered a loss of control over their personal information, which was combined with data from other sources in a manner that would be unforeseeable to most users.

The FCO’s action against Facebook was an administrative proceeding, intended to compel the company to change its practices, rather than merely extracting a financial penalty. However, Facebook has already announced plans to appeal the decision, in a process that begins next month.