The EU is probing Facebook over anticompetitive business practices relating to its classified-ads arm ‘Marketplace.’ United Kingdom’s regulatory watchdog Competition and Market Authority also launched its own investigation into Marketplace as well as the company’s dating service Facebook Dating.
Last Friday, Facebook was dealt yet another setback when the European Union opened a formal antitrust investigation into the company’s classified advertising service known as Marketplace. In a separate but similar announcement, the United Kingdom’s Competition and Market Authority (CMA) also launched their own investigation owing to suspicions that Facebook is illicitly giving itself an unfair advantage over its much smaller competitors in the area.
Margrethe VestagerOpens a new window , the EVP of EU’s executive arm European Commission and the competition policy in-charge denounced the distortion of the level playing field between rivals by using its data to its own advantage. “Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups,†Vestager said.
“We will look in detail at whether this data gives Facebook an undue competitive advantage in particular in the online classified ads sector, where people buy and sell goods every day, and where Facebook also competes with companies from which it collects data.â€
Investigations Against Facebook
i. EC’s Antitrust Probe
This isn’t the first time Facebook has run adrift, and not in a good way, off the EU coast for the wrong reasons. In fact, the company has been under scrutiny by the European watchdog for years now, the most recent one prior to these fresh new investigations being the EU’s probe into the company stifling competition, for which it sought internal company documents which Facebook declinedOpens a new window .
Facebook even went on to sue the European regulator over the demand to hand over these documents, citing risk to sensitive employee information. The company did, however, turn in one million documents.
The EC’s formal probe against the Menlo Park, CA-based company comes after it concluded a preliminary investigation, wherein the watchdog had reasons to believe that Facebook may, in fact, be using commercially valuable data provided by online classified advertising companies – its competition – to outperform them.
For instance, Facebook could leverage the exact data on some users’ buying preferences obtained by online classified ads providers, and use it to its benefit. Launched in 2016 in Europe, Marketplace presently has approximately one billion users and is used by seven million companies for advertising, enough to edge out competitors.
See Also: Can the Justice Department’s Antitrust Lawsuit Blunt Google’s Ad Tech Dominance?
ii. CMA’s Antitrust Probe
CMA’s antitrust investigation is based on similar observations as the EC. But unlike EC, the CMA is also looking into Facebook Dating, the company’s online dating service, besides Marketplace. Facebook Dating was launched in Europe in October 2020, making it less than a year old in the continent, which signifies the grave concerns U.K.’s regulators have for the company’s practices.
“We intend to thoroughly investigate Facebook’s use of data to assess whether its business practices are giving it an unfair advantage in the online dating and classified ad sectors, said Andrea Coscelli, Chief Executive of the CMA. “Any such advantage can make it harder for competing firms to succeed, including new and smaller businesses, and may reduce customer choice.â€
The CMA said they will coordinate and “work closely†with the EC despite the U.K. not being a part of the 27-member nation bloc.
Big Tech and Antitrust
The probe against Facebook, like those against Apple and AWS, is based purely on the dominance of five companies in the digital economy, collectively known as Big Tech.
The five Big Tech companies including Google and Microsoft, have had their fair share of tussle with regulators over anticompetitive business practices. On the other hand, EC has been spearheading investigations, and has even proposed the Digital Services Act (DSA) and the Digital Markets Act (DMA) in December 2020Opens a new window .
Apple was charged by the EC in late April this year after investigations following Spotify’s 2018 complaint revealed that Apple distorted competition in music streaming services. Apple has 12 weeks to respond. Microsoft was sued by workplace messaging platform Slack over Teams.
Google also has a lot on its plate with three antitrust cases by the Department of Justice (DoJ) for maintaining monopoly over search by signing exclusive contracts to set Google as the default search engine for browsers; a group of 38 statesOpens a new window led by Colorado and Nebraska Attorney Generals, complaints of which are similar to DoJ’s allegations, and goes beyond search to other products such as voice assistants; a group of 10 statesOpens a new window led by Texas, which claimed Google and Facebook are in cahoots over rigging ad auctions in their areas.
Facebook itself was sued by the FTCOpens a new window and 46 states, Guam and Washington D.C.Opens a new window in separate federal and state lawsuits in December 2020, for ‘illegal’ and ‘predatory’ practices, and cited the acquisitions of WhatsApp and Instagram as examples.
More recently, Amazon, the parent company of cloud provider AWS among others, was accused of collecting and using dataOpens a new window from its own sellers, to develop similar products and compete with them.
See Also: Is the EU’s Much Anticipated Ruling in the Spotify-Apple Case a Watershed Moment for Big Tech?
Closing Thoughts
The initiation of investigation is one thing, however, reaching a conclusion based on all available evidence may take up to several years. For example, it took the EC over three years to charge Apple over Spotify’s allegations.
Though one thing is clear, IT behemoths engaged in business practices that suppress legitimate competitors, whether directly or indirectly, will continue to face the heat, especially from European regulators.
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