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Facebook Hit With German Antitrust Investigation Over User Terms

March 2, 2016, 9:42 AM UTC
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The German federal competition authority has opened an investigation into Facebook(FB), over what it suspects is “an abusive imposition of unfair conditions on users.”

The Bundeskartellamt said Wednesday that Facebook’s terms and conditions, in which users agree to have their data collected for the purposes of ad-targeting, were difficult for those users to understand.

“There is considerable doubt as to the admissibility of this procedure, in particular under applicable national data protection law,” the office said. “If there is a connection between such an infringement and market dominance, this could also constitute an abusive practice under competition law.”

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The competition authority said it was working closely with others on this investigation, including the European Commission, consumer protection associations, and competition authorities in other EU countries.

“We are confident that we comply with the law and we look forward to working with the Federal Cartel Office to answer their questions,” Facebook said.

The probe marks a major shift in the country’s approach to enforcing privacy law, linking it with the target company’s position in the market to take it into the realm of antitrust.

This may have something to do with the fact that Facebook claims it is (within Europe) only under the jurisdiction of the data protection authority in Ireland, where its international headquarters are located. By tackling Facebook’s alleged transgressions through the prism of competition law, Germany is avoiding this messy argument.

The Bundeskartellamt is also far better-resourced than the German data protection authorities, which operate at state level (uniquely within the EU) and are struggling to cope with the massive case loads resulting from the fall of the EU-U.S. Safe Harbor agreement on data sharing.

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The maximum fines under antitrust law are also far heavier than those under privacy law. Data protection authorities are currently unable to fine very much — certainly not enough to make much of a dent in the finances of a company like Facebook. The EU’s upcoming General Data Protection Regulation rules will allow for fines of up to 4% of global annual turnover (for egregious offences), but German antitrust fines can theoretically go as high as 10% of group revenue.

Interestingly, the German competition authority is also clearly seeing user data as something to be weighed up against market power. Facebook has roughly 80% of the social media market in Germany, giving it clear market dominance.

“For advertising-financed Internet services such as Facebook, user data are hugely important,” said Bundeskartellamt president Andreas Mundt. “For this reason it is essential to also examine under the [perspective] of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected.”

This article was updated to add further information.