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Facebook Ruling, Disney Bet, Gucci Top: CEO Daily for February 7, 2019

Good morning. David Meyer here, filling in for Alan from Berlin.

European regulators are finding new ways to make life hard for U.S. tech giants.

The latest blow comes courtesy of Germany’s Federal Cartel Office, which has ruled against Facebook on the basis that the company dominates the social networking market, and it’s using that power for “exploitative abuse” of people’s privacy.

The issue is Facebook’s personal data collection from outside its core service—not only from Facebook properties such as WhatsApp and Instagram, but also third-party sites that feature its “like” and “share” buttons. The antitrust regulator doesn’t believe Facebook’s users understand how this data is collated and used; it particularly doesn’t like that users are forced to agree to all this if they want to use Facebook itself. Under German law, those are “exploitative business terms.”

“In view of Facebook’s superior market power, an obligatory tick on the box to agree to the company’s terms of use is not an adequate basis for such intensive data processing,” said Andreas Mundt, the watchdog’s president. “The only choice the user has is either to accept the comprehensive combination of data or to refrain from using the social network. In such a difficult situation the user’s choice cannot be referred to as voluntary consent.”

“Voluntary consent means that the use of Facebook’s services must not be subject to the users’ consent to their data being collected and combined in this way. If users do not consent, Facebook may not exclude them from its services and must refrain from collecting and merging data from different sources.”

This is fundamental stuff for companies like Facebook and Google, which rely on using data from as many sources as possible in order to profile people for advertising purposes.

So it’s no surprise that Facebook is appealing the decision. In a statement released shortly after the ruling, the company claimed it doesn’t have market dominance in social networking, because it competes “directly with YouTube, Snapchat, Twitter and others.”

Except those other social networks are either only tangentially in competition with Facebook, or no real competition at all.

As I wrote last week, Facebook is too massive for the market to push back against its well-catalogued misdeeds—it’s too difficult for most users to escape the social network’s gravitational pull. That leaves regulators with the responsibility of reining it in, on both the privacy and antitrust fronts…at once, in this case.

As companies like Facebook present new regulatory challenges due to their scale and the novelty of the data-centric economy, it’s only natural that regulators respond by getting creative too.

More news below.

David Meyer
@superglaze
david@dmeyer.eu

Top News

Disney Bet

Disney will not allow the streaming of its upcoming Captain Marvel on Netflix, instead keeping it behind the fortifications of the upcoming Disney+ streaming service. Disney reckons its decision to treat its new films in this way will cut its operating income by around $150 million this year, but chairman Bob Iger likens it to deploying capital to build out theme parks. Fortune

Gucci Top

Gucci put out an $890 balaclava top that is black, has cartoonishly thick, red lips around the mouth cut-out and… well, it looks like blackface. And yesterday people noticed. Gucci quickly apologized: “We are fully committed to increasing diversity throughout our organization and turning this incident into a powerful learning moment for the Gucci team and beyond.” Fortune

Italian Growth

The European Commission has slashed its growth forecasts for Italy—just 0.2% for 2019, rather than 1.2%, and 0.8% for 2020, rather than 1.3%. Why? The populist government there. Commission: “While the initial slowdown was largely due to less dynamic world trade, the recent slackening of economic activity is more attributable to sluggish domestic demand, particularly investment, as uncertainty related to the government’s policy stance and rising financing costs took its toll.” Reuters

SoftBank Buyback

Masayoshi Son’s big buyback idea paid off, raising SoftBank Group’s market value by around $17.6 billion—the buyback itself was worth less than a third of that figure. Son’s own stake in the company goosed his net worth by around $5 billion. Bloomberg

Around the Water Cooler

Net Neutrality

After U.S. telecoms firms won the repeal of the Obama-era net neutrality rules, largely on the argument that the rules stifled investment, they… stopped investing as much as they did before. In fact, while the Big Four’s collective capex rose during the years in which net neutrality was mandated, it fell by 0.4% last year. Financial Times

Huawei Security

Huawei has told U.K. lawmakers that it will take three to five years for it to address concerns over the security of its telecommunications equipment. British authorities are worried about the risks, but have apparently not found any evidence of espionage conducted through the equipment. BBC

May Mission

U.K. Prime Minister Theresa May is in Brussels today, attempting to get what the EU has already said it will not give: a re-opening of Brexit negotiations. The visit comes during a British outcry over Donald Tusk, the president of the European Council (a body made up of EU countries’ national leaders,) saying there is a “special place in hell” for those who pushed Brexit without a plan for how it would work. CNBC

Social Media CEO

Zozo CEO Yusaku Maezawa—the Japanese billionaire who will be SpaceX’s first space tourist, and who holds the world record for most-retweeted tweet—is taking a break from Twitter. He said he was doing so he could focus on his actual job. Investors applauded by boosting Zozo’s share price. Bloomberg

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.