Apart from a $122 million fine four years ago, for misleading the European Union’s top competition authority over its WhatsApp takeover, Facebook has avoided any serious run-ins with the watchdog—until now.
On Friday, the European Commission’s antitrust department opened a formal investigation into Facebook’s classified ads business. The probe has two tracks: The commission will look into Facebook’s potential use of advertisers’ data to illegally compete against them; and it will try to establish whether Facebook illegally ties its own classified ads business, Marketplace, to its social network.
That means Facebook has just joined other U.S. Big Tech firms such as Google, Amazon, and Apple in the club of commission antitrust probe targets. In Google’s case, the regulator’s investigations led to more than $9 billion in fines.
Also on Friday, the U.K.’s Competition and Markets Authority (CMA) launched a similar probe into Facebook’s use of other classified ad operators’ data, as well as the data of online dating service providers who might compete with Facebook’s own, recently launched dating service.
The British and European authorities will work together on their investigations.
In premarket trading, Facebook shares fell on the news. At 6:40 a.m. ET, Facebook futures contracts were trading lower by 1.2%, underperforming the Nasdaq.
‘Vast troves’
“Facebook is used by almost 3 billion people on a monthly basis, and almost 7 million firms advertise on Facebook in total. Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups,” said Margrethe Vestager, who is both competition commissioner and one of the European Commission’s executive vice presidents, in a statement.
“We will look in detail at whether this data gives Facebook an undue competitive advantage in particular on 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,” she said. “In today’s digital economy, data should not be used in ways that distort competition.”
Specifically, the European Commission is concerned about online classified ad providers which, given Facebook’s dominance in social networking, need to advertise their own services on Facebook, their rival. The EU executive said a preliminary investigation had shown “Facebook might make use of the data obtained from competing providers in the context of their advertising on Facebook’s social network, to help Facebook Marketplace outcompete them.”
“Facebook could, for instance, receive precise information on users’ preferences from its competitors’ advertisement activities and use such data in order to adapt Facebook Marketplace,” Vestager’s unit said.
As for the question of Facebook Marketplace being illegally tied to the social network, that may constitute “a form of tying which gives it an advantage in reaching customers and forecloses competing online classified ads services,” the commission said.
“We are always developing new and better services to meet evolving demand from people who use Facebook,” the company said in a statement. “Marketplace and Dating offer people more choices, and both products operate in a highly competitive environment with many large incumbents. We will continue to cooperate fully with the investigations to demonstrate that they are without merit.”
B2B data
There appear to be similarities between these cases and one of the EU’s Amazon probes, in which the commission found Amazon was using the data of third-party merchants which use its platform to calibrate its own offerings. That investigation led to formal charges last November.
Andrea Coscelli, the chief executive of the U.K.’s CMA, said in a separate statement that Facebook’s alleged misdeeds “can make it harder for competing firms to succeed, including new and smaller businesses, and may reduce customer choice.”
“We will be working closely with the European Commission as we each investigate these issues, as well as continuing our coordination with other agencies to tackle these global issues,” he added.
The CMA recently launched a Digital Markets Unit that is focusing on Big Tech. The unit works alongside the U.K. Information Commissioner’s Office, which is the country’s privacy watchdog; in this sector, regulators are increasingly viewing antitrust and data-protection issues as being closely connected.
In December, Facebook also became the target of a federal U.S. antitrust suit that could potentially lead to its divestiture of WhatsApp and Instagram.
