Today, in its decision the German Federal Court of Justice confirmed in summary proceedings that the extensive collection and use of data by Facebook across multiple services could constitute an abuse of a dominant market position (case no. KVR 69/19)

The decision

The German Federal Court of Justice (Bundesgerichtshof (BGH)) decided today in a ruling that Facebook temporarily is not allowed to collect data of its users across different services outside the Facebook platform itself. The decision was rendered in summary proceedings and overruled the decision of the Higher Regional Court of Düsseldorf in the previous instance last summer. The Higher Regional Court of Düsseldorf, in turn, had suspended the order of the German Competition Authority – the Federal Cartel Office (“FCO”) – of February 2019 against Facebook to stop its current business model.

According to the BGH in its ruling today, however, there is “no serious doubt” that Facebook (i) is dominant on the market for social media platforms in Germany and (ii) that there could be an abuse of its dominant market position by Facebook’s terms of use. Ultimately, the BGH thus confirmed the FCO’s assessment in the summary proceedings.

As a consequence of the BGH’s ruling of today, Facebook must stop to use its existing terms of use allowing Facebook to collect personal data of its users outside of Facebook’s social network. Although the main proceedings are still to come, it is likely that Facebook will have to ask its users for explicit consent, if the tech giant wants to collect personal data outside its social network.

Background

Facebook provides its social media platform to its users for free. However, the terms of use allow the company extensive data processing, even outside of Facebook’s main social network. For instance, Facebook also collects the data of multiple sources with different apps and services, such as Instagram, WhatsApp, or via the "Like" button of other websites outside its platform in order to create a profile of every single user. Facebook provides these tools for other websites and app owners. These owners can integrate Facebook’s tools in their own service offerings so that the user is able to connect with Facebook. As a result, Facebook gains data about the user’s online behavior on these websites and apps.

The FCO saw in this behavior a violation of data protection law and at the same time an abuse of a dominant market position. On thee 6th of February 2019 the FCO therefore issued a prohibition order against Facebook and other group companies. In the FCO’s view, Facebook’s terms of use are illegal because personal data is combined with data from sources outside the Facebook platform without the free and explicit consent of the users. From a data protection point of view such consent is required, because the collection of personal data outside of Facebook’s social network is not necessary for the use of the social network itself.

The decision has been widely debated and criticism has been voiced. On the other hand, it has been described as a pioneer decision being the first proceedings of an EU competition authority to decide that the violation of data protection law by a tech platform’s terms of use could at the same time be an abuse of a dominant market position under competition law.

In contrast, the Higher Regional Court of Düsseldorf did not follow the FCO’s line of argument and ordered the suspensive effect of Facebook's appeal against the FCO’s prohibition order last year. Today the BGH has overturned this decision. The BGH stressed the high importance of access to data from an economic perspective which must also be taken into account. Most notably, according to Germany’s highest civil court, Facebook users do not have a choice which not only impairs their personal autonomy and the preservation of their right to “informational self-determination” protected by data protection law such as the European General Data Protection Regulation (GDPR). At the same time, the terms of use could also harm competition according to the BGH.

Conclusion

Today’s decision is not the end of the Facebook saga. The Higher Regional Court of Düsseldorf has not yet ruled on Facebook’s appeal against this decision in the main proceedings. It will therefore be very interesting to see how the court in the main proceedings will decide. Yet, it can be expected that the Higher Regional Court of Düsseldorf will rather cautiously handle the issue of dominance and abusive behavior after having heard the BGH’s reasoning in the summary proceedings.  

In any case, these proceedings show that the FCO sees itself as a consumer protection authority as it is the case in other jurisdictions (e.g. Australia with its Australian Competition and Consumer Commission (ACCC)). If upheld in the main proceedings, in particular digital B2C business models which are based on data collection and a cross-service use of Big Data need to be even more cautious of not getting into the focus of competition authorities.

To that extent, the proceedings also reflect a general trend, in which the legislator and authorities claim to be in need of more powerful and flexible tools to cope with the speed of digitalization and its players, in particular large online platforms. Prominent examples can be found in the upcoming reform of the German Competition Act (e.g. platform regulation and proposed interim measures for the FCO), but also on the European level, such as the envisaged “New Competition Tool” by the European Commission (see here) or the Digital Services Act (see here).

A press release to the decision of the BGH rendered today can be found here.

For further inquiries please contact:

Dr Sebastian Felix Janka, LL.M. (Stellenbosch)
T +49 89 23714 10915
sebastian.janka@luther-lawfirm.com

Christian Kuß, LL.M.
T +49 221 9937 25686
christian.kuss@luther-lawfirm.com

Samira Altdorf
T +49 211 5660 11176
samira.altdorf@luther-lawfirm.com