The twin investigation into Facebook’s alleged abuse of digital advertising markets through its collection and use of data may not only result in huge fines, but could finally smash its Teflon image and force the company to rip up its current business model.
Both the UK Competition & Markets Authority (CMA) and the European Commission antitrust investigations will probe whether Facebook’s Marketplace service is unfairly distorting competition for classified ads.
They seeks to determine whether Facebook has gained an unfair advantage over competitors in providing services for online classified ads and online dating, through how it gathers and uses certain data.
The firm collects data from its digital advertising services, which allow other businesses to advertise to Facebook users, and from its single sign-on option, Facebook Login, which offers people the ability to sign into other websites, apps and services using their Facebook log-in details.
The CMA and EU will look into whether Facebook has unfairly used the data gained from its advertising and single sign-on to benefit its own services, in particular Facebook Marketplace – where users and businesses can put up classified ads to sell items – and Facebook Dating – a dating profile service it launched in Europe in 2020.
The move marks European Competition Commissioner Margrethe Vestager’s first antitrust probe into Facebook and its “vast trove” of data from nearly 7 million companies which advertise on the site.
Facebook has successfully pushed back the investigation for two years, arguing that the scale of the EU’s previous document request – first sent out in 2019 – meant it would have to hand over unrelated, yet highly sensitive, information.
Vestager said in a statement: “Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups.~
“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.”
In response, Facebook said it believes the allegations are “without merit,” adding that both Facebook Marketplace and Facebook Dating are part of “highly competitive” markets.
The company added: “We are always developing new and better services to meet evolving demand from people who use Facebook. 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.”
CMA chief executive Andrea Coscelli said: “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.
“Any such advantage 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.”
Across Europe, the authorities have been stepping up their probes into US tech giants, with Amazon and Apple also facing multiple investigations.
The EU competition authority fined Google a record €4.34bn (£3.9bn) fine in 2018 for using its Android mobile operating system to block rivals. Google was also fined €1.49bn (£1.28bn) by the EU for blocking rival online search advertisers in 2019. That followed a €2.42bn fine in 2017 for hindering rivals of shopping comparison websites.
Just yesterday the French competition watchdog – Autorité de la Concurrence – hit Google with a €220m (£189m) fine for abusing its advertising power and forcing it to be more transparent.
One industry insider told Decision Marketing: “You have to wonder why it has taken them so long; Facebook has been riding roughshod over the online advertising market for years. And while this investigation could take years to conclude – and no doubt Facebook will launch an appeal if its loses – make no mistake this will be hugely significant.
“Not many in the industry are willing to speak out about Facebook as they have so much power and, of course, advertisers will still flock to the site but it seems Facebook’s Teflon coating is finally being pierced.”
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