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Facebook’s Small Print Might Be Next Big Antitrust Target

  • German investigation pushes limits of privacy, antitrust law
  • Facebook probe’s first results might come by end of 2017

Facebook Inc.’s small print may be the next big thing in European antitrust as watchdogs home in on how the world’s biggest social network collects information from users that helps generate vast advertising revenues.

Germany’s Federal Cartel Office is examining whether Facebook essentially takes advantage of its popularity to bully users into agreeing to terms and conditions they might not understand. The details that users provide help generate the targeted ads that make the company so rich.

In the eyes of the Cartel Office, Facebook is “extorting” information from its users, said Frederik Wiemer, a lawyer at Heuking Kuehn Lueer Wojtek in Hamburg. "Whoever doesn’t agree to the data use, gets locked out of the social network community,” he said. “The fear of social isolation is exploited to get access to the complete surfing activities of users."

The European Union’s antitrust arm has grabbed the limelight with eye-popping penalties for U.S. technology firms it found fell foul of anti-competitive behavior. Last year, it ordered Apple Inc. to pay 13 billion euros ($14.9 billion) in back taxes and last week it fined Google 2.4 billion euros for allegedly skewing search results in its favor. But lawyers say the Cartel Office’s probe is testing the boundaries of antitrust law -- with ramifications far beyond Germany and Facebook as all kinds of powerful technology firms seek to find new ways to cash in on their trove of customer information.

It’s “more radical” than the EU’s Google case “because it asserts that privacy concerns can be antitrust concerns” and that consumers have a broader role than buyers of services in an economy, said Alec Burnside, an attorney at Dechert in Brussels.

Two Billion

The German probe comes as Facebook, which now has 2 billion members and made more than $27 billion in revenue last year...