Social monopolists

Germany's Facebook cartel probe deserves a Like

Facebook is not charging its users any money, yet still is not free: users are paying with their personal data. But are they getting a fair deal or is Facebook abusing a dominant position? Either way, it's good that a pioneering investigation by Germany's competition watchdog is asking the question.

In privacy-obsessed Germany, Facebook has already had many brawls with data protection bodies. For instance, Hamburg's data protection office in 2015 legally challenged the company to allow users to sign up with pseudonyms. Yet the probe launched by Germany's cartel office on March 2 is entering unchartered water: for the first time, it is linking conventional arguments about market power with privacy.

With a market share of about 90 per cent, according to a joint survey by Darmstadt and Dresden Universities, Facebook is Germany's dominant social network. Anyone wanting to connect with friends online has few viable alternatives - domestic competitors like StudiVZ faltered years ago. This is caused by a natural winner-takes-all dynamic: the more people are using a network, the more useful it becomes for everyone.

The German authorities suspect Facebook may be exploiting its dominance to push inappropriate or even illegal data protection policies on its users. The company says it is confident that it does not violate any laws.

The cartel office has shown its teeth to internet giants before. In 2013, retailer Amazon dropped clauses that restricted competition on its Amazon Marketplace. Last year, the regulator forced online booking sites HRS and Booking.com to tweak inappropriate contractual terms with hotels.

The Facebook case is more complex, and likely to drag on for months if not years. If the cartel office concludes Facebook is in fact violating a dominant position, the immediate financial fallout for the company would probably be negligible. The competition watchdog cannot impose a fine but would have to call for a change in business practice. A potential remedy may be greater transparency on how the company is using customer data.

The cartel probe implies competition authorities are taking potential market abuse and consumer rights on the internet seriously. For that, it warrants at least a Like.