CMA and EU open investigations into Facebook’s use of ad data

The CMA is assessing if Facebook uses information to benefit its own services while the European Commission is considering if Facebook violated EU rules by gathering data from advertisers to compete with them in providing classified ads.

The Competition and Markets Authority and European Commission are investigating whether Facebook is abusing a dominant position in the social media or digital advertising markets through its collection and use of advertising data.

CMA investigation

The CMA is investigating if Facebook has gained an unfair advantage over competitors through its collection and use of certain data when providing services for online classified ads and online dating. The investigation follows the CMA’s previous work including its online platforms and digital advertising market study and the digital markets taskforce. In its market study, the CMA found that Facebook had market power in social media and digital display advertising.

Facebook 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 will examine 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 CMA launched the Digital Markets Unit (DMU) in April. Separately from the investigation into Facebook’s use of advertising market data, the DMU is looking at how codes of conduct could work in practice to govern the relationship between digital platforms and groups, such as small businesses, which rely on these platforms to reach potential customers. The DMU is operating in “shadow”, non-statutory form, pending legislation that will provide it with its full powers. Ahead of this, the CMA says that it will continue its work promoting competition and the interests of consumers in digital markets, including taking enforcement action where necessary.

The investigation is under Chapter II of the Competition Act 1998. The CMA has not reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections. It points out that not all cases lead to the CMA issuing a statement of objections.

EU investigation

The European Commission has also opened a formal antitrust investigation. It will assess if Facebook violated EU competition rules by using advertising data it gathered particularly from advertisers to compete with them in markets where Facebook is active, such as classified ads. The formal investigation will also assess whether Facebook ties its online classified ads service “Facebook Marketplace” to its social network, which would be a breach of EU competition rules. 

The Commission will examine in detail whether Facebook's position in social networks and online advertising allows it to harm competition in neighbouring markets, where Facebook is also active thanks to its social network, and in particular in online classified ads. When advertising their services on Facebook, companies, which also compete directly with Facebook, may provide it commercially valuable data. Facebook might then use this data to compete against the companies which provided it.

This especially applies to online classified ads providers, the platforms on which many European consumers buy and sell products. Online classified ads providers advertise their services on Facebook's social network. At the same time, they compete with Facebook's own online classified ads service, “Facebook Marketplace”.

Following a preliminary investigation, the Commission has concerns that Facebook may distort competition for the online classified ads services. In particular, 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 out-compete them. Facebook could, for instance, receive precise information on users' preferences from its competitors' advertisement activities and use such data to adapt Facebook Marketplace.

The Commission will also examine whether the way Facebook Marketplace is embedded in the social network constitutes a form of tying which gives it an advantage in reaching customers and forecloses competing online classified ads services.

If proven, the practices under investigation may breach EU competition rules on anticompetitive agreements between companies (Article 101 of the Treaty on the Functioning of the European Union (TFEU)) and/or on the abuse of a dominant position (Articles 102 TFEU).

The Commission will now carry out its in-depth investigation as a matter of priority. The opening of a formal investigation does not prejudge its outcome.

Cooperation between CMA and European Commission

The CMA and the European Commission say that they will seek to work closely with each other as the independent investigations develop.

Published: 2021-06-04T16:00:00

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