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Germany uses new law to double down on Meta

German regulators have been investigating Meta’s VR division for antitrust violations since 2020.

Germany on May 4 classified Meta as a company of “paramount significance for competition across markets,” giving the country’s antitrust watchdog more powers to rein in any anticompetitive behaviour by the owner of Facebook, Instagram, and WhatsApp.

The decision was made by Germany’s cartel office Bundeskartellamt based on powers given by the new Section 19a of the German Competition Act introduced in early 2021. Under the new provision, any company declared to be of “paramount significance for competition across markets” will be prohibited from certain specified practices and the designated company carries the burden of proving the practice’s pro-competitive effects.

Meta now joins Google, which the Bundeskartellamt has already classified to be of paramount significance across markets. Meta has decided not to appeal the decision, the authority said.

“The validity of the Bundeskartellamt’s decision is limited to five years after its entry into force in accordance with statutory provisions. Within this period Meta is subject to special abuse control by the Bundeskartellamt in Germany as set out in Section 19a(2) GWB,” the authority noted.

Why has Meta been given this new classification?

  • Meta is constantly expanding: Meta already has Facebook, Messenger, Instagram, WhatsApp, Oculus (now Meta Quest), and the “internationally active digital corporation” continues to expand its range of services, the office noted.
  • Leading provider of social media advertising: “Meta’s services are used by more than 3.5 billion people worldwide. Its services are also widely used in Germany. Owing to its large user base and the user data available to the company, Meta is also the leading provider of social media advertising, which is the company’s almost exclusive source of revenue. In 2021 Meta’s net income increased again in year-on-year comparison by more than a third to almost USD 40bn,” the German authority said. “Altogether, Meta operates a strong social media ecosystem which is financed through advertising and keeps expanding,” it added.

Bundeskartellamt shared the following illustration to make its point:

Source: Germany’s Bundeskartellamt

“The digital ecosystem created by Meta has a very large user base and makes the company the key player in social media. Our investigations have shown that Meta is of paramount significance across markets, also within the meaning of competition law. Following a proceeding which was contested for some time, we have now formally proven the company’s relevant position. Based on this, we are able to intervene against potential competition infringements more efficiently than with the toolkit available to us so far. Meta has waived the right to appeal our decision.” – Andreas Mundt, President of the Bundeskartellamt:

How will this new classification help the antitrust authority?

Bundeskartellamt in early 2019 prohibited Meta from combining user data from different sources due to competition concerns. However, Meta legally challenged this decision. Furthermore, since 2020, the German watchdog has been conducting another proceeding against Meta for linking Meta Quest’s (formerly Oculus) offering of VR headsets/products with Facebook.

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By formally determining Meta’s paramount significance for competition across markets, the Bundeskartellamt has now established the basis for a more rapid conclusion of such proceedings, the authority noted.

Notably, the Competition Commission of India is also investigating Facebook and WhatsApp for their data sharing practices.

What powers are granted by the new Section 19a of the Competition Act?

According to Section 19a(2) of Germany’s Competition Act, Bundeskartellamt can prohibit a company that has been declared as being of paramount significance for competition across markets from the following:

  1. Favouring its own products and services over others when acting as an intermediary such as by presenting its own offers in a more favourable manner or exclusively pre-installing its own offers on devices.
  2. Taking measures that impede other companies in carrying out their business activities on supply or sales markets where the designated company’s activities are of relevance for accessing such markets. A good example of this is measures taken by Google and Apple in running their app stores.
  3. Directly or indirectly impeding competitors in a market in which the designated company can rapidly expand its position even without being dominant
  4. Creating or appreciably raising barriers to market entry or otherwise impeding other companies by processing data relevant to competition that has been collected by the designated company
  5. Refusing the interoperability of products or services or data portability, or making it more difficult, and in this way impeding competition
  6. Providing other companies with insufficient information about the scope, quality or success of the service rendered or commissioned, or otherwise making it more difficult for such companies to assess the value of this service
  7. Demanding benefits for handling the offers of another company which are disproportionate to the reasons for the demand such as demanding the transfer of data or rights that are not absolutely necessary for the purpose.

Furthermore, any designated company that objects to any conduct listed above must bear the burden of proof by demonstrating that they have an objective justification for continuing to engage in these practices.

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