Germany’s Antitrust Watchdog Deals Shattering Blow to Facebook’s Advertising Model

In what may well turn out to be the biggest blow to Facebook’s business model, Germany’s antitrust regulator has ruled that Facebook is effectively exploiting consumers by forcing them into agreeing to its data collection practices in order to have an account.

In forbidding the practice, the regulator, known as the Federal Cartel Office, has dealt a debilitating blow to Facebook’s lucrative advertising model, which relies on tracking the behavior of its billion users. Facebook intends to appeal the decision. In response to the ruling, the social media giant said In a blog post that disagrees with conclusions of the office and that it intends to appeal the ruling “so that people in Germany continue to benefit fully from all our services.”

Facebook has long argued that its data collection practices help it better cater to the tastes of its users and ultimately offer them a better experience. But privacy advocates have long pointed out that the company does not make obvious to its users how and where it collects data on them and what it does with it exactly. The argument is that Facebook intentionally tries to blur parts of the trade-off that its users have to make in order to use its services.

Why the Anti-trust Regulator?

According to antitrust expert Lina Khan, the ruling makes clear that privacy is an antitrust matter. “The FCO’s theory is that Facebook’s dominance is what allows it to impose on users contractual terms that require them to allow Facebook to track them all over. When there is a lack of competition, users accepting terms of service are often not truly consenting. The consent is a fiction,” she is quoted as saying on Wired.

Basically, because Facebook is so strong and competitors are so weak, individuals have practically no choice for an alternative. Their options are either accepting the entirety of Facebook’s data collection stipulations or refraining from using the social network altogether. “In such a difficult situation the user’s choice cannot be referred to as voluntary consent,” said FCO president Andreas Mundt in a statement announcing the decision.

If Facebook fails the appeal, it would be forced to change the way it processes data internally for German users. Facebook has about 32 million monthly active users in Germany, a really small portion of its billion-plus user base, but if the appeal fails, and Facebook changes its ways, it wouldn’t be too far-fetched to imagine other countries following suit quickly.