Facebook faces privacy policy antitrust investigation in Germany

The German Federal Cartel Office is investigating whether Facebook has abused a dominant position in social networking to impose unfair terms on users

Facebook may be abusing a dominant position in the market for social networks to impose unfair privacy policies on its users, Germany's antitrust authority suspects.

The German Federal Cartel Office opened proceedings Wednesday against Facebook's German subsidiary, the U.S. parent company, and Facebook Ireland, to which the company delegates responsibility for the privacy of all users outside North America.

The government agency suspects that Facebook violates Germany's data protection laws with its conditions of use, and that it may have a dominant position in the social networking market in country.

Facebook has already had a number of run-ins with German authorities over its user agreements. Most recently, on Monday a Berlin regional court fined the company €100,000 (US$109,000) for delays in respecting an earlier court order to delete some wording from rules on licensing intellectual property.

While not every infringement by a dominant company is relevant under competition law, the Cartel Office believes that, in this case, Facebook's use of unlawful terms and conditions could represent an abusive imposition of unfair conditions on users. The agency will examine the extent to which a connection exists between the clauses and the company's possible dominant position, it said.

Dominant companies have special obligations, including providing their service on adequate terms, according to the agency.

"For advertising-financed internet services such as Facebook, user data are hugely important. For this reason it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected," said its president, Andreas Mundt.

The agency's initial investigation indicates that Facebook has a dominant position in the market for social networks. The company obliges users to agree to its collection and use of their data before accessing the service -- but it is difficult for those users to understand and assess the scope of the agreement they are accepting, the agency said.

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Peter Sayer

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