Last week, European authorities launched investigations into the advertising practices of Facebook and Google in a move that could significantly affect the future business models of the tech giants.
In a series of announcements made within hours of each other, the European Commission, the UK’s Competition and Markets Authority and its German equivalent, the Federal Cartel Office, all announced independent probes targeted at the companies.
“The European Commission has opened a formal antitrust investigation to assess whether Facebook violated EU (European Union) competition rules by using advertising data gathered in particular from advertisers in order to compete with them in markets where Facebook is active such as classified ads,” said the EU in a statement. EU Executive Vice President Margrethe Vestager said Facebook’s data, collected from its three billion users and seven million advertisers enables it to target specific groups at the potential disadvantage of other companies.
“We will look in detail at whether this data gives Facebook an undue competitive advantage in particular on the online classified ads sector where people buy and sell goods every day and where Facebook also competes with companies from which it collects data,” said Vestager. The EU said findings of a preliminary investigation raised concern that Facebook may distort competition for online classified ads using data obtained from competing providers on the social network, which then helps boost the platform’s own classified ads service 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,” said EU in the statement.
The UK’s Competition and Markets Authority (CMA) simultaneously released its statement, saying in addition to Facebook Marketplace, the regulators will take a closer look at Facebook Dating, a service the firm launched in Europe last year.
“We intend to thoroughly investigate Facebook’s use of data to assess whether its business practices are giving it an unfair advantage in the online dating and classified ad sectors,” said Andrea Coscelli, chief executive of the CMA.
And in Germany, where a new law gave the Federal Cartel Office (FCO) powers to regulate digital corporations, the investigation is targeted at Google’s parent company Alphabet Inc.
“The Federal Cartel Office has initiated proceedings against Alphabet Inc and its affiliated companies (Google) to examine the Google News Showcase under antitrust law,” said FCO in a statement.
In addition to the probe launched on Google last week, FCO is currently following up on similar proceedings against Facebook and Amazon launched earlier this year.
“A cooperation with Google can be attractive for publishers and other news providers and offer consumers new or improved information offers,” said Andreas Mundt, president of the FCO.
“However, it must be ensured that there is no discrimination between individual publishers,” he said. Google launched Google News Showcase last year as a licensing partnership with select publishers around the world in what the company termed a helping hand to help journalism thrive in the digital age.
The service was initially started in Germany, Australia and Brazil, with leading publications such as Der Spiegel, InQueensland and InDaily roped in. Google said negotiations with many more publishers are ongoing.
The latest raft of investigations into the social media giants come on the back of months of mounting pressure for tighter regulation on the Silicon Valley giants by governments across the world.
Last year, the US Federal Trade Commission (FTC) and 48 states filed two separate lawsuits, accusing Facebook of breaking the law in its acquisition of Instagram (2012) and WhatsApp (2014) and sniffling competition and rivals in the advertising industry in what is considered a legal challenge that could see the company split up.
In February this year, Facebook took down several news sites from its platform in Australia to protest a proposed law that would compel tech companies to pay royalties for news content shared on their platforms.
Facebook was forced to reverse the ban after several critical sites, including Covid-19 information pages and those carrying weather reports, were also caught up in the blackout even as the Australian government went ahead and passed the law.
Closer home, the Communications Authority of Kenya (CA) has said it plans to undertake a study later this year that will inform how it progresses with regulating Big Tech, including compelling companies like Google and Facebook to share revenues with Kenya content producers.