Not Like Us: Facebook and Google May Run Afoul of European Regulators

France’s competition agency, Autorité de la concurrence, reached a preliminary probe into online advertising with findings focused on Facebook and Google’s market dominance on March 6, 2018, setting up the possibility for more thorough antitrust investigations.

According to the agency, Facebook and Google’s market power has yielded a “fragile” equilibrium in the online advertising sphere where stakeholders must contend with “competition from global stakeholders.” Facebook and Google both employ “unrivaled volumes” of consumer data to bolster their competitive advantages, including of logged-in users who provide reams of data, offering advertisers the chance to reach incredibly broad and incredibly specific audiences. The authority report highlighted that the two companies acted as publishers and technical intermediaries for advertisers, giving them a competitive advantage.

Both companies have already faced regulatory scrutiny. For example, the French data protection authority, the Commission national informatique et libertés, sanctioned Google in 2014 and Facebook in 2017 for collecting data without user consent. Europeans are far more sensitive to how their personal data are collected than their American counterparts, partly a result of their experience with totalitarian states.

In an agreement with the government data protection agency in Ireland, the company promised to tweak the Facebook site for users across Europe. Among other things, it promised to clarify how user data is employed to deliver advertising and to keep users’ ad-click data for no more than two years. In addition, German regulators clashed with Facebook over companies using its “like” button to target advertising, as well as over some of its photo features.

Back in 2015, the EU launched a landmark antitrust case against Google Inc. What worries them was how companies such as Google, Apple Inc., Amazon.com Inc. and Facebook Inc. amassed dominant positions in critical areas of technology and the Internet. Their rapid rise guaranteed that these firms will influence—and profit from—the major transformations under way across a host of industries. In the case against Google, EU regulators alleged that the company stifled competitors by “systematically favoring” its own shopping service in violation of the law. The 28-country EU also opened an investigation into potentially anti-competitive practices involving Google’s Android mobile operating system.

EU Commission found that Google systematically gave prominent placement to its own comparison shopping service and demoted rival comparison shopping services in its search results. The European Commission fined Google a record-breaking $2.73 billion for antitrust violations pertaining to its Google’s Shopping search comparison service — in what was widely considered the most significant antitrust ruling in Europe since the 2004 Microsoft decision.

Antitrust enforcement has been one of the most significant differences in business law between the U.S. and the EU. While U.S. antitrust laws are in some respects more powerful than EU laws have been, enforcement has been more vigorous in the EU than in the U.S. in recent years.

Article 81 of the European Community Treaty prohibiting cartels and other “concerted practices” that distort competition is roughly comparable to Section 1 of the Sherman Act (the principal U.S. antitrust law), which outlaws concerted action to restrain trade. In general, “concerted action” for a Section 1 violation means that at least two companies must be involved in restraining trade, as opposed to unilateral action by one business. Price-fixing or bid-rigging are prime examples of illegal concerted action.

The EU, in fact, has a counterpart to the Sherman Act’s Section 2, which prohibits the willful acquisition or maintenance of monopoly power. Article 82 of the EC Treaty states: “Any abuse by one or more undertakings of a dominant position within the common market . . . shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.”

European antitrust law places special obligations on powerful firms, said Ioannis Lianos, a professor of competition law at University College London.

“In the U.S., if you have achieved dominance because you have been better or more aggressive, that’s not a problem – in a way, it’s kind of a cowboy thing,”

he said. In Europe, a dominant firm “has to be a gentleman to a certain degree.” However, Facebook warned European lawmakers that too many rules would hurt the ability of Facebook and other companies to grow in Europe, saying that “there is a risk that an excessively litigious environment would impede the development of innovative services that can bring real benefit to European citizens.”