In December, the European Commission (“Commission”) issued a Statement of Objections (“SO”) to Facebook’s parent company Meta Platforms Inc. The Commission said that based on its preliminary view, Facebook had violated EU antitrust rules by distorting competition for online display advertising on social media linked to Facebook Marketplace.
Marketplace, which Meta launched back in 2016, is a virtual place for Facebook users to discover, buy and sell just about anything, from vehicles, clothes, books, smartphones, and even property, within their local social community.
The Commission’s preliminary theory of harm presented in the SO concludes that Meta abused its dominating positions in the two ways described below.
First, Meta ties its online classified ads service Facebook Marketplace with its dominant personal social network Facebook. Facebook users can’t opt in or out of the program and have automatic access to Facebook Marketplace. The Commission is concerned that competitors of Facebook Marketplace may be facing foreclosure as the tie gives Facebook Marketplace unfair leverage over its peers that they cannot match.
The second is regarding Facebook’s advertising business. When competing online classified ad providers advertise on Meta’s platforms (Facebook or Instagram), Meta unilaterally imposes unfair trading terms.
Also, Commission is concerned about the terms and conditions, which authorize Meta to use ads-related data from competitors to benefit Facebook Marketplace. According to the Commission, the only beneficiary of that arrangement is Facebook Marketplace.
In its official statement, the Commission called this practice “unjustified, disproportionate and not necessary for the provision of online display advertising services on Meta’s platforms.”
The Commission and the UK Competition and Markets Authority (“CMA“) announced in June 2021 separate but cooperative initiatives to assess whether Meta was abusing its dominant market position by utilizing data from its social network to obtain unfair advantage over competitors in the online classified ads space. The Commission is now following the CMA’s initiative in pursuing its case against Meta, as CMA did in August this year.
Issuing a company with the SO is a formal stage in the EU competition probes and does not prejudicate the conclusions of a probe. Before the Commission decides on the charges, the Silicon Valley social media giant may submit a written defense and request a closed-door hearing. However, if the Commission still determines that there is enough evidence of a breach after a company has presented its response, it may be forced to amend its business practices or pay a fine of up to 10% of its annual global turnover. For Meta’s $118 billion in revenues in 2021, this may result in a fine of up to $11.8 billion.
The news that Meta is under the scrutiny of competition authorities worldwide is no longer a surprise, but this is the first time that the EU accused Meta of abusing its dominating position. Five years ago, Meta was fined €110 million by the EU for failing to provide accurate info during the EU’s merger review of the WhatsApp acquisition.
This SO comes just two months after Meta was ordered to sell animated images platform Giphy GIFs by CMA. Despite Meta’s attempt to overturn the decision, the CMA stood by its decision in October 2022, concluding that Meta might strengthen its already considerable market position by preventing or restricting access to Giphy GIFs on other social media platforms, which would drive users to Meta-owned websites. This means Meta will have to unwind the acquisition worth around $400 million.
Authors: Milica Novaković, Nikola Ivković, Vasilije Bošković
