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EU Charges Meta For Antitrust Breach - Fine Could Be $11.8B

December 20, 2022

The European Commission has informed Meta of its preliminary view that the company breached EU antitrust rules by distorting competition in the markets for online classified ads. The Commission takes issue with Meta tying its online classified ads service, Facebook Marketplace, to its personal social network, Facebook. The Commission is also concerned that Meta is imposing unfair trading conditions on Facebook Marketplace's competitors for its own benefit.

Meta is a US multinational technology company. Its flagship product is its personal social network “Facebook”, which allows registered users to create profiles, upload photos and videos, send messages and connect with other people. Meta also offers an online classified ads service, called “Facebook Marketplace” where users can buy and sell goods.

Meta made $117.92 billion in annual revenues in 2021, thus the penalty is worth as much as $11.8 billion.

Margrethe Vestager, Executive Vice-President in charge of competition policy said, "With its Facebook social network, Meta reaches globally billions of monthly users and millions active advertisers. Our preliminary concern is that Meta ties its dominant social network Facebook to its online classified ad services called Facebook Marketplace. This means Facebook users have no choice but to have access to Facebook Marketplace. Furthermore, we are concerned that Meta imposed unfair trading conditions, allowing it to use of data on competing online classified ad services. If confirmed, Meta’s practices would be illegal under our competition rules."

Statement of Objections on Meta's tying practice and advertising data 

The Commission preliminary finds that Meta is dominant in the market for personal social networks, which is across Europe, as well as the national markets for online display advertising on social media.

The Commission preliminarily finds that Meta abused its dominant positions in the following two ways:

  • First, Meta ties its online classified ads service Facebook Marketplace with its dominant personal social network Facebook. This means that users of Facebook automatically have access to Facebook Marketplace, whether they want it or not. The Commission is concerned that competitors of Facebook Marketplace may be foreclosed as the tie gives Facebook Marketplace a substantial distribution advantage that competitors cannot match.
  • Second, Meta unilaterally imposes unfair trading conditions on competing online classified ads services which advertise on Facebook or Instagram. The Commission is concerned that the terms and conditions, which authorise Meta to use ads-related data derived from competitors for the benefit of Facebook Marketplace, are unjustified, disproportionate and not necessary for the provision of online display advertising services on Meta's platforms. Such conditions impose a burden on competitors and only benefit Facebook Marketplace.

If confirmed, these practices would infringe Article 102 of the Treaty on the Functioning of the European Union (‘TFEU') that prohibits the abuse of a dominant market position.

The sending of a Statement of Objections does not prejudge the outcome of an investigation.

Background

Article 102 of the TFEU prohibits the abuse of a dominant position. The implementation of these provisions is defined in the Antitrust Regulation (Council Regulation No 1/2003), which can also be applied by the national competition authorities.

On 4 June 2021, the Commission opened formal proceedings into possible anticompetitive conduct of Facebook.

A Statement of Objections is a formal step in Commission investigations into suspected violations of EU antitrust rules. The Commission informs the parties concerned in writing of the objections raised against them. The addressees can examine the documents in the Commission's investigation file, reply in writing and request an oral hearing to present their comments on the case before representatives of the Commission and national competition authorities. Sending a Statement of Objections and opening of a formal antitrust investigation does not prejudge the outcome of the investigations.

If the Commission concludes, after the company has exercised its rights of defence, that there is sufficient evidence of an infringement, it can adopt a decision prohibiting the conduct and imposing a fine of up to 10% of the company's annual worldwide turnover.

There is no legal deadline for bringing an antitrust investigation to an end. The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the undertakings concerned cooperate with the Commission and the exercise of the rights of defence.

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