In this article we are going to discuss why the European Commission has fined META on 14 November 2024 for almost 800 million EUR and why it considered that Facebook Marketplace is violating the EU antitrust rules.
Some background information
META Platforms, formerly known as Facebook, is a US company, a global giant that focuses on social networking and owns popular social media platforms like Facebook, Instagram, WhatsApp and Messenger. In October 2016, META introduced Facebook Marketplace, where users can purchase and sell items in their local area. It is a permanent feature and cannot be removed or disabled.
The European Commission, which oversees the fair competition of businesses within the EU and proper application of relevant regulations, has a wide authority to investigate companies, conduct hearings and impose fines.
In June 2021, the European Commission started official antitrust proceedings against Facebook Ireland Limited and its parent company for violating EU competition rules. The Commission was mainly investigating whether Facebook might be unfairly linking its classified ads service (Facebook Marketplace) to its main social network platform, as well as using data collected from advertisers on its social network to benefit its own competing products, like Facebook Marketplace.
Better understanding of the issue
After the proceedings were initiated, Executive Vice-President of the European Commission Margrethe Vestager, in charge of competition policy, said: “Facebook is used by almost 3 billion people on a monthly basis and almost 7 million firms advertise on Facebook in total. Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups. 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. In today’s digital economy, data should not be used in ways that distort competition.”.
To illustrate even more clearly, Facebook and Instagram are immense international platforms, where many companies are accommodating their advertisements. Thus, after the creation of Facebook Marketplace, they have to compete with them.
You might ask a fully justified follow-up question։ why does it pose a problem in modern free market conditions? The issue is (concern initially raised by the Commission) that Facebook could use data collected from advertisers on its social network to give its own product, Facebook Marketplace, an unfair advantage. For example, Facebook might use information about user preferences gleaned from competitor’s ads to improve Facebook Marketplace and outcompete them.
Another aspect of the problem is that Facebook Marketplace is permanently linked to the social network and cannot be deleted, which can give it additional advantage.
Results of the investigation and Commission’s decision
As legal ground for the Commission’s decision served Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the European Economic Area Agreement, which prohibit the abuse of a dominant position.
While being a dominant company isn’t illegal under EU antitrust laws, these companies have a special responsibility. They must not abuse their power to limit competition, either in their own market or in related ones.
Based on an analysis of these and a number of other EU regulations (Council Regulation No 1/2003, Commission Regulation No 773/2004), the European Commission came to the conclusion that:
- META holds a dominant position in the market for personal social networks across Europe and also dominates national markets for online advertising.
- It abused its dominant position by tying its online classified ads service to its personal social network, which is automatic and without consideration of the users’ consent. It provided “a substantial distribution advantage” to Facebook marketplace against its competitors.
- META forced unfair rules on other online ad providers that advertise on their platforms (like Facebook and Instagram), which lets META to use data from other advertisers for the benefit of its own Marketplace.
The Commission fined META 797.72 million EUR and ordered it to stop this behaviour. This sanction ranks among the 10 largest antitrust fines, which the European Commission has imposed against Big Tech giants over the recent years. While choosing the penalty, the Commission took into consideration the “duration and gravity of the infringement”, as well as the turnover of Meta and Facebook Marketplace.
META response to the Commission’s Decision
In its response to the above noted decision, META argued that it built Facebook Marketplace to provide a new choice to European users and to make it easier for people to discover, buy and sell items without any charge. It disagreed with the Commission noting that Facebook users can choose whether or not to use Facebook Marketplace, and many don’t. META believes people use it because they want to, not because they are forced to.
META denied the use of advertisers’ data, which was not proved by the Commission. Moreover, according to them, they have already built systems and controls to ensure the impossibility of such a practice.
META found it disappointing that the Commission has chosen to take regulatory action against a free and innovative service built to meet consumer demand in circumstances when many marketplaces in Europe (eBay, Leboncoin, etc.) continue to grow and dominate in the EU. It announced that it will comply with the Commission’s decision but, however, will appeal it.
Conclusion
As a user of Facebook social network, I cannot personally assess the risks of companies and the damage caused to them by unfair competition, but I can state that when discovering Facebook Marketplace, I was angry that I couldn’t manage my page and remove it. I was shocked that Facebook didn’t care about my opinion, and that no one asked it, for example through a simple consent button.
Gohar Simonyan
M2 Cyberjustice – Promotion 2024/2025
