New rules apply to Meta (formerly Facebook) – Bundeskartellamt determines its “paramount significance for competition across markets”

The Bundeskartellamt has formally determined the paramount significance for competition across markets of Meta Platforms, Inc., Menlo Park, USA. The toolkit for extended abuse control introduced by the German legislator in early 2021 can thus be applied to Meta.

The new provision (Section 19a of the German Competition Act (GWB)) enables the Bundeskartellamt to intervene earlier and more effectively against the practices of large digital companies. If the Bundeskartellamt formally determines that an undertaking is of paramount significance for competition across markets, it can prohibit it from engaging in anti-competitive practices.

Andreas Mundt, President of the Bundeskartellamt: “The digital ecosystem created by Meta has a very large user base and makes the company the key player in social media. Our investigations have shown that Meta is of paramount significance across markets, also within the meaning of competition law. Following a proceeding which was contested for some time, we have now formally proven the company’s relevant position. Based on this, we are able to intervene against potential competition infringements more efficiently than with the toolkit available to us so far. Meta has waived the right to appeal our decision.”

Meta is an internationally active digital corporation which is known in particular for its services Facebook (including Messenger), Instagram and WhatsApp. With features like “Stories” and “Reels” or offers like “Watch” or “Shops” Meta continuously expands its range of services. As major project for the future Meta invests in particular in hardware and software for a “metaverse”, i.e. an extensive VR world. Meta’s efforts in this regard include its acquisition of Oculus (now: Meta Quest), a manufacturer of VR headsets and technology.

Meta’s services are used by more than 3.5 billion people worldwide. Its services are also widely used in Germany. Owing to its large user base and the user data available to the company, Meta is also the leading provider of social media advertising, which is the company’s almost exclusive source of revenue. In 2021 Meta’s net income increased again in year-on-year comparison by more than a third to almost USD 40bn.

Altogether, Meta operates a strong social media ecosystem which is financed through advertising and keeps expanding (for more information see the attached illustration).

In early 2019 the Bundeskartellamt already prohibited Meta from combining user data from different sources due to competition concerns (see press release of 7 February 2019). However, the legal dispute with Meta with regard to this decision is still pending before the courts. Furthermore, since 2020 the Bundeskartellamt has been conducting another proceeding against Meta for linking Meta Quest’s (formerly Oculus) offer of VR headsets/products with Facebook (see press release of 10 December 2020).

By formally determining Meta’s paramount significance for competition across markets pursuant to Section 19a(1) GWB, the Bundeskartellamt has now established the basis for a more rapid conclusion of such proceedings.

The validity of the Bundeskartellamt’s decision is limited to five years after its entry into force in accordance with statutory provisions. Within this period Meta is subject to special abuse control by the Bundeskartellamt in Germany as set out in Section 19a(2) GWB.

Meta has announced not to appeal the decision and not to deny its status as norm addressee within the meaning of Section 19a(1) GWB. However, in doing so Meta specifically has not declared that it necessarily agrees with all the facts as established by the decision division in its decision and the conclusions drawn from these facts.

The Bundeskartellamt will publish a summary of its decision shortly.

Background:

Since the entry into force of the 10th amendment to the GWB in early 2021 new rules regarding abuse control have been in place enabling the Bundeskartellamt to intervene earlier and more effectively against the practices of large digital corporations. The authority has since initiated new proceedings against Google, Amazon, Meta (formerly Facebook) and Apple. In a decision which became final in late 2021 the Bundeskartellamt already formally determined the paramount significance across markets of Alphabet / Google (see press release of 5 January 2022).