Tag: competition law

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Don’t break up big tech — regulate data access, says EU antitrust chief

Breaking up tech giants should be a measure of last resort, the European Union’s competition commissioner, Margrethe Vestager, has suggested.

“To break up a company, to break up private property would be very far reaching and you would need to have a very strong case that it would produce better results for consumers in the marketplace than what you could do with more mainstream tools,” she warned this weekend, speaking in a SXSW interview with Recode’s Kara Swisher. “We’re dealing with private property. Businesses that are built and invested in and become successful because of their innovation.”

Vestager has built a reputation for being feared by tech giants, thanks to a number of major (and often expensive) interventions since she took up the Commission antitrust brief in 2014, with still one big outstanding investigation hanging over Google.

But while opposition politicians in many Western markets — including high profile would-be U.S. presidential candidates — are now competing on sounding tough on tech, the European commissioner advocates taking a scalpel to data streams rather than wielding a break-up hammer to smash market-skewing tech giants.

“When it comes to the very far reaching proposal to split up companies, for us, from a European perspective, that would be a measure of last resort,” she said. “What we do now, we do the antitrust cases, misuse of dominant position, the tying of products, the self-promotion, the demotion of others, to see if that approach will correct and change the marketplace to make it a fair place where there’s no misuse of dominant position but where smaller competitors can have a fair go. Because they may be the next big one, the next one with the greatest idea for consumers.”

She also pointed to an agreement last month, between key European political institutions on regulating online platform transparency, as an example of the kind of fairness-focused intervention she believes can work to counter market imbalance.

The bread and butter work regulators should be focused on where big tech is concerned are things like digital sector enquiries and hearings to examine how markets are operating in detail, she suggested — using careful scrutiny to inform and shape intelligent, data-led interventions.

Albeit ‘break up Google’ clearly makes for a punchier political soundbite.

Vestager is, however, in the final months of her term as antitrust chief — with the Commission due to turn over this year. Her time at the antitrust helm will end on November 1, she confirmed. (Though she remains, at least tentatively, on a shortlist of candidates who could be appointed the next European Commission president.)

The commissioner has spoken up before about regulating access to data as a more interesting option for controlling digital giants vs breaking them up.

And some European regulators appear to be moving in that direction already. Such the German Federal Cartel Office (FCO) which last month announced a decision against Facebook which aims to limit how it can use data from its own services. The FCO’s move has been couched as akin to an internal break up of the company, at the data level, without the tech giant having to be forced to separate and sell off business units like Instagram and WhatsApp.

It’s perhaps not surprising, therefore, that Facebook founder Mark Zuckerberg announced a massive plan to merge all three services at the technical level just last week — billing the switch to encrypted content but merged metadata as a ‘pro-privacy’ move, while clearly also intending to restructure his empire in a way that works against regulatory interventions that separate and control internal data flows at the product level.

The Competition Commission does not have a formal probe of Facebook or the social media sector open at this point but Vestager said her department does have its eye on how social media giants are using data.

“We’re sort of hoovering over social media, Facebook — how data’s being used in that respect,” she said, also flagging the preliminary work it’s doing looking into Amazon’s use of merchant data. (Also still not yet a formal probe.)

“The good thing is now the debate is really sort of taking off,” she added, of competition regulation generally. “When I’ve been visiting and speaking with people on The Hill previously, I’ve sensed a new sort of interest and curiosity as to what can competition achieve for you in a society. Because if you have fair competition then you have markets serving the citizen in our role as consumer and not the other way around.”

Asked whether she’s personally convinced by Facebook’s sudden ‘appreciation’ of privacy Vestager said if the announcement signifies a genuine change of philosophy and direction which leads to shifts in its business practices it would be good news for consumers.

Though she said she’s not simply taking Zuckerberg at his word at this point. “It may be a little far-reaching to assume the best,” she said politely when pushed by Swisher on whether she believed a sincere pivot is possible from a company with such a long privacy-hostile history.

Big tech, small tax

The interview also delved into the issue of big tech and the tiny amounts it pays in tax.

Reforming the global tax system so digital businesses pay a fair share vs traditional businesses is now “urgent” work to do, said Vestager — highlighting how the lack of a consensus position among EU Member States is pushing some countries to move forward with their own measures, given resistance to Commission proposals from other corners of the bloc.

France‘s push for a tax on tech giants this year is “absolutely necessary but very unfortunate”, Vestager said.

“When you do numbers that can be compared we see that digital businesses they would pay on average nine per cent [in taxes] where traditional businesses on average pay 23 per cent,” she continued. “Yet they’re in the same market for capital, for skilled employees, sometimes competing for the same customers. So obviously this is not fair.”

The Commission’s hope is that individual “pushes” from Member States frustrated by the current tax imbalance will generate momentum for “a European-wide way of doing things” — and therefore that any fragmentation of tax policies across the bloc will be short-lived.

She also she Europe is keen for the Organisation for Economic Co-operation and Development to “push forward for this” too, remarking: “Because we sense in the OECD that a number of places in the world take an interest also in the U.S. side of things.”

Is the better way to reset inequalities related to big tech and society achieved via reforming the tax system or are regulators doomed to have to keep fining them “into the next century”, wondered Swisher.

“You get a fine when you do something illegal. You pay your taxes to contribute to society where you do your business. These are two different things and we definitely need both,” responded Vestager. “But we cannot have a situation where some businesses do not contribute and the majority of businesses they do. Because it’s simply not fair in the marketplace or fair towards citizens if this continues.”

She also made short shrift of the favored big tech lobbyist line — to loudly claim privacy regulation helps big guys because it’s easier for them to fund compliance — by pointing out that Europe’s General Data Protection Regulation has “different brackets” and does not simply clobber big and small alike with the same requirements.

Of course small businesses “don’t have the same obligations as Google”, said Vestager.

“I’d say if they find it easy, I’d say they can do better,” she added, raising the much complained about consumer rights issue of consent vs inscrutable T&Cs.

“Because I still find that it’s quite tricky to understand what it is that you accept when you accept your terms and conditions. And I think it would be great if we as citizens could really say ‘oh this is what I am signing up to and I’m perfectly happy with that’.”

Though she admitted there’s still a way to go for European privacy rights to be fully functioning as intended — arguing it’s still too hard for individual consumers to exercise the rights they have in law.

“I know I own my data but I really do not know how to exercise that ownership,” she said. “How to allow for more people to have access to my data if I want to enable innovation, new market participants coming in. If that was done in large scale you could have an innovative input into the marketplace and we’re definitely not there yet,” she said.

Asked about the idea of taxing data flows as another possible means of clipping the wings of big tech Vestager pointed to early signs of an intermediate market spinning up in Europe to help individual extract value from what corporate entities are doing with their information. So not literally a tax on data flows but a way for consumers to claw back some of the value that’s being stripped from them.

“It’s still nascent in Europe but since now we have the rights that establishes your ownership of your data we see there is a beginning market development of intermediaries saying should I enable you yourself to monetize your data, so it’s not just the giants who monetize your data. So that maybe you get a sum every month reflecting how your data has been passed on,” she said. “That is one opportunity.”

She also said the Commission is looking at how to make sure “huge amounts of data will not be a barrier to entry in a marketplace” — or present a barrier to innovation for newcomers. The latter being key given how tech giants’ massive data pools are translating into a meaty advantage in AI R&D.

In another interesting exchange, Vestager suggested the convenience of voice interfaces presents an acute competition challenge — given how the tech could naturally concentrate market power via preferring quick-fire Q&A style interactions which don’t support offering lots of choice options.

“One of the things that is really mindboggling for us is how to have choice if you have voice,” she said, arguing that voice assistance dynamic doesn’t lend itself to multiple suggestions being offered every time a user asks a question. “So how to have competition when you have voice search?.. How would this change the marketplace and how would we deal with such a market? So this is what we’re trying to figure out.”

Again she suggested regulators are thinking about how data flows behind the scenes as a potential route to remedying interfaces that work against choice.

“We’re trying to figure out how access to data will change the marketplace,” she added. “Can you give a different access to data because the one who holds the data, also holds the resources for innovation. And we cannot rely on the big guys to be the innovative ones.”

Asked for her worst case scenario for tech 10 years hence, she said it would be to have “all of the technology but none of the societal positive oversight and direction”.

On the flip side, the best case would be for legislators to be “willing to take sufficient steps in taxation and in regulating access to data and fairness in the marketplace”.

“We would also need to see technology develop to have new players,” she emphasized. “Because we still need to see what will happen with quantum computing, what will happen with blockchain, what other uses are there for all if that new technology. Because I still think that it holds a lot of promise. But only if our democracy will give it direction. Then you will have a positive outcome.”

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UK parliament calls for antitrust, data abuse probe of Facebook

A final report by a British parliamentary committee which spent months last year investigating online political disinformation makes very uncomfortable reading for Facebook — with the company singled out for “disingenuous” and “bad faith” responses to democratic concerns about the misuse of people’s data.

In the report, published today, the committee has also called for Facebook’s use of user data to be investigated by the UK’s data watchdog.

In an evidence session to the committee late last year, the Information Commissioner’s Office (ICO) suggested Facebook needs to change its business model — warning the company risks burning user trust for good.

Last summer the ICO also called for an ethical pause of social media ads for election campaigning, warning of the risk of developing “a system of voter surveillance by default”.

Interrogating the distribution of ‘fake news’

The UK parliamentary enquiry looked into both Facebook’s own use of personal data to further its business interests, such as by providing access to user data to developers and advertisers in order to increase revenue and/or usage; and examined what Facebook claimed as ‘abuse’ of its platform by the disgraced (and now defunct) political data company Cambridge Analytica — which in 2014 paid a developer with access to Facebook’s developer platform to extract information on millions of Facebook users in build voter profiles to try to influence elections.

The committee’s conclusion about Facebook’s business is a damning one with the company accused of operating a business model that’s predicated on selling abusive access to people’s data.

“Far from Facebook acting against “sketchy” or “abusive” apps, of which action it has produced no evidence at all, it, in fact, worked with such apps as an intrinsic part of its business model,” the committee argues. “This explains why it recruited the people who created them, such as Joseph Chancellor [the co-founder of GSR, the developer which sold Facebook user data to Cambridge Analytica]. Nothing in Facebook’s actions supports the statements of Mark Zuckerberg who, we believe, lapsed into “PR crisis mode”, when its real business model was exposed.

“This is just one example of the bad faith which we believe justifies governments holding a business such as Facebook at arms’ length. It seems clear to us that Facebook acts only when serious breaches become public. This is what happened in 2015 and 2018.”

“We consider that data transfer for value is Facebook’s business model and that Mark Zuckerberg’s statement that ‘we’ve never sold anyone’s data” is simply untrue’,” the committee also concludes.

We’ve reached out to Facebook for comment on the committee’s report.

Last fall the company was issued the maximum possible fine under relevant UK data protection law for failing to safeguard user data from Cambridge Analytica saga. Although Facebook is appealing the ICO’s penalty, claiming there’s no evidence UK users’ data got misused.

During the course of a multi-month enquiry last year investigating disinformation and fake news, the Digital, Culture, Media and Sport (DCMS) committee heard from 73 witnesses in 23 oral evidence sessions, as well as taking in 170 written submissions. In all the committee says it posed more than 4,350 questions.

Its wide-ranging, 110-page report makes detailed observations on a number of technologies and business practices across the social media, adtech and strategic communications space, and culminates in a long list of recommendations for policymakers and regulators — reiterating its call for tech platforms to be made legally liable for content.

Among the report’s main recommendations are:

  • clear legal liabilities for tech companies to act against “harmful or illegal content”, with the committee calling for a compulsory Code of Ethics overseen by a independent regulatory with statutory powers to obtain information from companies; instigate legal proceedings and issue (“large”) fines for non-compliance
  • privacy law protections to cover inferred data so that models used to make inferences about individuals are clearly regulated under UK data protection rules
  • a levy on tech companies operating in the UK to support enhanced regulation of such platforms
  • a call for the ICO to investigate Facebook’s platform practices and use of user data
  • a call for the Competition Markets Authority to comprehensively “audit” the online advertising ecosystem, and also to investigate whether Facebook specifically has engaged in anti-competitive practices
  • changes to UK election law to take account of digital campaigning, including “absolute transparency of online political campaigning” — including “full disclosure of the targeting used” — and more powers for the Electoral Commission
  • a call for a government review of covert digital influence campaigns by foreign actors (plus a review of legislation in the area to consider if it’s adequate) — including the committee urging the government to launch independent investigations of recent past elections to examine “foreign influence, disinformation, funding, voter manipulation, and the sharing of data, so that appropriate changes to the law can be made and lessons can be learnt for future elections and referenda”
  • a requirement on social media platforms to develop tools to distinguish between “quality journalism” and low quality content sources, and/or work with existing providers to make such services available to users

Among the areas the committee’s report covers off with detailed commentary are data use and targeting; advertising and political campaigning — including foreign influence; and digital literacy.

It argues that regulation is urgently needed to restore democratic accountability and “make sure the people stay in charge of the machines”.

Ministers are due to produce a White Paper on social media safety regulation this winter and the committee writes that it hopes its recommendations will inform government thinking.

“Much has been said about the coarsening of public debate, but when these factors are brought to bear directly in election campaigns then the very fabric of our democracy is threatened,” the committee writes. “This situation is unlikely to change. What does need to change is the enforcement of greater transparency in the digital sphere, to ensure that we know the source of what we are reading, who has paid for it and why the information has been sent to us. We need to understand how the big tech companies work and what happens to our data.”

The report calls for tech companies to be regulated as a new category “not necessarily either a ‘platform’ or a ‘publisher”, but which legally tightens their liability for harmful content published on their platforms.

Last month another UK parliamentary committee also urged the government to place a legal ‘duty of care’ on platforms to protect users under the age of 18 — and the government said then that it has not ruled out doing so.

“Digital gangsters”

Competition concerns are also raised several times by the committee.

“Companies like Facebook should not be allowed to behave like ‘digital gangsters’ in the online world, considering themselves to be ahead of and beyond the law,” the DCMS committee writes, going on to urge the government to investigate whether Facebook specifically has been involved in any anti-competitive practices and conduct a review of its business practices towards other developers “to decide whether Facebook is unfairly using its dominant market position in social media to decide which businesses should succeed or fail”. 

“The big tech companies must not be allowed to expand exponentially, without constraint or proper regulatory oversight,” it adds.

The committee suggests existing legal tools are up to the task of reining in platform power, citing privacy laws, data protection legislation, antitrust and competition law — and calling for a “comprehensive audit” of the social media advertising market by the UK’s Competition and Markets Authority, and a specific antitrust probe of Facebook’s business practices.

“If companies become monopolies they can be broken up, in whatever sector,” the committee points out. “Facebook’s handling of personal data, and its use for political campaigns, are prime and legitimate areas for inspection by regulators, and it should not be able to evade all editorial responsibility for the content shared by its users across its platforms.”

The social networking giant was the recipient of many awkward queries during the course of the committee’s enquiry but it refused repeated requests for its founder Mark Zuckerberg to testify — sending a number of lesser staffers in his stead.

That decision continues to be seized upon by the committee as evidence of a lack of democratic accountability. It also accuses Facebook of having an intentionally “opaque management structure”.

“By choosing not to appear before the Committee and by choosing not to respond personally to any of our invitations, Mark Zuckerberg has shown contempt towards both the UK Parliament and the ‘International Grand Committee’, involving members from nine legislatures from around the world,” the committee writes.

“The management structure of Facebook is opaque to those outside the business and this seemed to be designed to conceal knowledge of and responsibility for specific decisions. Facebook used the strategy of sending witnesses who they said were the most appropriate representatives, yet had not been properly briefed on crucial issues, and could not or chose not to answer many of our questions. They then promised to follow up with letters, which—unsurprisingly—failed to address all of our questions. We are left in no doubt that this strategy was deliberate.”

It doubles down on the accusation that Facebook sought to deliberately mislead its enquiry — pointing to incorrect and/or inadequate responses from staffers who did testify.

“We are left with the impression that either [policy VP] Simon Milner and [CTO] Mike Schroepfer deliberately misled the Committee or they were deliberately not briefed by senior executives at Facebook about the extent of Russian interference in foreign elections,” it suggests.

In an unusual move late last year the committee used rare parliamentary powers to seize a cache of documents related to an active US lawsuit against Facebook filed by a developer called Six4Three.

Seized cache of Facebook docs raise competition and consent questions

The cache of documents is referenced extensively in the final report, and appears to have fuelled antitrust concerns, with the committee arguing that the evidence obtained from the internal company documents “indicates that Facebook was willing to override its users’ privacy settings in order to transfer data to some app developers, to charge high prices in advertising to some developers, for the exchange of that data, and to starve some developers… of that data, thereby causing them to lose their business”.

“It seems clear that Facebook was, at the very least, in violation of its Federal Trade Commission [privacy] settlement,” the committee also argues, citing evidence from the former chief technologist of the FTC, Ashkan Soltani .

On Soltani’s evidence, it writes:

Ashkan Soltani rejected [Facebook’s] claim, saying that up until 2012, platform controls did not exist, and privacy controls did not apply to apps. So even if a user set their profile to private, installed apps would still be able to access information. After 2012, Facebook added platform controls and made privacy controls applicable to apps. However, there were ‘whitelisted’ apps that could still access user data without permission and which, according to Ashkan Soltani, could access friends’ data for nearly a decade before that time. Apps were able to circumvent users’ privacy of platform settings and access friends’ information, even when the user disabled the Platform. This was an example of Facebook’s business model driving privacy violations.

While Facebook is singled out for the most eviscerating criticism in the report (and targeted for specific investigations), the committee’s long list of recommendations are addressed at social media businesses and online advertisers generally.

It also calls for far more transparency from platforms, writing that: “Social media companies need to be more transparent about their own sites, and how they work. Rather than hiding behind complex agreements, they should be informing users of how their sites work, including curation functions and the way in which algorithms are used to prioritise certain stories, news and videos, depending on each user’s profile. The more people know how the sites work, and how the sites use individuals’ data, the more informed we shall all be, which in turn will make choices about the use and privacy of sites easier to make.”

The committee also urges a raft of updates to UK election law — branding it “not fit for purpose” in the digital era.

Its interim report, published last summer, made many of the same recommendations.

Russian interest

But despite pressing the government for urgent action there was only a cool response from ministers then, with the government remaining tied up trying to shape a response to the 2016 Brexit vote which split the country (with social media’s election-law-deforming help). Instead it opted for a ‘wait and see‘ approach.

The government accepted just three of the preliminary report’s forty-two recommendations outright, and fully rejected four.

Nonetheless, the committee has doubled down on its preliminary conclusions, reiterating earlier recommendations and pushing the government once again to act.

It cites fresh evidence, including from additional testimony, as well as pointing to other reports (such as the recently published Cairncross Review) which it argues back up some of the conclusions reached. 

“Our inquiry over the last year has identified three big threats to our society. The challenge for the year ahead is to start to fix them; we cannot delay any longer,” writes Damian Collins MP and chair of the DCMS Committee, in a statement. “Democracy is at risk from the malicious and relentless targeting of citizens with disinformation and personalised ‘dark adverts’ from unidentifiable sources, delivered through the major social media platforms we use every day. Much of this is directed from agencies working in foreign countries, including Russia.

“The big tech companies are failing in the duty of care they owe to their users to act against harmful content, and to respect their data privacy rights. Companies like Facebook exercise massive market power which enables them to make money by bullying the smaller technology companies and developers who rely on this platform to reach their customers.”

“These are issues that the major tech companies are well aware of, yet continually fail to address. The guiding principle of the ‘move fast and break things’ culture often seems to be that it is better to apologise than ask permission. We need a radical shift in the balance of power between the platforms and the people,” he added.

“The age of inadequate self-regulation must come to an end. The rights of the citizen need to be established in statute, by requiring the tech companies to adhere to a code of conduct written into law by Parliament, and overseen by an independent regulator.”

The committee says it expects the government to respond to its recommendations within two months — noting rather dryly: “We hope that this will be much more comprehensive, practical, and constructive than their response to the Interim Report, published in October 2018. Several of our recommendations were not substantively answered and there is now an urgent need for the Government to respond to them.”

It also makes a point of including an analysis of Internet traffic to the government’s own response to its preliminary report last year — in which it highlights a “high proportion” of online visitors hailing from Russian cities including Moscow and Saint Petersburg…

Source: Web and publications unit, House of Commons

“This itself demonstrates the very clear interest from Russia in what we have had to say about their activities in overseas political campaigns,” the committee remarks, criticizing the government response to its preliminary report for claiming there’s no evidence of “successful” Russian interference in UK elections and democratic processes.

“It is surely a sufficient matter of concern that the Government has acknowledged that interference has occurred, irrespective of the lack of evidence of impact. The Government should be conducting analysis to understand the extent of Russian targeting of voters during elections,” it adds.

Three senior managers knew

Another interesting tidbit from the report is confirmation that the ICO has shared the names of three “senior managers” at Facebook who knew about the Cambridge Analytica data breach prior to the first press report in December 2015 — which is the date Facebook has repeatedly told the committee was when it first learnt of the breach, contradicting what the ICO found via its own investigations.

The committee’s report does not disclose the names of the three senior managers — saying the ICO has asked the names to remain confidential (we’ve reached out to the ICO to ask why it is not making this information public) — and implies the execs did not relay the information to Zuckerberg.

The committee dubs this as an example of “a profound failure” of internal governance, and also branding it evidence of “fundamental weakness” in how Facebook manages its responsibilities to users.

Here’s the committee’s account of that detail:

We were keen to know when and which people working at Facebook first knew about the GSR/Cambridge Analytica breach. The ICO confirmed, in correspondence with the Committee, that three “senior managers” were involved in email exchanges earlier in 2015 concerning the GSR breach before December 2015, when it was first reported by The Guardian. At the request of the ICO, we have agreed to keep the names confidential, but it would seem that this important information was not shared with the most senior executives at Facebook, leading us to ask why this was the case.

The scale and importance of the GSR/Cambridge Analytica breach was such that its occurrence should have been referred to Mark Zuckerberg as its CEO immediately. The fact that it was not is evidence that Facebook did not treat the breach with the seriousness it merited. It was a profound failure of governance within Facebook that its CEO did not know what was going on, the company now maintains, until the issue became public to us all in 2018. The incident displays the fundamental weakness of Facebook in managing its responsibilities to the people whose data is used for its own commercial interests.

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Is Europe closing in on an antitrust fix for surveillance technologists?

The German Federal Cartel Office’s decision to order Facebook to change how it processes users’ personal data this week is a sign the antitrust tide could at last be turning against platform power.

One European Commission source we spoke to, who was commenting in a personal capacity, described it as “clearly pioneering” and “a big deal”, even without Facebook being fined a dime.

The FCO’s decision instead bans the social network from linking user data across different platforms it owns, unless it gains people’s consent (nor can it make use of its services contingent on such consent). Facebook is also prohibited from gathering and linking data on users from third party websites, such as via its tracking pixels and social plugins.

The order is not yet in force, and Facebook is appealing, but should it come into force the social network faces being de facto shrunk by having its platforms siloed at the data level.

To comply with the order Facebook would have to ask users to freely consent to being data-mined — which the company does not do at present.

Yes, Facebook could still manipulate the outcome it wants from users but doing so would open it to further challenge under EU data protection law, as its current approach to consent is already being challenged.

The EU’s updated privacy framework, GDPR, requires consent to be specific, informed and freely given. That standard supports challenges to Facebook’s (still fixed) entry ‘price’ to its social services. To play you still have to agree to hand over your personal data so it can sell your attention to advertisers. But legal experts contend that’s neither privacy by design nor default.

The only ‘alternative’ Facebook offers is to tell users they can delete their account. Not that doing so would stop the company from tracking you around the rest of the mainstream web anyway. Facebook’s tracking infrastructure is also embedded across the wider Internet so it profiles non-users too.

EU data protection regulators are still investigating a very large number of consent-related GDPR complaints.

But the German FCO, which said it liaised with privacy authorities during its investigation of Facebook’s data-gathering, has dubbed this type of behavior “exploitative abuse”, having also deemed the social service to hold a monopoly position in the German market.

So there are now two lines of legal attack — antitrust and privacy law — threatening Facebook (and indeed other adtech companies’) surveillance-based business model across Europe.

A year ago the German antitrust authority also announced a probe of the online advertising sector, responding to concerns about a lack of transparency in the market. Its work here is by no means done.

Data limits

The lack of a big flashy fine attached to the German FCO’s order against Facebook makes this week’s story less of a major headline than recent European Commission antitrust fines handed to Google — such as the record-breaking $5BN penalty issued last summer for anticompetitive behaviour linked to the Android mobile platform.

But the decision is arguably just as, if not more, significant, because of the structural remedies being ordered upon Facebook. These remedies have been likened to an internal break-up of the company — with enforced internal separation of its multiple platform products at the data level.

This of course runs counter to (ad) platform giants’ preferred trajectory, which has long been to tear modesty walls down; pool user data from multiple internal (and indeed external sources), in defiance of the notion of informed consent; and mine all that personal (and sensitive) stuff to build identity-linked profiles to train algorithms that predict (and, some contend, manipulate) individual behavior.

Because if you can predict what a person is going to do you can choose which advert to serve to increase the chance they’ll click. (Or as Mark Zuckerberg puts it: ‘Senator, we run ads.’)

This means that a regulatory intervention that interferes with an ad tech giant’s ability to pool and process personal data starts to look really interesting. Because a Facebook that can’t join data dots across its sprawling social empire — or indeed across the mainstream web — wouldn’t be such a massive giant in terms of data insights. And nor, therefore, surveillance oversight.

Each of its platforms would be forced to be a more discrete (and, well, discreet) kind of business.

Competing against data-siloed platforms with a common owner — instead of a single interlinked mega-surveillance-network — also starts to sound almost possible. It suggests a playing field that’s reset, if not entirely levelled.

(Whereas, in the case of Android, the European Commission did not order any specific remedies — allowing Google to come up with ‘fixes’ itself; and so to shape the most self-serving ‘fix’ it can think of.)

Meanwhile, just look at where Facebook is now aiming to get to: A technical unification of the backend of its different social products.

Such a merger would collapse even more walls and fully enmesh platforms that started life as entirely separate products before were folded into Facebook’s empire (also, let’s not forget, via surveillance-informed acquisitions).

Seized cache of Facebook docs raise competition and consent questions

Facebook’s plan to unify its products on a single backend platform looks very much like an attempt to throw up technical barriers to antitrust hammers. It’s at least harder to imagine breaking up a company if its multiple, separate products are merged onto one unified backend which functions to cross and combine data streams.

Set against Facebook’s sudden desire to technically unify its full-flush of dominant social networks (Facebook Messenger; Instagram; WhatsApp) is a rising drum-beat of calls for competition-based scrutiny of tech giants.

This has been building for years, as the market power — and even democracy-denting potential — of surveillance capitalism’s data giants has telescoped into view.

Calls to break up tech giants no longer carry a suggestive punch. Regulators are routinely asked whether it’s time. As the European Commission’s competition chief, Margrethe Vestager, was when she handed down Google’s latest massive antitrust fine last summer.

Her response then was that she wasn’t sure breaking Google up is the right answer — preferring to try remedies that might allow competitors to have a go, while also emphasizing the importance of legislating to ensure “transparency and fairness in the business to platform relationship”.

But it’s interesting that the idea of breaking up tech giants now plays so well as political theatre, suggesting that wildly successful consumer technology companies — which have long dined out on shiny convenience-based marketing claims, made ever so saccharine sweet via the lure of ‘free’ services — have lost a big chunk of their populist pull, dogged as they have been by so many scandals.

From terrorist content and hate speech, to election interference, child exploitation, bullying, abuse. There’s also the matter of how they arrange their tax affairs.

The public perception of tech giants has matured as the ‘costs’ of their ‘free’ services have scaled into view. The upstarts have also become the establishment. People see not a new generation of ‘cuddly capitalists’ but another bunch of multinationals; highly polished but remote money-making machines that take rather more than they give back to the societies they feed off.

Google’s trick of naming each Android iteration after a different sweet treat makes for an interesting parallel to the (also now shifting) public perceptions around sugar, following closer attention to health concerns. What does its sickly sweetness mask? And after the sugar tax, we now have politicians calling for a social media levy.

Just this week the deputy leader of the main opposition party in the UK called for setting up a standalone Internet regulatory with the power to break up tech monopolies.

Talking about breaking up well-oiled, wealth-concentration machines is being seen as a populist vote winner. And companies that political leaders used to flatter and seek out for PR opportunities find themselves treated as political punchbags; Called to attend awkward grilling by hard-grafting committees, or taken to vicious task verbally at the highest profile public podia. (Though some non-democratic heads of state are still keen to press tech giant flesh.)

In Europe, Facebook’s repeat snubs of the UK parliament’s requests last year for Zuckerberg to face policymakers’ questions certainly did not go unnoticed.

Zuckerberg’s empty chair at the DCMS committee has become both a symbol of the company’s failure to accept wider societal responsibility for its products, and an indication of market failure; the CEO so powerful he doesn’t feel answerable to anyone; neither his most vulnerable users nor their elected representatives. Hence UK politicians on both sides of the aisle making political capital by talking about cutting tech giants down to size.

The political fallout from the Cambridge Analytica scandal looks far from done.

Quite how a UK regulator could successfully swing a regulatory hammer to break up a global Internet giant such as Facebook which is headquartered in the U.S. is another matter. But policymakers have already crossed the rubicon of public opinion and are relishing talking up having a go.

That represents a sea-change vs the neoliberal consensus that allowed competition regulators to sit on their hands for more than a decade as technology upstarts quietly hoovered up people’s data and bagged rivals, and basically went about transforming themselves from highly scalable startups into market-distorting giants with Internet-scale data-nets to snag users and buy or block competing ideas.

Zuckerberg owns or clones most of the “8 social apps” he cites as competition

The political spirit looks willing to go there, and now the mechanism for breaking platforms’ distorting hold on markets may also be shaping up.

The traditional antitrust remedy of breaking a company along its business lines still looks unwieldy when faced with the blistering pace of digital technology. The problem is delivering such a fix fast enough that the business hasn’t already reconfigured to route around the reset. 

Commission antitrust decisions on the tech beat have stepped up impressively in pace on Vestager’s watch. Yet it still feels like watching paper pushers wading through treacle to try and catch a sprinter. (And Europe hasn’t gone so far as trying to impose a platform break up.) 

But the German FCO decision against Facebook hints at an alternative way forward for regulating the dominance of digital monopolies: Structural remedies that focus on controlling access to data which can be relatively swiftly configured and applied.

Vestager, whose term as EC competition chief may be coming to its end this year (even if other Commission roles remain in potential and tantalizing contention), has championed this idea herself.

In an interview on BBC Radio 4’s Today program in December she poured cold water on the stock question about breaking tech giants up — saying instead the Commission could look at how larger firms got access to data and resources as a means of limiting their power. Which is exactly what the German FCO has done in its order to Facebook. 

At the same time, Europe’s updated data protection framework has gained the most attention for the size of the financial penalties that can be issued for major compliance breaches. But the regulation also gives data watchdogs the power to limit or ban processing. And that power could similarly be used to reshape a rights-eroding business model or snuff out such business entirely.

The merging of privacy and antitrust concerns is really just a reflection of the complexity of the challenge regulators now face trying to rein in digital monopolies. But they’re tooling up to meet that challenge.

Speaking in an interview with TechCrunch last fall, Europe’s data protection supervisor, Giovanni Buttarelli, told us the bloc’s privacy regulators are moving towards more joint working with antitrust agencies to respond to platform power. “Europe would like to speak with one voice, not only within data protection but by approaching this issue of digital dividend, monopolies in a better way — not per sectors,” he said. “But first joint enforcement and better co-operation is key.”

The German FCO’s decision represents tangible evidence of the kind of regulatory co-operation that could — finally — crack down on tech giants.

Blogging in support of the decision this week, Buttarelli asserted: “It is not necessary for competition authorities to enforce other areas of law; rather they need simply to identity where the most powerful undertakings are setting a bad example and damaging the interests of consumers.  Data protection authorities are able to assist in this assessment.”

He also had a prediction of his own for surveillance technologists, warning: “This case is the tip of the iceberg — all companies in the digital information ecosystem that rely on tracking, profiling and targeting should be on notice.”

So perhaps, at long last, the regulators have figured out how to move fast and break things.

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German antitrust office limits Facebook’s data-gathering

A lengthy antitrust probe into how Facebook gathers data on users has resulted in Germany’s competition watchdog banning the social network giant from combining data on users across its own suite of social platforms without their consent.

The investigation of Facebook data-gathering practices began in March 2016.

The decision by Germany’s Federal Cartel Office, announced today, also prohibits Facebook from gathering data on users from third party websites — such as via tracking pixels and social plug-ins — without their consent.

Although the decision does not yet have legal force and Facebook has said it’s appealing. The BBC reports that the company has a month to challenge the decision before it comes into force in Germany.

In both cases — i.e. Facebook collecting and linking user data from its own suite of services; and from third party websites — the Bundeskartellamt asserts that consent to data processing must be voluntary, so cannot be made a precondition of using Facebook’s service.

The company must therefore “adapt its terms of service and data processing accordingly”, it warns.

“Facebook’s terms of service and the manner and extent to which it collects and uses data are in violation of the European data protection rules to the detriment of users. The Bundeskartellamt closely cooperated with leading data protection authorities in clarifying the data protection issues involved,” it writes, couching Facebook’s conduct as “exploitative abuse”.

“Dominant companies may not use exploitative practices to the detriment of the opposite side of the market, i.e. in this case the consumers who use Facebook. This applies above all if the exploitative practice also impedes competitors that are not able to amass such a treasure trove of data,” it continues.

“This approach based on competition law is not a new one, but corresponds to the case-law of the Federal Court of Justice under which not only excessive prices, but also inappropriate contractual terms and conditions constitute exploitative abuse (so-called exploitative business terms).”

Commenting further in a statement, Andreas Mundt, president of the Bundeskartellamt, added: “In future, Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts.

“The combination of data sources substantially contributed to the fact that Facebook was able to build a unique database for each individual user and thus to gain market power. In future, consumers can prevent Facebook from unrestrictedly collecting and using their data. The previous practice of combining all data in a Facebook user account, practically without any restriction, will now be subject to the voluntary consent given by the users.

“Voluntary consent means that the use of Facebook’s services must not be subject to the users’ consent to their data being collected and combined in this way. If users do not consent, Facebook may not exclude them from its services and must refrain from collecting and merging data from different sources.”

“With regard to Facebook’s future data processing policy, we are carrying out what can be seen as an internal divestiture of Facebook’s data,” Mundt added. 

Facebook has responded to the Bundeskartellamt’s decision with a blog post setting out why it disagrees. The company did not respond to specific questions we put to it.

One key consideration is that Facebook also tracks non-users via third party websites. Aka, the controversial issue of ‘shadow profiles’ — which both US and EU politicians questioned founder Mark Zuckerberg about last year.

Which raises the question of how it could comply with the decision on that front, if its appeal fails, given it has no obvious conduit for seeking consent from non-users to gather their data. (Facebook’s tracking of non-users has already previously been judged illegal elsewhere in Europe.)

The German watchdog says that if Facebook intends to continue collecting data from outside its own social network to combine with users’ accounts without consent it “must be substantially restricted”, suggesting a number of different criteria are feasible — such as restrictions including on the amount of data; purpose of use; type of data processing; additional control options for users; anonymization; processing only upon instruction by third party providers; and limitations on data storage periods.

Should the decision come to be legally enforced, the Bundeskartellamt says Facebook will be obliged to develop proposals for possible solutions and submit them to the authority which would then examine whether or not they fulfil its requirements.

While there’s lots to concern Facebook in this decision — which, it recently emerged, has plans to unify the technical infrastructure of its messaging platforms — it isn’t all bad for the company. Or, rather, it could have been worse.

The authority makes a point of saying the social network can continue to make the use of each of its messaging platforms subject to the processing of data generated by their use, writing: “It must be generally acknowledged that the provision of a social network aiming at offering an efficient, data-based business model funded by advertising requires the processing of personal data. This is what the user expects.”

Although it also does not close the door on further scrutiny of that dynamic, either under data protection law (as indeed, there is a current challenge to so called ‘forced consent‘ under Europe’s GDPR); or indeed under competition law.

“The issue of whether these terms can still result in a violation of data protection rules and how this would have to be assessed under competition law has been left open,” it emphasizes.

It also notes that it did not investigate how Facebook subsidiaries WhatsApp and Instagram collect and use user data — leaving the door open for additional investigations of those services.

On the wider EU competition law front, in recent years the European Commission’s competition chief has voiced concerns about data monopolies — going so far as to suggest, in an interview with the BBC last December, that restricting access to data might be a more appropriate solution to addressing monopolistic platform power vs breaking companies up.

In its blog post rejecting the German Federal Cartel Office’s decision, Facebook’s Yvonne Cunnane, head of data protection for its international business, Facebook Ireland, and Nikhil Shanbhag, director and associate general counsel, make three points to counter the decision, writing that: “The Bundeskartellamt underestimates the fierce competition we face in Germany, misinterprets our compliance with GDPR and undermines the mechanisms European law provides for ensuring consistent data protection standards across the EU.”

On the competition point, Facebook claims in the blog post that “popularity is not dominance” — suggesting the Bundeskartellamt found 40 per cent of social media users in Germany don’t use Facebook. (Not that that would stop Facebook from tracking those non-users around the mainstream Internet, of course.)

Although, in its announcement of the decision today, the Federal Cartel Office emphasizes that it found Facebook to have a dominant position in the Germany market — with (as of December 2018) 23M daily active users and 32M monthly active users, which it said constitutes a market share of more than 95 per cent (daily active users) and more than 80 per cent (monthly active users).

It also says it views social services such as Snapchat, YouTube and Twitter, and professional networks like LinkedIn and Xing, as only offering “parts of the services of a social network” — saying it therefore excluded them from its consideration of the market.

Though it adds that “even if these services were included in the relevant market, the Facebook group with its subsidiaries Instagram and WhatsApp would still achieve very high market shares that would very likely be indicative of a monopolisation process”.

The mainstay of Facebook’s argument against the Bundeskartellamt decision appears to fix on the GDPR — with the company both seeking to claim it’s in compliance with the pan-EU data-protection framework (although its business faces multiple complaints under GDPR), while simultaneously arguing that the privacy regulation supersedes regional competition authorities.

So, as ever, Facebook is underlining that its regulator of choice is the Irish Data Protection Commission.

“The GDPR specifically empowers data protection regulators – not competition authorities – to determine whether companies are living up to their responsibilities. And data protection regulators certainly have the expertise to make those conclusions,” Facebook writes.

“The GDPR also harmonizes data protection laws across Europe, so everyone lives by the same rules of the road and regulators can consistently apply the law from country to country. In our case, that’s the Irish Data Protection Commission. The Bundeskartellamt’s order threatens to undermine this, providing different rights to people based on the size of the companies they do business with.”

The final plank of Facebook’s rebuttal focuses on pushing the notion that pooling data across services enhances the consumer experience and increases “safety and security” — the latter point being the same argument Zuckerberg used last year to defend ‘shadow profiles’ (not that he called them that) — with the company claiming now that it needs to pool user data across services to identify abusive behavior online; and disable accounts link to terrorism; child exploitation; and election interference.

So the company is essentially seeking to leverage (you could say ‘legally weaponize’) a smorgasbord of antisocial problems many of which have scaled to become major societal issues in recent years, at least in part as a consequence of the size and scale of Facebook’s social empire, as arguments for defending the size and operational sprawl of its business. Go figure.

In a statement provided to us last month ahead of the ruling, Facebook also said: “Since 2016, we have been in regular contact with the Bundeskartellamt and have responded to their requests. As we outlined publicly in 2017, we disagree with their views and the conflation of data protection laws and antitrust laws, and will continue to defend our position.” 

Separately, a 2016 privacy policy reversal by WhatsApp to link user data with Facebook accounts, including for marketing purposes, attracted the ire of EU privacy regulations — and most of these data flows remain suspended in the region.

An investigation by the UK’s data watchdog was only closed last year after Facebook committed not to link user data across the two services until it could do so in a way that complies with the GDPR.

Although the company does still share data for business intelligence and security purposes — which has drawn continued scrutiny from the French data watchdog.