Facebook parent company Meta has been warned by the European Commission that it has breached antitrust violations by distorting competition in the markets for online classified ads.
The European Commission confirmed that it is investigating Meta’s practices on Monday when it released a statement of objections to the U.S. multinational technology company.
“[Meta’s ]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,” the European Commission said.
The preliminary investigation said “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.”
‘Abused its Dominant Positions’ in 2 Ways
The commission’s preliminary findings found that Meta abused its dominant positions in 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,” it said.
“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.”
The commission said 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.
Formal proceedings by the European Commission started in June 2021.
In a statement, Meta denied that its business practices were anti-competitive, reported Reuters.
“The claims made by the European Commission are without foundation,” said Meta spokesperson Tim Lamb. “We will continue to work with regulatory authorities to demonstrate that our product innovation is pro-consumer and pro-competitive.”
No Legal Deadline
With no legal deadline to finalize antitrust investigations, the duration depends on a number of factors. It will take into account the complexity of the case, coupled with adequate cooperation from the accused party, as well as allowing sufficient scope to exercise the rights of defense.
Meta will be able to appeal the allegations before a final decision is made. If a breach of antitrust regulations is indeed confirmed, Meta could be facing a hefty fine, potentially of up to 10 percent of its yearly global turnover.
The case marks the first time the tech giant has specifically come under scrutiny by the EU’s antitrust enforcers for violation of article 102. Similar allegations have been brought forward by the United Kingdom, where the company is facing similar charges, reported Politico.
A previous EU lawsuit saw the company being fined €110 million (US 116 million) for providing false or misleading information, in regard to its involvement with WhatsApp, according to an investigation conducted by the EU in 2014. Brussels is currently also investigating the company over the so-called Jedi Blue deal with Google, in which further allegations to distort competition in the ad tech market were brought to light.
