Meta could face $11.8B fine for breaching EU antitrust law by distorting competition and abusing its dominant position

Early this month, the EU privacy watchdog ruled that Facebook’s Meta cannot run advertising based on personal data and will need users’ consent to do so. The ruling was a big blow for the social giant which already lost over 70 percent of its market value due to a bad bet on the metaverse.

Now, the European Union, the EU’s executive arm, has released its much-anticipated findings about Meta’s online classifieds business  Facebook Marketplace, which lets its billion users list items for sale, with its personal social network, Facebook.

On Monday, the European Commission said that it found that “Meta abused its dominant positions.” The EU said that Meta breached the EU antitrust rules by distorting competition in the markets for online classified ads. The Commission criticized Meta’s pairing of its Facebook Marketplace service, adding that it was concerned that the arrangement gives Facebook Marketplace a “substantial distribution advantage that competitors cannot match.”

The Commission said that “Meta ties its online classified ads service Facebook Marketplace with its dominant personal social network Facebook.

“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.”

Margrethe Vestager, Executive Vice-President in charge of competition policy, also added the co-join of Facebook with Marketplace gives users “no choice but to have access to Facebook Marketplace.”

“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.”

The Commission also accused of Meta unilaterally imposing unfair trading conditions on competing for online classified ads services that advertise on Facebook or Instagram.

“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 authorize 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 Commisson said.

Vestager added, “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.”

Tim Lamb, head of EMEA competition at Meta, said: “The claims made by the European Commission are without foundation.”

“We will continue to work with regulatory authorities to demonstrate that our product innovation is pro-consumer and pro-competitive,” he added.

In June 2021, the EU Commission opened an investigation into Meta to look into “possible anticompetitive conduct of Facebook.” Meta could face potential changes to its business practices or a fine of up to 10% of global annual revenue and a penalty worth as much as $11.8 billion.

This is not the first time Meta got into trouble with privacy regulators around the world. In August, Mata agreed to pay $37.5 million for violating users’ privacy and tracking their movements through smartphones without their permission. As part of the settlement reached in San Francisco federal court, Meta agreed to pay $37.5 million to settle the lawsuit that began about four years ago. However, Meta denied wrongdoing in agreeing to settle the case.

In April last year, Meta revealed 500,000 fewer daily log-ins and declining profits. Zuckerberg said Facebook users’ decline was partly due to the boom in popularity of the competitor platform TikTok. That’s not all. Meta also blamed the woes on a combination of other factors, including privacy changes to Apple’s iOS and economic challenges, for Wednesday’s decline in stock prices.

Meanwhile, App said that its new App Tracking Transparency “requires all apps to get the user’s permission before tracking their data across apps or websites owned by other companies for advertising, or sharing their data with data brokers.”  Apple said that apps can prompt users for permission, and in Settings, users will be able to see which apps have requested permission to track so they can make changes to their choice at any time.