Facebook's entire business model is in danger after it was given an unprecedented kicking by an EU regulator

REUTERS/Charles Platiau/File Photo

Facebook CEO Mark Zuckerberg.

• Facebook has been clobbered with a landmark ruling in Germany, which could mean huge changes to the way it collects data for 32 million users in the country.
• Germany's antitrust regulator has told Facebook it must stop forcing users to allow it to collect and combine their data from sources outside Facebook.
• Such sources include Facebook-owned apps like WhatsApp and Instagram, as well as third-party websites with in-built Facebook features like the "share" button.
• Facebook is appealing the decision, and has a month to do so.

Germany's antitrust regulator, the Bundeskartellamt (Federal Cartel Office), on Thursday issued Facebook with an ultimatum: Stop hoarding people's data.

Following an unprecedented three-year investigation, involving extensive conversations with Facebook, the Bundeskartellamt issued a press statement declaring that it has "imposed on Facebook far-reaching restrictions in the processing of user data."

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It demands that Facebook - which has 32 million monthly users in Germany - change its terms and conditions so that people can explicitly stop it from hoarding data from different sources, including Facebook-owned apps like WhatsApp and Instagram, as well as third-party websites with embedded tools, such as "like" or "share" buttons.

The regulator says bundling users' data together from different sources without explicit consent results in a lack of control. It also said the extent to which the social network amasses data from elsewhere is an abuse of its dominant market position.

"The only choice the user has is either to accept the comprehensive combination of data or to refrain from using the social network. In such a difficult situation the user's choice cannot be referred to as voluntary consent," Bundeskartellamt President Andreas Mundt said in a press release.

Facebook uses its giant wells of user data to target advertising with ruthless efficiency. Some 99% of its total revenue of $55.8 billion last year came from advertising on its platforms.

Reuters

Andreas Mundt, the head of the Bundeskartellamt in Germany.

Mundt told journalists in Bonn, Germany, that the decision is a step in the direction of breaking up dominant tech companies, Bloomberg reports. "People always ask to break up huge internet companies... Well what we do here today is really something like internally breaking them up," he said.

Read more: Facebook's business model is being dissected in Germany, where regulators are getting tough on tech

In an FAQ about the ruling, the Bundeskartellamt said that if Facebook plans to continue combining users' data from various sources, the type of data processing it can use will be "substantially restricted." If it takes this course, Facebook would have four months to draw up proposals to present to the Bundeskartellamt.

Facebook to appeal

In a blog post published soon after the ruling, Facebook said it disagrees with Bundeskartellamt and intends to appeal the decision. It must lodge its formal appeal with the Düsseldorf Higher Regional Court in the next month.

Yvonne Cunnane, Facebook's head of data protection in Ireland, and associate general counsel, Nikhil Shanbhag, wrote the blog.

"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," they said.

The Facebook executives argued that gathering information on users helps improve its services, and protects people's safety and security by shielding them from inappropriate content and election interference.

Cunnane and Shanbhag added that the Bundeskartellamt ruling threatens to "undermine" the regulatory structures put in place by EU data laws. "GDPR specifically empowers data protection regulators - not competition authorities - to determine whether companies are living up to their responsibilities," they said.

Concluding, the pair said: "Every day, people interact with companies that connect and use data in similar ways. And all of this should be - and is - a legitimate area of focus for regulators and policymakers around the world. Yet the Bundeskartellamt is trying to implement an unconventional standard for a single company.

"This is the point we'll continue to make to the Bundeskartellamt and defend these important arguments in court, so that people and businesses in Germany can continue to benefit from all of our services."