In a landmark ruling, a top court in Germany has told Facebook that it has to allow users to block the platform from combining data it gets from their usage of Facebook and from other websites. The move is a direct assault on the company’s business model, which delivers targeted advertisements by combining such data.
The ruling came from Germany’s Federal Court of Justice, which upheld a decision made by the Federal Cartel Office in Germany, last year. Regulators had, at the time, said that the social media company violated competition laws by using data it gets from other websites, third party apps, WhatsApp and Instagram. The investigation originally began in March 2016.
Facebook’s terms and conditions leave users with a choice to either let the platform use their data from various sources or not use the platform at all. The regulatory body saw this, combined with Facebook’s market position as the leading social platform, as an abuse of power. It called the company’s tracking norms “exploitative abuse".
“There are neither serious doubts about Facebook’s dominant position on the German social network market nor the fact that Facebook is abusing this dominant position," the court said yesterday.
The regulators’ decision first came last year, but a different court ruled in favour of Facebook at the time, saying that the regulators had overstepped their authority. The federal court mentioned above ruled against Facebook yesterday.
The move is important because Facebook makes most of its money from advertising revenues. It excels at this because it combines user behaviour data from various sources. The company places cookies on third party websites to track what users are doing there, while it also gets data from apps like Instagram that it owns. All this is used to deliver targeted advertising.
In fact, this is why viewing a product on Amazon prompts Facebook to display ads about that product. Being unable to do so could seriously hamper how accurately Facebook can target users with ads, and hence reduce the return on investment brands get for advertising on the platform.
It’s worth noting that the legal process doesn’t end with yesterday’s ruling. Facebook may have a shot at appealing to a federal high court if a lower court rules in its favour, though reports say that the lower court’s ruling is usually considered a formality.