German Regulators Outlaw Facebook’s Ad Business

Things keep getting worse for Mark Zuckerberg. Facebook’s lucrative advertising model ($1B/quarter) relies on tracking its 1 billion users across the online space. Facebook collects data about where we shop and what we buy. But now Germany has outlawed Facebook ads.

Privacy advocates argue that Facebook isn’t transparent enough about what it does with the data.

Germany’s antitrust regulator has ruled that Facebook is exploiting consumers

In an important move that has implications for Facebook ad users worldwide, Germany agrees. Its antitrust regulator, the Federal Cartel Office (FCO), has ruled that Facebook is exploiting consumers by requiring them to agree to the current data collection practice as part of having a Facebook account. It has now prohibited the practice going forward.

“Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection of non-Facebook data to their Facebook user accounts,” FCO president Andreas Mundt said in a statement.

Consumer “consent” is a misrepresentation

Lina Khan, Columbia Law School antitrust expert, believes that authorities haven’t done a good job of articulating why privacy is an antitrust issue. But the German regulator clarifies it. They believe that Facebook’s dominance is what allows it to impose contractual terms on users that require them to allow Facebook to track them.

The harm to users is the loss of control

“When there is a lack of competition, accepting terms of service isn’t truly “consenting”. Users are not presented with choices. They either accept the data collection or stop using Facebook.According to German regulators, the harm to Facebook’s users is the “loss of control.”

With an 80% market share, Facebook dominates the social space in Germany

Facebook had 32M monthly active users in Germany at the end of 2018, a market share of more than 80%. “As a dominant company, Facebook is subject to special obligations under competition law. Facebook users cannot switch to other social networks,” said Mundt.

Privacy and competition are intertwined

The ruling makes clear that privacy and competition are inextricably intertwined. If Facebook loses, Germany will become a test case in whether the surveillance economy is fundamental to the operation of social media.

Facebook insists that tracking makes services safer and better

The FCO believes Facebook hasn’t proven that data collection and bundling are in the best interest of every consumer and that its sites couldn’t function without it.

Facebook’s response: “We disagree with their conclusions and intend to appeal so that people in Germany continue to benefit fully from all our services.” What’s at stake? Facebook would potentially have to change how it processes data for German users. If Facebook loses the appeal, Germany will have successfully challenged the relationship between the collection of user data and the social media accounts from which that information comes.

Other Europeans and Americans well may demand they be given the same option, and there would be implications for all of us. Only the very naïve believe that it’s only Facebook that is guilty of sharing user data. Facebook’s the one that got caught.

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The feeding frenzy of online privacy policies

Is it possible that anyone these days is unaware of our current online privacy frenzy? Facebook got busted for sharing millions of user data accounts with third-party vendors. The result? Thousands of lawyers are busy whipping up new privacy policies that none of us reads, yet must agree to before we can access a staggering number of websites.

When Mark Zuckerberg spent five hours with Congress, he talked about things like cookies, privacy and his opening up Facebook data files to third-party vendors.

Here are some key takeaways:

1. Facebook’s privacy policy is inadequate

• Facebook’s policy was inadequate and confusing. Broad agreements haven’t kept pace with the increase in data fields and the information that makes up user profiles.
• Lindsey Graham: “Most Americans have no idea what they are signing up for because Facebook’s terms of service are beyond comprehension.”

2. Regulation is coming

There’s a growing appetite for imposing laws to govern the behavior of Facebook and other social-media companies. To think that these companies will police themselves is laughable. One more thing: If you think that other companies aren’t indiscriminately using your data, you’re being naïve. Facebook is just the one that got caught.

3. Say hello to the Facebook monopoly conversation

Facebook is the world’s biggest social-media platform, receiving more than 87% of digital advertising revenue in 2017. The most popular alternative to Facebook? Instagram, also owned by Facebook. Lindsey Graham again: “Contrary to Mr. Zuckerberg’s assertion, Facebook is a virtual monopoly and monopolies need to be regulated.”

4. Solving content woes with artificial intelligence

Finding and eliminating hate speech from the network is one of the hardest problems to tackle, but artificial intelligence can help solve the issue in 5-10 years. Facebook has said before that its staff focused on sensitive security and community issues would grow to 20,000 people by the end of the year.

5. Facebook has no idea how much damage has been done

Lawmakers wanted to know what groups besides political consulting firm Cambridge Analytica obtained user data.Facebook doesn’t know how much data was harvested, bought and sold. Legislators and most users believe that Facebook hasn’t done enough to prevent its tools from being misused.

6. Zuckerberg did better than expected

Zuckerberg’s performance apparently won over investors and a few lawmakers.

• Zuckerberg’s performance ostensibly went a long way towards restoring trust of investors and legislators. Shares of Facebook rallied 4.5% after one of the company’stoughest weeks on record.
• Facebook has a significant mess to clean up. What can they do to ensure that data remain safe? They can’t guarantee anything. Facebook needs to be accountable, demonstrating to users that they’ve improved and their systems are better.

Facebook has apologized and promised to self-correct; is that enough?

Many users have closed down their accounts. Others are apprehensive, looking for Facebook to step up and be accountable, becoming the model for responsible cyber citizenship. Trust can erode a relationship. Their ability to protect user data will have serious implications for Facebook’s future.

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