On June 4, 2021, the Commission[1] and the UK Competition and Markets Authority (“CMA”)[2] announced parallel investigations concerning Facebook Marketplace. The Commission will investigate at least two potential theories of harm: (i) the potential misuse of data gathered by Facebook, in particular from advertisers, in order to compete with them in other markets where Facebook is active (e.g., in classified ads with Facebook Marketplace); and (ii) the potential tying of Marketplace to Facebook’s social network. Although formally independent, the CMA’s investigation will focus on similar concerns[3] and both authorities announced they would collaborate closely.[4]

Market context

Online classified ads platforms provide dedicated advertising space for (mostly private) users to buy and sell (mostly used) goods, with transactions normally completed off-platform. They include vertical platforms (offering vehicle, real estate and job listings) and generalist platforms (offering consumer goods, often alongside vehicle, real estate and jobs listings). Since 2016, Facebook has started to roll out its classified ads product, Facebook Marketplace. Initially a generalist platform, Facebook Marketplace has rapidly gained scale across European markets and is expanding into new categories.

Potential misuse of data

Facebook is a major provider of advertising services across its products (Facebook’s social network, Instagram, Messenger, or third party websites that are part of the Facebook Audience Network).[5] To market their platform, online classified ads service providers may resort to Facebook’s advertising services, giving Facebook access to “commercially valuable data,” such as data on the providers’ marketing campaigns, targeted demographics, and user preferences. Following a preliminary investigation, the Commission was concerned that Facebook might use these data to help Facebook Marketplace outcompete rival classified ad service providers.[6] This theory of harm is reminiscent of the allegations in the ongoing Commission’s investigation into Amazon’s data practices in online retail.[7]

Potential tying

The Commission will also investigate whether the manner in which Facebook has “embedded” Marketplace in its social network constitutes “a form of tying” which may give the Marketplace an undue advantage in reaching customers over competing classified ads platforms.[8] The Commission’s press release does not expand further on this theory of harm, though it appears that Marketplace is offered or included on Facebook’s social network, while competing classified ad services are not.

Source: Facebook iOS App, June 24, 2021

Were the Commission to classify this conduct as tying, it would normally need to show that: (i) Facebook is dominant in the market for social networking services; (ii) Facebook’s social network and Facebook Marketplace are two distinct products;[9] (iii) Facebook’s users have no choice but to obtain the social network (the tying product) without Facebook Marketplace (the tied product); and (iv) Facebook’s tying is likely to produce anticompetitive effects in the market for online classified ads.[10]

The case will likely hinge on the last criterion— the establishment of actual, or potential, anticompetitive effects. The Commission will need to demonstrate that the practices are likely to foreclose competing classified ads platforms. Should Facebook invoke efficiencies, the Commission will need to examine those efficiencies and verify whether they outweigh any actual or potential anticompetitive effects.

Facebook joins other digital platforms investigated in the EU

Facebook has been targeted by the German and the French competition authorities,[11] and has now joined a long queue of pending Commission investigations of digital platforms (in addition to the Google Ad Tech investigation addressed in this Newsletter):[12]

  • Amazon Marketplace.[13] In November 2020, the Commission sent Amazon a Statement of Objections (“SO”), alleging that Amazon misused non-public and sensitive business data of third-party sellers to the benefit of its own retail These data allegedly inform Amazon’s strategic decisions, including product launches and targeted discounts, and allow it to focus its own offers on best-selling products (while other retailers have no comparable advantage).
  • Amazon – Buy [14] In November 2020, the Commission also formally opened a separate investigation examining the manner in which Amazon selects sellers that appear in the “Buy Box,” Amazon’s direct purchase feature through which the bulk of online transactions are conducted.
  • Apple – App Store [15] In June 2020, following complaints from Spotify and an e-book distributor, the Commission opened three separate formal investigations targeting Apple’s App Store rules applicable to music streaming, e-books/audiobooks and apps that compete with Apple offerings. On April 30, 2021, the Commission issued an SO regarding Apple’s distribution of music streaming apps.[16]
  • Apple Pay.[17] In June 2020, the Commission also opened an investigation into Apple Pay, examining whether Apple may be foreclosing rival providers of mobile payments from offering their solutions to users of iOS devices. The Commission is reviewing (i) Apple’s terms and conditions, and other measures related to the use of Apple Pay for purchases made on merchant apps and websites accessed from iOS devices; and (ii) alleged favoring of Apple Pay by making this payment option the only solution with access to so-called “tap and go” technology embedded in iOS mobile devices.

[1]      Commission Press Release IP/21/2848, “Antitrust: Commission opens investigation into possible anticompetitive conduct of Facebook,” June 4, 2021.

[2]      CMA Press Release, “CMA investigates Facebook’s use of ad data,” June 4, 2021.

[3]      The CMA press release also mentions concerns regarding Facebook’s collection of data from its single sign-on option, Facebook Login, which offers users the ability to sign into other websites, apps and services using their Facebook log-in details. The CMA press release also mentions Facebook’s digital dating product, Facebook Dating.

[4]      The Commission is also investigating Facebook’s data-related practices more broadly in a separate, still informal, investigation (Case AT.40628), which was delayed due to order of the General Court in October 2020 following Facebook’s pushback against extensive Commission requests for information (see Facebook v. Commission (Case T-451/20) EU:T:2020:515 (as discussed in our October 2020 EU Competition Law Newsletter). The investigation should also be viewed in the broader context of the Proposed Digital Markets Act, which will impose ex ante obligations on platforms that have a “gatekeeper” role in digital markets, as detailed in our December 2020 EU Competition Law Newsletter.

[5]      As Commissioner Vestager pointed out, “Facebook is used by almost 3 billion people on a monthly basis and almost 7 million firms advertise on Facebook in total.” See, Commission Press Release IP/21/2848, “Antitrust: Commission opens investigation into possible anticompetitive conduct of Facebook,” June 4, 2021.

[6]      The Commission press release notes that Facebook could “for instance, receive precise commercial information on user preference” and “use such data in order to adapt Facebook Marketplace.”

[7]      Amazon Marketplace (Case AT.40462), case pending (as discussed in our November 2020 EU Competition Law Newsletter).

[8]      Commission Press Release IP/21/2848, “Antitrust: Commission opens investigation into possible anticompetitive conduct of Facebook,” June 4, 2021.

[9]      To prove that Facebook’s social network and Marketplace are distinct products, the Commission would need to demonstrate that there is distinct standalone demand for Marketplace (see Microsoft v. Commission (Case T-201/04) EU:T:2007:289, paras. 917–918).

[10]    Article 102 Guidance Paper, paras. 48– 51. See also Microsoft (Case COMP/C3/37/792), Commission decision of March 24, 2004, para.794.

[11]    Facebook (Case B6-22/16), German Federal Cartel Office’s decision of February 6, 2019. As reported in our Cleary Gottlieb Alert Memorandum of June 29, 2020, the German Competition Authority’s decision was challenged before the German courts. Following two interim judgments by the Higher Regional Court of Düsseldorf (August 26, 2019) and Federal State Court (June 23, 2020) respectively, the case is now pending before the Higher Regional Court of Düsseldorf, which requested a preliminary ruling from the European Court of Justice. See also, German Federal Cartel Office Press Release “Bundeskartellamt examines linkage between Oculus and the Facebook network,” December 10, 2020; and French Competition Authority Press Release, “In the context of an investigation opened before the Autorité in the online advertising sector, Facebook proposes commitments,” June 3, 2021.

[12]    As reported in our January 2021 European and U.S. Competition Outlook.

[13]    Amazon Marketplace (Case AT.40462), case pending (as discussed in our November 2020 EU Competition Law Newsletter).

[14]    Amazon – Buy Box, (Case AT.40703), case pending (as discussed in our November 2020 EU Competition Law Newsletter).

[15]    Apple – App Store Practices (music streaming) (AT.40437); Apple – App Store Practices (e-books/audiobooks) (AT.40652); and Apple – App Store Practices (AT.40716). As reported in our May 2019 EU Competition Law Newsletter and our June 2020 EU Competition Law Newsletter.

[16]    Apple – App Store Practices (music streaming) (Case AT.40437), as reported in our May 2021 EU Competition Law Newsletter.

[17]    Apple – Mobile payments (AT.40452), as reported in our May 2020 EU Competition Law Newsletter.