Meta Loses Appeal on How It Harvests Data in Germany

The News

Meta’s ability to harvest data about users in order to sell personalized ads was thrown into question on Tuesday after the European Union’s highest court upheld a decision by German antitrust regulators that the company had abused its dominance in social media.

The ruling in the closely watched case by the European Court of Justice cleared the way for Germany’s top antitrust enforcer, the Bundeskartellamt, to block Meta from combining data collected about users across its different platforms, including Facebook, Instagram and WhatsApp, as well as from outside websites and apps, unless it gets explicit permission from users.

The decision undercuts Meta’s business model, which relies on selling targeted advertising based on the massive amounts of data it gathers about its users as they use Meta services and browse the wider internet.

Why It Matters: Emboldening tougher oversight of Big Tech

The decision provides fresh momentum for supporters of tougher regulation of the world’s largest technology companies. Although the ruling applies only to Meta services in Germany, it is expected to influence other antitrust authorities in the European Union.

A new E.U. antitrust law, called the Digital Markets Act, takes effect in the coming months and gives regulators new powers to encourage competition in the tech sector.

In particular, Tuesday’s court ruling gives authorities in the European Union a firmer legal basis to examine how data-collection practices could undercut competition, which is a new direction for antitrust enforcement.

The court said regulators investigating antitrust cases can also examine whether a company is breaking the European Union’s data protection law, called the General Data Protection Regulation, or G.D.P.R.

Background: A new spin on antitrust law

In 2019, German regulators used a novel interpretation of antitrust law to determine that Meta’s data-gathering practices were a violation of not just competition rules, but also the G.D.P.R. The authorities said Meta needed to get permission from users and could not just collect endless amounts of data simply because a user had signed up to use one of the company’s services.

Andreas Mundt, Germany’s top antitrust regulator, said Meta’s policies amounted to a false choice, forcing people to either use Meta services and share their data, or stay off the company’s ubiquitous social media sites altogether.

After the company appealed the decision, it eventually landed before the European Court of Justice in Luxembourg.

Mr. Mundt has long pushed for regulators to be tougher against Facebook and other tech giants. He has argued that Facebook uses the data it collects from users to strengthen its position over rivals, harming competition.

What’s Next

In a statement, Meta said it was “evaluating the Court’s decision and will have more to say in due course.”

The company will now have to make changes in Germany to comply with the ruling. That is likely to include a new menu that gives users more choice about how their data is collected.

But the decision also has implications for other online platforms that collect large amounts of data for digital advertising, including Amazon, Google and TikTok.

“When large internet companies use the very personal data of consumers, this usage can also be deemed abusive under competition law,” Mr. Mundt, the German antitrust regulator, said in a statement on Tuesday. “The judgment will have far-reaching effects on the business models used in the data economy.”