The European Commission launches probe into Facebook Marketplace

Two days ago the European Commission has opened a formal investigation to assess whether Facebook violated EU competition rules, writes Catherine Feore.

Online classified ads providers advertise their services via Facebook, at the same time they compete with Facebook’s own online classified ads service, ‘Facebook Marketplace’. The Commission is investigating whether Facebook might have given Facebook Marketplace an unfair competitive advantage by using data obtained from competing providers while advertising on Facebook.

The formal investigation will also assess whether Facebook ties its online classified ads service ‘Facebook Marketplace’ to its social network. The Commission will examine whether the way Facebook Marketplace is embedded in the social network constitutes a form of tying which gives it an advantage in reaching customers. As a ‘social marketplace’ you can also see broader profiles, mutual friends and can chat using Facebook messenger, features that are different to other providers.

The Commission points out that with almost three billion people using Facebook on a monthly basis and almost seven million firms advertising, Facebook has access to vast trove of data on the activities of users of its social network and beyond, enabling it to target specific customer groups.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “We will look in detail at whether Facebook has an undue competitive advantage in particular in the online classified ads sector, where people buy and sell goods every day, and where Facebook also competes with companies from which it collects data. In today’s digital economy, data should not be used in ways that distort competition.”

UK: ‘We will be working closely with the European Commission’

The UK’s Competition and Marketing Authority (CMA) has also launched an investigation into Facebook’s activities in this area. The Commission’s competition spokesperson Ariana Podesta said: “The Commission will seek to work closely with the UK’s Competition and Markets Authority as the independent investigations develop.”

Andrea Coscelli, Chief Executive of the CMA, said: “We intend to thoroughly investigate Facebook’s use of data to assess whether its business practices are giving it an unfair advantage in the online dating and classified ad sectors.

“Any such advantage can make it harder for competing firms to succeed, including new and smaller businesses, and may reduce customer choice.

“We will be working closely with the European Commission as we each investigate these issues, as well as continuing our coordination with other agencies to tackle these global issues.”

The CMA have highlighted how the Facebook Login, which can be used to sign into other websites, apps and services using their Facebook log-in details could be being used to benefit Facebooks own services. The CMA also highlights ‘Facebook Dating’ – a dating profile service it launched in Europe in 2020.

Separately from this new investigation into Facebook’s use of advertising market data, the UK’s Digital Markets Unit (DMU) has started to look at how codes of conduct could work in practice to govern the relationship between digital platforms and groups, such as small businesses, which rely on these platforms to reach potential customers.

The DMU is operating in ‘shadow’, non-statutory form, pending legislation that will provide it with its full powers. Ahead of this, the CMA will continue its work promoting competition and the interests of consumers in digital markets, including taking enforcement action where necessary.