Facebook is being investigated by competition watchdogs in the UK and EU over whether it is abusing its market leading position in social media to gain an unfair advantage against dating and classifieds competitors.
The Competition and Markets Authority and European Commission have announced they will work “closely together” on their separate investigations that centre around Facebook’s use of its log-in service. This allows users to log on to other sites with their Facebook credentials.
Commeting on the action, a Facebook spokesman said the company would "cooperate fully with the investigations to demonstrate that they are without merit".
Although it is not spelled out by the CMA announcement, the implication would appear to be that Facebook uses this knowledge of what users have been doing elsewhere to offer targeted advertising and to promote its own Facebook Dating and Marketplace service. Essentially, the social giant stands accused of using its dominant data-gathering position in social to gain an advantage against dating and classifieds rivals.
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.”
A tougher 'proactive stance' from regulators
The new investigation is important not so much for what it is looking into but rather what it signifies, according to Joseph Evans, head of technology at Enders Analysis. The competition authorities may not realise they could have been too lenient in the past and so are now taking a “proactive stance”, he suggested.
“Facebook Marketplace and Dating are not huge commercial products, they aren't strategically central to Facebook, and they operate in competitive markets,” he said.
“However, there's a sense at competition authorities that they dropped the ball on things like Facebook's acquisition of Instagram, because they underestimated how complex and fast changing online markets are. Even if these investigations don't come to anything, they reflect a new determination not to let any potential abuse go unexamined.”
Facebook ready to 'cooperate fully'
Facebook has responded to both investigations by saying each service operates in highly competitive markets. This was potentially borne out in the classifieds market by the CMA saying Facebook Marketplace is “expanding the market” in its February decision on the merger of eBay Classifieds and Adevinta (in section 226 of the paper).
The German competition authority made a very similar comment when it investigated the same merger, suggesting Facebook was playing a role in providing consumers with “sufficient alternatives”.
A Facebook spokesman commented: “Marketplace and Dating offer people more choices and both products operate in a highly competitive environment with many large incumbents. We will continue to cooperate fully with the investigations to demonstrate that they are without merit.”