Today (4 June) 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.
Antitrust: Commission sends Statement of Objections to Apple on App Store rules for music streaming providers
The European Commission has informed Apple of its preliminary view that it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store. The Commission takes issue with the mandatory use of Apple's own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple's App Store. The Commission is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.
The Statement of Objections concerns the application of these rules to all music streaming apps, which compete with Apple's music streaming app “Apple Music” in the European Economic Area (EEA). It follows-up on a complaint by Spotify. The Commission's preliminary view is that Apple's rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices. In addition, Apple becomes the intermediary for all IAP transactions and takes over the billing relationship, as well as related communications for competitors. If confirmed, this conduct would infringe Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position. The sending of a Statement of Objections does not prejudge the outcome of an investigation.
Executive Vice President Margrethe Vestager, in charge of competition policy, said: “App stores play a central role in today's digital economy. We can now do our shopping, access news, music or movies via apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.” A full press release is available online.
Vestager accuses Apple of abusing its role as gatekeeper in music streaming market
The European Commission accuses Apple of abusing their position as a gatekeeper in the music streaming market.
In its ‘statement of objections’ the Commission says music streaming app developers who want to reach Apple device users (iPhone, iPad) have to use Apple store and are charged a 30% commission fee on all subscriptions. They are also obliged to follow Apple’s ‘anti-steering provisions’, which limit developers from informing consumers of alternative purchasing possibilities outside of apps.
Executive Vice President Margrethe Vestager, in charge of competition policy, said: “Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”
Markus Ferber MEP, European People’s Party group spokesman on economic affairs welcomed the development: “There is always a big risk of abuse for a platform operator like Apple to give preference to its own services on its platform compared to competing services.
“Apple has been using its App Store for a while to keep its competitors at bay by using dodgy contractual clauses and exorbitant fees. By making use of these anti-competitive practices, gatekeepers such as Apple are preventing true competition from emerging in the first place.”
Ferber also called the Commission’s action long overdue: “It took years for EU competition authorities to get their act together. Apple’s competitors have had to take the hit in the meantime. We urgently have to move from ex-post competition enforcement to ex-ante prevention of market abuse. The Digital Markets Act can be a powerful tool in this regard.”
Time for the #EuropeanUnion to close longstanding #digital gaps
The European Union recently unveiled its European Skills Agenda, an ambitious scheme to both upskill and reskill the bloc’s workforce. The right to lifelong learning, enshrined in the European Pillar of Social Rights, has taken on new importance in the wake of the coronavirus pandemic. As Nicolas Schmit, the Commissioner for Jobs and Social Rights, explained: “The skilling of our workforces is one of our central responses to the recovery, and providing people the chance to build the skillsets they need is key to preparing for the green and digital transitions”.
Indeed, while the European bloc has frequently made headlines for its environmental initiatives—particularly the centrepiece of the Von der Leyen Commission, the European Green Deal—it’s allowed digitalisation to fall somewhat by the wayside. One estimate suggested that Europe utilizes only 12% of its digital potential. To tap into this neglected area, the EU must first address the digital inequalities in the bloc’s 27 member states are addressed.
The 2020 Digital Economy and Society Index (DESI), an annual composite assessment summarizing Europe’s digital performance and competitiveness, corroborates this claim. The latest DESI report, released in June, illustrates the imbalances which have left the EU facing a patchwork digital future. The stark divisions revealed by DESI’s data—splits between one member state and the next, between rural and urban areas, between small and large firms or between men and women—make it abundantly clear that while some parts of the EU are prepared for the next generation of technology, others are lagging significantly behind.
A yawning digital divide?
DESI evaluates five principal components of digitalization—connectivity, human capital, the uptake of Internet services, firms’ integration of digital technology, and the availability of digital public services. Across these five categories, a clear rift opens up between the highest-performing countries and those languishing at the bottom of the pack. Finland, Malta, Ireland and the Netherlands stand out as star performers with extremely advanced digital economies, while Italy, Romania, Greece and Bulgaria have a lot of ground to make up.
This overall picture of a widening gap in terms of digitalization is borne out by the report’s detailed sections on each of these five categories. Aspects such as broadband coverage, internet speeds, and next-generation access capability, for example, are all critical for personal and professional digital use—yet parts of Europe are falling short in all of these areas.
Wildly divergent access to broadband
Broadband coverage in rural areas remains a particular challenge—10% of households in Europe’s rural zones are still not covered by any fixed network, while 41% of rural homes are not covered by next generation-access technology. It’s not surprising, therefore, that significantly fewer Europeans living in rural areas have the basic digital skills they need, compared to their compatriots in larger cities and towns.
While these connectivity gaps in rural areas are troubling, particularly given how important digital solutions like precision farming will be for making the European agricultural sector more sustainable, the problems aren’t limited to rural zones. The EU had set a goal for at least 50% of households to have ultrafast broadband (100 Mbps or faster) subscriptions by the end of 2020. According to the 2020 DESI Index, however, the EU is well short of the mark: only 26% of European households have subscribed to such fast broadband services. This is a problem with take-up, rather than infrastructure—66.5% of European households are covered by a network able to provide at least 100 Mbps broadband.
Yet again, there’s a radical divergence between the frontrunners and the laggards in the continent’s digital race. In Sweden, more than 60% of households have subscribed to ultrafast broadband—while in Greece, Cyprus and Croatia less than 10% of households have such rapid service.
SMEs falling behind
A similar story plagues Europe’s small and medium enterprises (SMEs), which represent 99% of all businesses in the EU. A mere 17% of these firms use cloud services and only 12% use big data analytics. With such a low rate of adoption for these important digital tools, European SMEs risk falling behind not only companies in other countries—74% of SMEs in Singapore, for example, have identified cloud computing as one of the investments with the most measurable impact on their business—but losing ground against larger EU firms.
Larger enterprises overwhelmingly eclipse SMEs on their integration of digital technology—some 38.5% of large firms are already reaping the benefits of advanced cloud services, while 32.7% are relying on big data analytics. Since SMEs are considered the backbone of the European economy, it’s impossible to imagine a successful digital transition in Europe without smaller firms picking up the pace.
Digital divide between citizens
Even if Europe manages to close these gaps in digital infrastructure, though, it means little
without the human capital to back it up. Some 61% of Europeans have at least basic digital skills, though this figure falls alarmingly low in some member states—in Bulgaria, for example, a mere 31% of citizens have even the most basic software skills.
The EU has still further trouble equipping its citizens with the above-basic skills which are increasingly becoming a prerequisite for a wide range of job roles. Currently, only 33% of Europeans possess more advanced digital skills. Information and Communications Technology (ICT) specialists, meanwhile, make up a meager 3.4% of the EU’s total workforce—and only 1 out of 6 are women. Unsurprisingly, this has created difficulties for SMEs struggling to recruit these highly-in-demand specialists. Some 80% of companies in Romania and Czechia reported problems trying to fill positions for ICT specialists, a snag which will undoubtedly slow down these countries’ digital transformations.
The latest DESI report lays out in stark relief the extreme disparities which will continue to thwart Europe’s digital future until they are addressed. The European Skills Agenda and other programs intended to prepare the EU for its digital development are welcome steps in the right direction, but European policymakers should lay out a comprehensive scheme to bring the entire bloc up to speed. They have the perfect opportunity to do so, too—the €750 billion recovery fund proposed to help the European bloc get back on its feet after the coronavirus pandemic. European Commission President Ursula von der Leyen has already stressed that this unprecedent investment must include provisions for Europe’s digitalization: the DESI report has made it clear which digital gaps must be addressed first.
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