Facebook’s bad week just got worse: It’s being investigated in Germany for linking usage of its VR product, Oculus, to having a Facebook account.
The tech giant raised the hackles of the VR community this summer when it announced it would be merging users of the latest Oculus kit onto a single Facebook account — and would end support for existing Oculus account users by 2023.
New users were immediately required to have a Facebook account in order to log in and access content for the virtual reality kit.
In August Facebook also announced that it was changing the name of the VR business it acquired back in 2014 for around $2BN — and had allowed to operate separately — to “Facebook Reality Labs“, signalling the assimilation of Oculus into its wider social empire.
(Related: The last of Oculus’ original co-founders left the company last year.)
In recent years Facebook has been pushing to add a ‘social layer’ to the VR platform — but the heavy-handed requirement for Oculus users to have a Facebook account has not proved popular with gamers.
Now antitrust authorities are taking an interest in the move.
Germany’s Federal Cartel Office (aka, the Bundeskartellamt) said today that it’s instigated abuse proceedings against Facebook to examine the linkage between Oculus VR products and its eponymous social network.
In a statement, its president, Andreas Mundt, said:
In the future, the use of the new Oculus glasses requires the user to also have a Facebook account. Linking virtual reality products and the group’s social network in this way could constitute a prohibited abuse of dominance by Facebook. With its social network Facebook holds a dominant position in Germany and is also already an important player in the emerging but growing VR (virtual reality) market. We intend to examine whether and to what extent this tying arrangement will affect competition in both areas of activity.
The FCO has another ‘abuse of dominance proceeding’ ongoing against Facebook — related to how it combines user data for ad profiling in a privacy-hostile way which the authority contends is an abuse of Facebook’s market dominance.
That case is seen as highly innovative in how it combines privacy and antitrust concerns so is being closely watched.
The latest FCO proceeding against Facebook comes at an awkward time for the tech giant, which has been hit with a massive antitrust lawsuit from 46 U.S. States — accusing it of suppressing competition through monopolistic business practices.
As antitrust regulators have stepped up their scrutiny of Zuckerberg’s empire in recent years, Facebook has responded aggressively: Announcing a plan to consolidate its messaging products onto a single technical backend, as well as adding Facebook branding to its acquisitions — in an apparent bid to make it harder for competition regulators to order a break up.
Facebook’s PR has also sought to cloak the ‘single backend’ move by claiming it will increase user privacy.
Yet the states’ antitrust case against the company includes filings that show a Facebook executive discussing using moments of perceived increased competition for its business as an opportunity to decrease user privacy.
So, uh, awkward….
Reached for comment on the FCO Oculus proceeding, a Facebook spokesperson sent us this statement: “While Oculus devices are not currently available for sale in Germany, we will cooperate fully with the Bundeskartellamt and are confident we can demonstrate that there is no basis to the investigation.”
The tech giant has used a series of legal tactics to block the FCO’s earlier order against ‘superprofiling’ users.
Last year Facebook successfully applied to block the order banning it from combining user data. However Germany’s Federal Court of Justice reversed the decision of the Higher Regional Court — confirming the FCO’s order.
Although the hearing on the main proceeding is still pending at the Düsseldorf Higher Regional Court — currently scheduled for March 26, 2021 (after being postponed from a date in November).
Facebook also responded to the Federal Court of Justice ruling by filing another emergency appeal against the FCO’s order — succeeding for a second time in blocking the order against combining user data.
The FCO says it does not have a route to appeal this preliminary block on points of law — meaning it’s had to lodge a complaint with the Federal Court of Justice, which it did on December 2.
In a statement, Mundt criticized Facebook for resorting to “legal remedies” to block the order which he said is delaying relief for consumers and competitors vis-a-vis Facebook’s abusive practices.
“The fact that Facebook has resorted to various legal remedies is not surprising in view of the significance which our proceedings have for the group’s business model. Nevertheless, the resulting delay in proceedings is of course regrettable for competition and consumers,” he said.
“This is the second time that the Higher Regional Court has preliminarily granted an emergency appeal filed by Facebook. The deadline imposed on Facebook for implementing our demands has again been suspended. As in our view the reasons for this are not sustainable, we have immediately filed a complaint with the Federal Court of Justice. We want the clock to be ticking again for Facebook.”
Facebook using courts to block attempts to hold its business model accountable for violating regional laws is par for the course in Europe.
The tech giant has recently succeeded in blocking a preliminary order from Ireland’s Data Protection Commission to suspend personal data transfers to the US by applying for a judicial review of the regulator’s process, for example.
It also sought to block Irish courts from referring the Schrems II case, which underpins that decision, to the CJEU in the first place — though it did not succeed.
In public remarks in September, Facebook VP Nick Clegg claimed it’s taking that legal action not to defend its own business model but to “try to send a signal that this is a really big issue for the whole European economy, for all small and large companies that rely on data transfers” — which he suggested would be “absolutely disastrous” for the EU as a whole.
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