Facebook Antitrust Probe: Oculus Account Linking Under Scrutiny

Facebook is facing further scrutiny as Germany initiates an investigation into its practice of requiring a Facebook account for use of its virtual reality product, Oculus.

This summer, the technology company sparked discontent within the VR community by announcing plans to integrate Oculus users into a unified Facebook account system, effectively discontinuing support for standalone Oculus accounts by 2023.

Currently, new Oculus users are mandated to possess a Facebook account to log in and access virtual reality content.

In August, Facebook also revealed a rebranding of the VR business it acquired in 2014 for approximately $2 billion—previously operating independently—to “Facebook Reality Labs,” indicating the incorporation of Oculus into its broader social media framework.

(Related: The final original co-founder of Oculus departed from the company last year.)

In recent times, Facebook has been focused on integrating a “social component” into the VR experience; however, the strict requirement of a Facebook account for Oculus users has been met with resistance from gamers.

Now, competition authorities are intervening in this matter.

Germany’s Federal Cartel Office (Bundeskartellamt) announced today that it has begun abuse proceedings against Facebook to assess the connection between Oculus VR products and its primary social network.

In a statement, the president of the office, Andreas Mundt, explained:

The FCO is also conducting an “abuse of dominance proceeding” concerning Facebook’s methods of combining user data for targeted advertising, which the authority believes constitutes an abuse of its dominant market position.

This ongoing case is considered groundbreaking in its combination of privacy and competition law, and is therefore receiving significant attention.

This latest FCO proceeding against Facebook occurs at a challenging time for the company, which is currently contending with a substantial antitrust lawsuit filed by 46 U.S. States, alleging suppression of competition through monopolistic practices.

As regulatory oversight of Facebook’s operations has increased in recent years, the company has responded by announcing plans to consolidate its messaging platforms onto a single technical infrastructure and by applying Facebook branding to its acquisitions—potentially to complicate future attempts by regulators to mandate a separation of its businesses.

Facebook’s public relations efforts have also framed the “single backend” initiative as a means of enhancing user privacy.

However, filings related to the states’ antitrust case reveal a Facebook executive discussing the possibility of leveraging periods of heightened competition as opportunities to reduce user privacy protections.

This situation presents a notable contradiction….

https://twitter.com/GiladEdelman/status/1336837161065263105

In response to a request for comment regarding the FCO’s Oculus investigation, a Facebook spokesperson provided the following statement: “While Oculus devices are not presently offered for sale in Germany, we will fully cooperate with the Bundeskartellamt and are confident in our ability to demonstrate the lack of merit to this investigation.”

The technology company has previously employed various legal strategies to challenge the FCO’s earlier order concerning “superprofiling” of users.

Last year, Facebook initially succeeded in blocking the order prohibiting the combination of user data. However, Germany’s Federal Court of Justice overturned the decision of the Higher Regional Court, thereby upholding the FCO’s order.

The hearing for the primary proceeding is still scheduled for March 26, 2021 at the Düsseldorf Higher Regional Court—following a postponement from a previous date in November.

Facebook further responded to the Federal Court of Justice ruling by filing another emergency appeal against the FCO’s order, again successfully blocking the prohibition on combining user data.

The FCO stated that it lacks a legal avenue to appeal this preliminary injunction and has therefore filed a complaint with the Federal Court of Justice, doing so on December 2.

In a statement, Mundt criticized Facebook for utilizing “legal remedies” to obstruct the order, which he asserted is delaying benefits for both consumers and competitors in relation to Facebook’s alleged anti-competitive practices.

“The fact that Facebook has pursued numerous legal avenues is unsurprising given the importance of these proceedings to the group’s business model. Nevertheless, the resulting delay in the proceedings is regrettable for competition and consumers,” he stated.

“This marks the second instance where the Higher Regional Court has preliminarily granted an emergency appeal submitted by Facebook. The deadline for Facebook to implement our requirements has once again been suspended. Given our belief that the grounds for this are unsustainable, we have immediately filed a complaint with the Federal Court of Justice. We aim to restart the timeline for Facebook.”

Facebook’s practice of leveraging the court system to contest attempts to hold its business practices accountable for violating regional regulations is a recurring pattern in Europe.

Recently, the company successfully blocked a preliminary order from Ireland’s Data Protection Commission to suspend personal data transfers to the U.S. by requesting a judicial review of the regulator’s procedures, for example.

It also attempted to prevent Irish courts from referring the Schrems II case—which forms the basis of that decision—to the CJEU, although this effort was unsuccessful.

During public comments in September, Facebook VP Nick Clegg asserted that the company’s legal actions are not intended to defend its own business model but rather to “signal that this is a significant issue for the entire European economy, for all small and large companies that rely on data transfers”—suggesting that the consequences would be “absolutely disastrous” for the EU as a whole.