The competition watchdog has launched an investigation into whether Facebook is abusing its dominance over the digital advertising market in a move that could trigger huge fines.
The Competition and Markets Authority said it will examine whether Facebook’s monopoly over social media and advertising data gives it an unfair advantage in online classified advertising.
It is the latest salvo against America’s tech giants by the UK regulator. It is also investigating whether Apple’s App Store gives it an unfair advantage over rival smartphone makers, and Google’s plans to remove third-party advertising trackers from its Chrome browser.
The move comes after a year-long study by the CMA into digital advertising markets. It found that Google held 90pc of the online search advertising market, while Facebook controlled 50pc of online display advertising.
The new investigation will ask whether Facebook abused its position by gleaning data from its ads service to build features to overtake rivals, such as eBay rival Facebook Marketplace, and Facebook Dating – a rival to Tinder.
The probe will examine whether data from its log-in service, which lets users sign into multiple apps using their Facebook details, was used to cement its dominance.
The European Commission is launching its own investigation into Facebook’s data gathering, working alongside the CMA.
Andrea Coscelli, the CMA chief executive, said: “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.”
Facebook faces a potential fine of up to 10pc of its global turnover if it is found to have broken competition rules, the CMA said. Based on its 2020 revenues, this could amount to $8.6bn (£6bn).
EU competition chief Margrethe Vestager
The European Commission’s probe will focus on Facebook’s classified advertising business and on Facebook Marketplace.
The Commission’s competition chief, Margrethe Vestager, said: “Facebook is used by almost 3bn people on a monthly basis and almost 7m firms advertise on Facebook in total. Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups. We will look in detail at whether this data gives Facebook an undue competitive advantage.”
The Commission previously fined Google close to $10bn over violations of competition law by its Android mobile and online shopping businesses.
A Facebook spokesperson said: “We are always developing new and better services to meet evolving demand from people who use Facebook. 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.”
In December, the US Federal Trade Commission sued Facebook over its monopoly in social networking and its acquisition of WhatsApp in 2014 and Instagram two years earlier.
The investigation comes after the CMA launched its Digital Markets Unit, a new division intended to regulate technology companies under the upcoming Online Safety Bill.
The regulator said this branch was operating in "shadow", non-statutory form, with legislation on online harms not expected to come into force until next year. The regulator has begun to examine how a code of conduct for Big Tech firms might be enforced.