UK and EU regulators are investigating Facebook over whether it is abusing its dominance in digital advertising.
It marks the first time the regulators have coordinated on a major inquiry since Brexit, and strikes at the core of Facebook’s revenues, which rely heavily on selling advertising on its platform.
The investigation will consider whether the social media giant has unfairly used its vast trove of data to help Facebook Marketplace – a classified ad platform where individuals and businesses buy and sell goods daily – beat out the competition. Britains’s Competition and Markets Authority (CMA) will also examine the competition implications of the Facebook Dating platform, which launched in Europe last year.
The CMA said it would work “closely” with the European Commission to determine whether Facebook might be stifling competition by “abusing a dominant position in the social media or digital advertising markets”.
Facebook, which could be fined by regulators depending on their findings, has said the investigations were launched “without merit”.
“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,” the spokesperson said. “We will continue to cooperate fully with the investigations to demonstrate that they are without merit.”
The social media platform, which was founded in 2004 by its now-billionaire chief executive, Mark Zuckerberg, is used by nearly 3 billion people a month, and about 7m firms advertise on the platform in total.
The European Commission said Facebook was able to collect “vast troves” of data through its social network and beyond, thanks to single sign-on features that allow users to log into other websites using their Facebook account. That data enables it to target specific customer groups that could make it harder for rivals to compete, the regulator added.
Meanwhile, companies that advertise on Facebook are also giving up valuable data, which the regulator said could be used by Facebook to “outcompete” those same firms.
“In today’s digital economy, data should not be used in ways that distort competition,” the EU’s competition commissioner, Margrethe Vestager, said.
Since its launch in 2016, Facebook Marketplace has grown to become one of the world’s largest classified ads platforms. It is now used by 800 million Facebook users across 70 countries, dwarfing long-established competitors such as Craigslist, with 60 million users, and Gumtree, with 16 million.
Marketplace’s rivals have complained to the EU that Facebook had a huge advantage in breaking into the classified ads market by being able to advertise the service for free to its 2 billion users.
Facebook Dating, which is being investigated by the CMA without the involvement of the European Union, launched in the UK and Europe a year after it began in the US. Unlike Marketplace, the service has not been a huge hit: reports from the tech site the Verge suggest it has just a few hundred thousand users in the entire New York City area, for instance.
Competing services such as Tinder and OKCupid are much larger, but they also have to pay to acquire users through Facebook Ads, while Facebook Dating gets the same service for free.
It is the CMA’s third investigation into a potential breach of competition rules online, after the watchdog opened investigations into Google’s plans to remove third-party cookies and other functionalities from its Chrome browser earlier this year. The UK regulator is also looking at whether Apple has set unfair terms and conditions for developers trying to access its App Store.
Meanwhile the European Commission has already fined Google more than €8bn on Google and is also investigating Amazon and Apple.