The German competition authority opened an investigation into Facebook today (Mar. 2), acting on a suspicion that it is abusing its position as the country’s leading social network. Facebook could face a fine of up to 10% of its revenues in Europe if found guilty, amounting to around $140 million, based on 2015 sales figures for the region.
The German authority, known as the Bundeskartellamt, says it believes Facebook occupies a dominant position in the market for social networks. The terms and conditions Facebook offers users in exchange for an account—handing over their data, which is then used to serve advertisers—could be an “abusive imposition” because of the company’s dominant position. The regulator says it’s difficult for users to understand the scope of this agreement.
“Dominant companies are subject to special obligations. These include the use of adequate terms of service as far as these are relevant to the market. For advertising-financed internet services such as Facebook, user data are hugely important,” Andreas Mundt, president of the Bundeskartellamt, said in a statement.
A Facebook spokesperson told Quartz in a statement: “We are confident that we comply with the law and we look forward to working with the Federal Cartel Office to answer their questions.”
The German regulator is investigating Facebook’s Irish subsidiary, its Germany entity in Hamburg, and the US parent company. Facebook reported $1.4 billion in revenue from Europe for 2015, although it doesn’t break down sales figures by country. Its European revenue accounted for 25% of total sales last year.
Data privacy is at the core of tensions between European authorities and American technology companies. A case involving Facebook’s Irish subsidiary triggered the collapse of the longstanding Safe Harbor data-sharing agreement between the EU and the US last year. Fears that Facebook data from European users was being exported to the US, where it could be subject to mass government surveillance, led to a court decision that invalidated Safe Harbor in October 2015. Bureaucrats scrambled to put a revised framework in place last month, avoiding all transatlantic data transfer suddenly becoming illegal.
The German authority’s move is only the latest in a string of European probes into tech companies. France is looking into Google’s tax arrangements; there are European Commission antitrust probes into Google’s shopping comparison service and Amazon’s e-book distribution practices; and the commission is also probing Apple’s tax deal in Ireland.