You are here

Facebook's new nemesis is a besuited German antitrust watchdog

[BRUSSELS] Andreas Mundt is Facebook's new nemesis. Mr Mundt, 57, is the president of the Federal Cartel Office, Germany's competition regulator. For nearly two years, his agency has been probing whether a key part of the Silicon Valley giant's business model is an abuse of a market dominance.

In a case that caused much surprise outside Germany, Mr Mundt unveiled preliminary findings on Tuesday, saying Facebook may take advantage of its popularity to bully users into agreeing to terms and conditions they often don't understand. The small print allows using the data to generate the targeted ads that make the company so rich.

"Competition law would be poorer without somebody like Andreas Mundt," said Nelson Jung, a lawyer at Clifford Chance in London. "He's characterised by his willingness to push boundaries and challenge the status quo."

Facebook took a dim view, saying the report painted an "inaccurate picture" of how it operates, homing in on the criticism that it's dominant, an important legal term that might curb future behavior.

The case tells the story of how an agency with roughly 360 employees, a budget of 29 million euros (S$46.16 million) and powers that technically end at Germany's borders, is confronting the world's biggest social network, with some 2 billion members and more than US$27 billion in revenue last year.

In the eight years he's been at the top job, Mr Mundt has reshuffled the office, adding two divisions for cartel prosecution and increasing the headcount by about 40 per cent. As the first home-grown talent to take the helm, Mr Mundt has strong backing from the men and women chairing the agency's "Decision Divisions."

He became an antitrust aficionado almost by accident. As a law graduate from Bonn University, he started his career at the Economy Ministry and later worked in parliament for the Free Democratic Party, a proponent of free markets and civil liberties.

At the time, Bonn was still the capital, but as a result of Germany's reunification, the government was set to move to Berlin, way to the east of the country. Mr Mundt wanted to stay in Bonn for family reasons. So in 1999, at age 40, he changed paths. He joined the office he already held in admiration.

"How such a small agency is able to take on the whole of Germany's business, that has always impressed me," Mr Mundt said in an interview last week.

He quickly moved up the career ladder and in less than a decade reached the top. Under his leadership, the agency highlighted the work on products important for everyone's pocket, chasing cartels on beer, chocolate, coffee or sausages.

That played well in the press, and the president, who exudes a youthful charm, hardly misses an opportunity to stress the regulator's impact.

"He's very media savvy, and maybe you have to be like this in today's world," said Rainer Velte, an antitrust partner at Heuking Kuehn in Dusseldorf. "He's definitely not hiding from the press. And he's selling his agency very well to the outside world."

The probe of the social network is part of a long development. Mr Mundt's people have taken a closer look at the internet earlier than most of their counterparts in Europe.

In a series of cases targeting online-sales restrictions, the Germans set influential examples. Part of their heft is due to the fact of their country being Europe's biggest economy. When companies are forced to comply with certain rules there, they sometimes choose to operate that way across Europe. When the Cartel Office forced to change terms for its Marketplace platform, for example, the new policy was rolled out across the bloc.

But sometimes Germany simply sticks out. Cases concerning manufacturers' curbs on retailers have also drawn criticism.

"The flip sideĀ of him pushing boundaries and doing pioneering work is there is a tendency towards over-enforcement," said Mr Jung, the lawyer at Clifford Chance. "Inadvertently the Cartel Office has also been creating a lot of legal uncertainty" with a blunt approach to end curbs on online retail and services.

Facebook didn't hold back in its attempt to rebut Mr Mundt's report, saying that it's wrong to label it as "dominant" in Germany.

"A dominant company can save the expense of innovating because it doesn't have to fear someone else developing better features. We must constantly innovate to attract people. If we fail, people will go elsewhere."

According to Mr Mundt, when data is called the new currency of the digital age, then the relationship to competition law is obvious. That's also why he's rejecting criticism that the probe blurs the line between privacy and antitrust enforcement.

"It can only be an antitrust issue if a customer can't avoid the company because it's dominating the market. Of course that has a privacy angle but it certainly also has an antitrust angle."

Mr Mundt calls the Facebook investigation a "pioneer case" since "for the first time we're looking into the relation between market power and big data."

For him, it's as important as the European Union's clampdown on Alphabet's Google, which in July was fined 2.4 billion euros for skewing shopping search results.

"I like the Google decision, it set out some markers for the future," Mr Mundt said. "That's what we're trying with the Facebook case as well, regardless of what the result will now be."