I am very pleased that Dr. Liza Lovdahl Gormsen, who is Senior Research Fellow in Competition Law and Co-Director of the Competition Law Forum at BIICL, has accepted to be interviewed by this blog. Liza made the news last month when she brought a class-action lawsuit against Facebook’s parent firm Meta at the UK’s Competition Appeal Tribunal. The lawsuit accused the technology giant of abusing its market dominance, and is seeking a minimum of £2.2 billion in damages.
Thanks for accepting our invitation, Liza. Why did you decide to bring a class-action lawsuit against Facebook’s parent firm Meta at the UK’s Competition Appeal Tribunal?
For a number of years we have seen Facebook – now Meta – abuse its dominant position by imposing unfair trading terms and unfair prices on users. Users have had no choice but to give up their valuable personal data, which Facebook has collected both on and off platform, in return for personalised targeted advertising and access to the social network. Facebook monetises its users’ data without providing adequate recompense to them. Facebook’s exploitative conduct has caused class members to suffer loss and damage because they have not been adequately compensated for, among other things, the commercial value of their personal data. Helpfully, in Lloyd / Google the Supreme Court made clear that data is a very valuable asset.
This is a case about Facebook’s abuse of its market power and the Competition Appeal Tribunal is the specialist competition tribunal where class actions can be pursued. It is an opt-out class action and such class actions are specifically permitted at the tribunal. As a result, I can claim damages on behalf of the 45 million British Facebook users affected.
Do you think it is important that academics leave their ivory tower to fight in the trenches? What has been the reaction of academic colleagues?
If academics have the skills and capabilities to fight the good fight, then why not? Litigation does not traditionally fall within the job description of academics, which tend to focus mainly on teaching and research. There is also a question of time. Academics – at least those working at UK universities – seem overburdened by endless administrative tasks on top of long teaching hours and a request for world class research. There is only so many hours in the day.
Interestingly, people from all walks of life have contacted me, but very few academics. Those academics that have been in touch are those who wanted to share potentially relevant empirical research for the case. Of course, academics may react through academic papers and journal articles by analysing the claim – their usual way of communicating. I am truly humbled by the rallying support I have received from all over the world – I have listened to the most heartfelt stories about their Facebook experiences. People seem tremendously enthusiastic about this class action.
The crux of your complaint seems to be that users of Facebook have been subject to an unfair deal in that they offer more value to Facebook than they receive from Facebook. On the basis of which factors are you making that claim?
Access to Facebook’s social network service is offered for ‘free’ to consumers. However, when signing up for Facebook, users must agree to various far-reaching, opaque, and complex terms and conditions. Accepting Facebook’s terms and conditions is a precondition for access to its products and services, and it is on a ‘take it or leave it’ basis. Users have no ability to negotiate individual terms. Facebook’s terms and conditions change on a regular basis and users have no other choice than to accept these or to leave the platform. By accepting Facebook’s terms and conditions, users give Facebook permission to collect, share and process users’ data not only on the Facebook’s platform, but also on other websites. This allows Facebook to build extremely detailed profiles of each user. These profiles are utilised, inter alia, to generate revenue for Facebook. While this allows Facebook to provide users with its social network service, it also allows Facebook to offers advertisers access to user data for targeted and display advertising. The CMA in its market study into online platforms and digital advertising, published in July 2020, supports these claims.
Competition authorities are generally reluctant to pursue so-called exploitative cases. Do you understand their reluctance or do you think they are too timid in that space?
This is a blind spot in competition law enforcement. While the U.K has been pursuing some exploitative cases, it has mainly been cases of excessive pricing rather than cases of unfair trading conditions. Compared to the U.K., the European Commission has an appalling record when it comes to exploitative cases. This is surprising given our current Competition Commissioner Vestager talks a lot about fairness. Fairness to her appears to be at a very theoretical level. If she was serious about preventing direct harm to consumers, you would think that she would be more focused on pursuing exploitative cases. The vast majority of competition cases at the European level concern exclusionary abuses. Prohibiting exclusionary conduct will eventually benefit consumers, so I am not arguing in favour of abandoning exclusionary cases. I am simply asking the European Commission to better understand emerging business models and their direct – and at times exploitative – impact on consumers and take action when they see it. On a principled level, it is very hard to understand why competition authorities are so reluctant to pursue exploitative cases given the objective of competition law is consumer welfare. On a practical level, I appreciate it is hard to prove exploitation, but we cannot ignore it just because it is difficult.
Did you bring this class action because you felt that the CMA was unlikely to launch an investigation against Facebook on exploitative grounds?
Considering the CMA’s conclusion not to make a market investigation reference following its Market Study on online platforms and digital advertising, published in July 2020, despite having found a number of exclusionary practices, I felt it would have very little appetite to go up against Facebook’s exploitative conduct. I understand the CMA needed to have a set of suitable remedies ready to intervene in the market following its market study, so I am not blaming the CMA for not intervening, but it nevertheless sends a signal about their enforcement appetite. Moreover, regulation of so-called companies with a strategic market status was being discussed, so the CMA probably felt regulation would be more suitable although regulation and enforcement are not mutually exclusive.
Opponents of class actions typically say that the only people doing well on these are the lawyers, as users will typically obtain small compensation. What is your view on this criticism?
I accept the criticism, but it does not have to be true. It all depends on how well the representative of the class runs the case. The main job of the class representative is to do what is in the best interests of the members of the class. That includes negotiating the fees of lawyers, economists and other experts and claiming the right amount for compensation for the class.
Do you think your action could have a deterrent effect, hence keeping Facebook or other large platforms on their toes? Is your claim only for damages or are you also seeking a change in Facebook’s behavior (whether through an injunction or more generally through the deterrent effect of the damages claim)?
Hopefully, my action will have a deterrent effect. Even better if it also creates awareness that data is a very valuable asset for which users need to be compensated. I am not seeking any structural remedies or – direct – behavioural remedies, as I do not have such powers – only the CMA has these powers. That said, if the Competition Appeal Tribunal decides to award damages to the members of the class, one would hope Facebook understands that users need to be paid for their data and the latter is no longer – if it ever was – a free asset. That in itself could force a behavioural change.