It’s hard to see who benefits from the European Commission’s (EC) latest attack on Meta. Certainly not consumers.

In mid-December 2022, the EC informed Meta of the commission’s “preliminary view that the company breached EU antitrust rules by distorting competition in the markets for online classified ads.” If the EC finds Meta guilty, Meta can be fined up to 10 percent of its annual global revenue.

The EC’s Statement of Objections is the latest step in the investigation it launched in June 2021. This step informs Meta in writing of the EC’s objections, to which Meta can reply after examining the EC’s investigation file.

I am not privy to the EC’s files, but the commission’s public statements leave me with doubts about the case.

Let’s begin with finding “that Meta is dominant in the market for personal social networks.” (Emphasis in original.) The EC must find that Meta is dominant in a market before attacking the company’s actions. The EC doesn’t explain its finding, but its words echo those of the Federal Trade Commission, and I explain here and here why “personal social networks” is by definition not a market for antitrust purposes. Even if it were, the EC does not explain why dominance there matters, given that the classified ads market is generally considered competitive, and only 4 percent of classified ad users go through social media sites.

Let’s next examine the claim that Meta is “distorting competition.” The claim begs the question: Distorting compared to what? Meta certainly isn’t distorting competition relative to competition in a free market, because the market for classified ads is and was free. But the EC tells us something of its ideal for undistorted competition: “First, Meta ties its online classified ads service Facebook Marketplace with its dominant personal social network Facebook. This means that users of Facebook automatically have access to Facebook Marketplace, whether they want it or not.” (Emphasis in original.)

In other words, in the EC’s ideal market, users would be required to ask Meta’s permission to access Facebook Marketplace. This would inconvenience Marketplace users, which would decrease the value of Marketplace for advertisers. It is unclear why the EC believes higher costs and lower value for Europeans is a good thing.

And there’s more: “The Commission is concerned that competitors of Facebook Marketplace may be foreclosed as the tie gives Facebook Marketplace a substantial distribution advantage that competitors cannot match.” This “substantial distribution advantage” is the convenience Meta creates by allowing users to select Facebook Marketplace as one of the many places users can go on Facebook. This is an advantage, but Meta legitimately created that advantage by making Facebook one of the world’s most attractive social media sites. And McKinsey concludes that there is “no online leader or dominant digital model” for online classified ads.

The EC has a second benchmark for knowing if competition is distorted:

Meta unilaterally imposes unfair trading conditions on competing online classified ads services which advertise on Facebook or Instagram. The Commission is concerned that the terms and conditions, which authorise Meta to use ads-related data derived from competitors for the benefit of Facebook Marketplace, are unjustified, disproportionate [sic] and not necessary for the provision of online display advertising services on Meta’s platforms. (Emphasis in original.)

In other words, the EC believes competition is distorted if terms of service are “unfair . . . unjustified, disproportionate, and not necessary.” But these criteria simply beg more questions: “Unfair” or “unjustified” on what bases? “Disproportionate” compared to what? And “not necessary” for what assumed purposes? The vagueness and subjectivity allow the EC to find almost any business in violation of EC rules, regardless of the circumstances.

What should be done? Meta is in a precarious position. It can and should argue the EC’s claims lack substance. But given the vagueness of Europe’s competition criteria and the EC’s predilections against American Big Tech companies, Meta will have a tough time winning.

What is clear is that Europeans have ironclad reasons to push back on the EC. While attacking large successful American companies might be good politics, the regulations hold Europeans back from becoming the next generation of successful tech leaders and from enjoying the services today’s companies can provide.

The post The Unstable Footing of the European Commission’s Meta Objections appeared first on American Enterprise Institute – AEI.