Facebook lost a legal challenge Tuesday at the European Union’s top court over a groundbreaking German antitrust decision that limited the way the company uses data for advertising.
The European Court of Justice said competition watchdogs can consider whether companies like Facebook comply with the continent’s strict privacy rules, which are normally enforced by national data privacy regulators.
The court ruled that antitrust authorities can take into account any violations of data privacy rules as they investigate whether tech giants are abusing their dominance in the market by boxing out competitors.
“We are evaluating the court’s decision and will have more to say in due course,” Facebook parent Meta Platforms Inc. META-Q said in a statement.
The court sided with a 2019 German antitrust ruling that threatened to upend Meta’s business model of selling ads targeted to users based on data gleaned from how they spend time on its services.
Meta, which also owns Instagram and WhatsApp, appealed that finding, which led German authorities to seek an opinion from the Court of Justice, the 27-nation bloc’s top tribunal.
Tuesday’s decision could pave the way for stricter scrutiny of tech companies. Europe has taken a pioneering role in reining in the power of big digital platforms with sweeping new standards taking effect next month and rules in the works on artificial intelligence.
The German Federal Cartel Office, or Bundeskartellamt, wasn’t contesting the company’s use of customer data to target ads to users on Facebook.
But it said for the company to combine data from all the services it runs to target ads more precisely, Facebook should have to first get permission separately from the other apps and websites to do so.
At issue is the way Facebook gains consent from users to process their data.
A press release summarizing the court’s decision said the company “cannot justify” claiming “legitimate interest” as a reason for using personal data to serve ads to users. Under European Union privacy rules, users need to freely give consent for their data to be used.
The EU court’s decision will have “far-reaching effects on the business models of the data economy,” said Andreas Mundt, president of the German Federal Cartel Office.