Meta's VR remains under antitrust abuse watch in Germany

Germany's Federal Cartel Office (FCO) is claiming credit for Meta untying its virtual reality headsets from its social accounts -- a change of direction the company announced back in August when it began to roll out Meta accounts and Meta Horizon Profiles, saying these accounts could be used to log into its virtual reality products in place of logins for Facebook and Instagram (while still allowing the latter options as a user choice).

However, despite winning this concession from Meta, the Bundeskartellamt is not closing its probe of its VR offerings. It said today that it wants to keep an eye on how the tech giant presents these account choice options to VR users -- ergo, it's scrutinizing the type of choice architecture (and/or dark patterns) Meta deploys -- and also said it's monitoring how Meta proposes to combine user data across different services.

That's particularly interesting as the German regulator will be hoping to enforce formal data separation between Meta's VR products and its other social services in the near future.

But it appears to have been able to extract a temporary partial separation already, per remarks it's made today.

The back story here is that FCO has a separate challenge to Meta's so-called 'superprofiling' of users, whereby the company pools usage data across different services and links it to a single user ID to flesh out ever more detailed profiles for ad targeting purposes -- a privacy-hostile surveillance-based business model that the German competition regulator views as abusive and has sought to block since early 2019.

Meta challenged the FCO's order that suspended enforcement during the appeals process -- and it's now pending a ruling by the European Union's top court that could land next year, either unblocking the order or tossing it.

The Bundeskartellamt's press release today notes that the extent to which "such data processing is permissible" is a "live discussion topic" between it and Meta, including as a result of the aforementioned legal proceeding pending before the European Court of Justice.

"Until this matter has been clarified, Meta will, subject to certain exceptions, keep the data of users with a separate Meta account which are generated during their use of the Meta Quest headsets separate from the data gathered from other Meta services," the FCO adds.

The German competition watchdog opened the separate probe over Meta's plan to tie Facebook accounts to Oculus (as the company and its VR business were known at the time) back in December 2020 -- saying it was concerned that linking access to its virtual reality products with its social network could constitute a prohibited abuse of dominance.

It's likely no accident that Meta's decision to reverse course and roll out separate accounts for users of its VR came a few short months after the FCO completed another proceeding confirming the tech giant is subject to a special competition abuse control regime, enabled by a 2021 update to Germany law -- meaning Meta faces tougher antitrust scrutiny by the FCO for the next five years. (Meta did not appeal the designation.)

On the VR issue, the FCO writes that Meta "expressed its interest in an amicable solution in the Facebook/Oculus matter" -- before going on, in late August 2022, to introduce the Meta account -- which it points out "allows users to use the Quest 2 and Quest Pro headsets without a Facebook or Instagram account."

"The Bundeskartellamt made it clear that in the process of setting up the headsets users would have to be allowed to decide as freely and uninfluenced as possible whether to use the headsets separately or in connection with other Meta services," the FCO goes on to note, implying that it applied pressure to Meta to tweak its proposals to remove manipulative nudges.

"Following corresponding adjustments, particularly with regard to user dialogues, the Quest 2 and Quest Pro headsets are also expected to be available in Germany soon," it adds.

A pan-European Union ex ante competition reform, the Digital Markets Act (DMA), will come into force across the bloc next year -- also putting up-front obligations on the most powerful 'gatekeeping' internet giants, with Meta a likely candidate to be designated as operating a core platform service under the DMA and subject to additional restrictions on how it can operate, which are intended to promote competition and fairness. So the operational noose for Meta's empire continues tightening in Europe.

Commenting in a statement today, the FCO's president, Andreas Mundt, wrote:

The digital ecosystem created by Meta with a very large user base makes the company the key player in social media. Meta is also an important player in the growing VR market. Competition in these two sectors could be severely impeded if only Facebook or Instagram members were able to use the VR headsets. Meta has responded to our concerns and has offered to give users of Quest glasses the option to create a separate Meta account as a solution to the problem. While we welcome this development, we will not terminate the proceeding today. We will now continue to monitor the actual design of users' options as well as issues regarding the combination and processing of user data from the various Meta services. This case shows that Section 19a of the German Competition Act (GWB), the new instrument to monitor large digital companies more effectively, allows us to efficiently address competition problems in practice.