Facebook is not free: the Administrative Court of Rome’s recent decision and its implications in terms of enforceability of the Italian Consumers’ Code

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On 10 January 2020 the Administrative Court of Rome (Tar di Roma) issued a landmark decision (no. 261/2020) in terms of gratuitousness of the services provided by social media platforms. The precedenti is worth an highlight for two reasons: first of all, because for the first time an Italian Administrative Court has officially ackowledged the economic value of users’ personal data and secondly because it entails that potantially all social media platforms can now be considered as “professionals”, hence subject to the Italian Consumers’ Code[1]. Hence, operators should now be aware that fairness and transparency in the treatment of personal and users’ generated data are not just a matter of data protection, but must be carefully regarded also in terms of compliance with the Consumers’ Code rules.

The litigation at stake was started by Facebook Inc and Facebook Ireland Ltd, which were fined by the Italian Antitrust Authority (the “IAA”), inter alia, for unfair commercial practices consisting in misleading information disclosed to users when subscribing to the ptalform[2]. More in particular, according to the IAA Facebook’s tagline “It’s free and will always be” – which used to appear on the platform’s homepage signup section[3] – was misleading, because the platform actually required – and still requires – a compensation for its services. Such compensation is not construed as an entry or a periodic fee but rather concerns Facebook’s right to treat users’ data, which have a commercial value and therefore generate profits for the Company. As a consequence, consumers should be made aware of the fact that they are not using a free service, but are rather paying by different means (i.e. consenting access to and treatment of their data and the information inferable thereunder, rather than paying money). Such lack of clarity was recognized by the IAA as an unfair commercial practice, hence punished with a EUR 5 mln fine.

In challenging the sanction, Facebook argued the lack of competence of the IAA. Indeed, according to the Company no commercial service is provided by the same – being it a free platform – and therefore (i) Facebook cannot be regarded as a “professional” pursuant to the Italian Consumers’ Code, (ii) as a consequence, the Consumers’ Code is not applicable and in any case (iii) the matter would concern only the treatment of personal data, which is to be handled solely by the Italian Data Protection Authority (“IDPA”). The Administrative Court of Rome, however, dismissed these arguments.

Indeed, the Administrative Judge has held that the economic value of personal and users’ generated data is currently unquestioned. As a consequence, the matter falls within the scope of both data protection legislation and the Consumers’ Code. The principle was also stressed by the European Commission, which, in its “Guidance on the implementation/application of Directive 2005/29/EC on unfair commercial practices”[4] warned that “Personal data, consumer preferences and other user generated content, have a “de facto” economic value and are being sold to third parties”.

Remarkably, the Administrative Court of Rome’s decision shortly follows the release by the Italian Communications Authority of the first “Observatory on Online Platforms”[5], where the average annual commercial value of users’ generated data has been quantified in a region between EUR 10 to 40 per user. Moreover, the IAA is not new at stressing the economic value of personal data: the same principle was highlighted in the context of decision no. 26597 of 11 May 2017, rendered on the Whatsapp/Facebook ref. no. PS10601 case.

As a consequence, unless the Administrative Court of Rome’s decision is annulled in second instance by the State Council (“Consiglio di Stato”) Facebook and all other social media platforms treating and making profits with users data should be aware of the fact that they are currently regarded as “professionals” pursuant to the Italian Consumers’ Code and are therefore subject to the rules provided thereunder in terms of unfair commercial practices. This opens new scenarios in terms of sanctioning activity by the IAA and the Italian Communications Authority and adds further degrees of complexity to the regulatory framework governing social media platforms’ activities.

 

[1] Italian Legislative Decree of 6 September 2005 no. 206.

[2] Reference is made to the IAA’s decision no. 27432 rendered on 29 November 2018 on proceeding ref. PS/11112.

[3] The tagline was repealed worldwide by the “It’s quick and easy” claim uploaded on Facebook’s signup section between 6 and 7 August 2019. https://www.businessinsider.com/facebook-changes-free-and-always-will-be-slogan-on-homepage-2019-8?IR=T. On the Italian website, such replacement took place on 15 April 2018.

[4] Issued on 25 May 2016.

[5] https://www.agcom.it/documents/10179/17328538/Documento+generico+20-12-2019/0cfa28b1-1567-46c5-8ad7-70fa96174ff4?version=1.0.

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