Is Facebook really ‘free’?: The Financial Value of Personal Data

4th February 2020 Media Law

On 10 January 2020 the Italian Administrative Court (IAC) provided a landmark decision by ruling that personal data has a financial value.  Amy Smethurst discusses the implications.

As I am sure you are aware, Facebook does not charge its users to use the social network. For more than a decade Facebook’s tagline was “sign up: it’s free and always will be”. This has recently changed to “sign up: it’s quick and easy” – here’s why…

In November 2018 the Italian Antitrust Authority (IAA) imposed a €10 million fine on Facebook Inc. This fine centred on two unfair commercial practices implemented by Facebook.

Firstly, the IAA decided that Facebook’s commercial practice was misleading. Specifically the tagline “sign up: it’s free and always will be”. No distinction was given between how the data would be used to connect users with other users and how it would be used for commercial purposes such as targeted advertising.

To state that the platform was ‘free’ was found to be deceptive. While users do not pay to join, they nonetheless consent to give Facebook access to their personal data. The personal data has a commercial value to Facebook.

Secondly, the IAA held that Facebook’s practice was aggressive. The IAA stated that Facebook forced an aggressive practice on their users because users data was automatically transmitted between Facebook and third party websites without the users express and prior consent.

Facebook did not accept the IAA’s ruling.  Facebook Inc and Facebook Ireland Ltd (the EU subsidiary) appealed the fine imposed to the IAC. They argued that as the network is free of charge there is a lack of economic value given. Therefore, consumer protection law did not apply. They argued that the case instead fell solely within privacy law.

On 10 January 2020 the IAC handed down its decision. They confirmed the first sanction regarding misleading practices, but rejected that of the aggressive practices. The fine was reduced from €10 million to €5 million.

This landmark decision has, for the first time, recognised that personal data has a commercial value. In the IAC’s view, consumers’ personal data is in fact proprietary and therefore must be protected.

Viewing personal data in this way has also been seen in the UK. In 2018 HM Treasury published a discussion paper entitled ‘The Economic Value of Data”. In this paper the treasury stated that personal data is a significant source of economic value to both businesses and consumers. They point to the fact that personal data enables firms to deliver personalised services leading to mutual benefit between buyers and sellers.

The IAC stated that Facebook had concealed the value of personal data by providing non-transparent information when users sign up to the platform. The economic value of personal data means that traders have a duty to inform consumers about the commercial purposes for which their data is collected and used.

The IAC concluded that personal data constitutes an “asset” in a negotiating sense and is susceptible to economic exploitation. Fundamentally, by signing up to Facebook, users enter into a contract with Facebook; Facebook allows the user to use the network, while the user hands over their personal data.

This important Italian legal decision chimes with a recent landmark decision made by the Court of Appeal for England and Wales in October 2019. In the case of Lloyd v Google the court considered that data, and consent to its use, has economic value that can be sold to advertisers. It was stated “even if data is not technically regarded as property in English law, its protection under EU law is clear”.

So, while Facebook users do not have to pay to use the social network, this by no means implies that it is “cost” free – users' data is the cost.

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Amy Smethurst is a Paralegal located in Manchesterin our Media Law department

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