Court of Appeal refuses Meta permission to appeal the certification

Mini-summary

This case involved an application by Meta for permission to appeal a Competition Appeal Tribunal (CAT) decision certifying a collective proceedings claim against Meta alleging abuse of dominance. The claim, under section 47B of the Competition Act 1998, was brought by Dr Liza Lovdahl Gormsen, the class representative (CR). It alleges that Meta abused its dominance in the market for provision of social network services by collecting and processing users' data for inadequate consideration, enabling Meta to monetise that data through charges to advertisers for targeted advertising to users (the Claim). The CAT, in certifying the revised Claim, held that it was arguable and capable of being case managed to trial. Meta sought to appeal the CAT's decision. The Court of Appeal (CoA) dismissed Meta's appeal. The CoA held that, contrary to Meta's case, the CAT had not erred in law in certifying the Claim. The CoA further stated that while the case may raise novel issues, it is for the CAT to examine these at trial.

Meta Platforms Inc & Ors v Gormsen [2024] EWCA Civ 1322

What are the practical implications of this case?

The case will now proceed in the CAT.

The CoA's judgment reflects the relatively high bar that parties like Meta face when bringing appeals of certification of collective proceedings cases by the CAT. The judgment also addresses the exploration of novel issues by the CAT and affirms that the CoA's role is not to cut such exploration off. The CoA showed support for the CAT's findings and its ability to exercise judgement based on its "evolving experience" of fairness in competition law and in the tech sector particularly. The CoA recognised that "The use of data as a proxy for monetary payment is a rapidly increasing phenomenon of modern digital life and as such it is generating a range of new legal issues". The CoA flagged that the law is flexible and there is no single test which must, necessarily, be applied to determine abuse.

Regarding data and potential future trends, the extraction and use of data in the manner presented in the Claim is no doubt going to arise again. What is particularly noteworthy is the types of data that are alleged to have been captured by Meta. The judgment extracts evidence from the claim form and supporting reports which allege that the data includes users researching their HIV medication, confidential reporting of sexual assault, and usage of addictive substances. The sensitive nature of this data is the central context for the Claim because it, as the CR alleges, provides Meta with an extremely valuable resource.

Although the substantive merits of the Claim have not been heard and determined, this judgment reflects a trend of claims against tech companies in relation to the collection and use of data. If this claim succeeds, it is possible that a similar data tracking activity (in particular of what data protection law considers "special categories of data", such as above) conducted by a company exercising market dominance and which gains substantial financial benefit from it - while its users whose data is tracked do not receive such an equal benefit - could result in potential liability in the event of a collective claim.

What was the background?

Earlier this year the CAT made a collective proceedings order authorising Dr Gormsen to act as the CR in opt-out collective proceedings against Meta for abuse of dominance. The CAT refused Meta's application for permission to appeal its decision.

The Claim

The Claim alleges that Meta abused its dominance in two separate but linked ways. Firstly, by making access to Facebook contingent on the provision of data by users. In particular, the terms and conditions regarding data collection and use were presented to users on a "take it or leave it" basis and, as the Claim alleges, this constituted an unfair trading condition (the Unfair Trading Abuse).

Secondly, by the imposition of an unfair price through the extraction by Facebook of off-Facebook data, i.e. data relating to users' activities on third-party websites (the Unfair Pricing Abuse). The Claim alleges that this data includes highly sensitive information, in some cases pertaining to users' medical conditions, political views, and sexual orientation, and is therefore an unreasonably high price to pay for the service offered by Facebook. Specifically, the Claim alleges that Meta started collecting off-Facebook data only in 2014, representing an increase in the price charged, whereas the service offered to users in return remained the same.

The Certification

The application before the CAT required consideration of the Claim methodology and causation.

In relation to the Unfair Trading Abuse, the CAT considered that in a counterfactual and competitive market, Meta may have been forced to offer an element of choice to users, including monetary compensation. This claim, the CAT determined, was arguable. In relation to the Unfair Pricing Abuse, the CAT deemed that the allegation in relation to a change in price, to include extraction of both on and off-Facebook data, was also arguable.

In relation to loss and damage, the CAT deemed the CR's proposed model of considering the difference between the value actually received by users in return for their data and the value they would have received in the counterfactual, to be arguable.

The Appeal

Meta sought permission to appeal the certification of the Claim on the basis that the CAT erred in law. Firstly, by permitting the test put forward by the CR in the Claim for assessing the Unfair Pricing Abuse (Ground 1) and secondly in its assessment of the Unfair Trading Abuse (Ground 2).

In relation to Ground 1, Meta relied on the test for unfairness as set out in Case C-20/7/26 United Brands v The Commission [1978] ECR 207 and maintained that the Claim fell outside the orthodox rule. They argued that the methodology proposed in the Claim, namely, to measure the value of the service provided by Facebook on an incremental basis (by reference to the increasing price), was artificial and erroneous. Instead, Meta contended that the test would require consideration of the entire economic value of the Facebook service to the user. They therefore argued the CAT had erred and certified the Claim on a basis unsupported by precedent.

In relation to Ground 2, Meta argued that there was a gap in the causal link between the Unfair Trading Abuse and alleged compensatory loss. Meta submitted that there is a "leap" made from the allegation that the imposition of the "take it or leave it" condition is abusive, to a hypothetical counterfactual bargain by which Facebook would have made payment to its users for their data. Meta had already raised this argument before the CAT. The CAT disagreed with Meta and explained that causation had been arguably pleaded.

What did the Court of Appeal decide?

In relation to Ground 1 the CoA found there were no grounds to grant permission to appeal and explicitly stated that the CAT did not err in its assessment of the law. In particular, the CAT was entitled to conclude that the methodology proposed in the Claim considered the full value of Facebook's service, and that contrasting the position pre-and-post the introduction of extracting off-Facebook data (since 2014) was not inconsistent with this. The CoA went further and, in acknowledging the logic behind analysing the incremental extraction of high value data, rejected the notion that there is a single test for determining abuse of dominance.

Further the CoA reproduced parts of the expert report served by the CR (and its summary) submitted as part of the Claim, setting out evidence including information relating to, (i) the increased revenue of Facebook post-2014, (ii) behaviour in other two-sided markets where there is effective competition, and (iii) whether Facebook uses extracted data to improve its service. The CoA considered all these types of evidence to be capable of relevance.

In relation to Ground 2 the CoA rejected this ground of appeal. The CoA supported the CAT's interpretation of the Claim as treating the Unfair Trading Abuse as an inherent part of the mechanism of the Unfair Pricing Abuse (i.e. that without the "take it or leave it" offer the unfair price could not be imposed).

What next?

The CoA ultimately dismissed Meta's application for permission to appeal meaning the Claim will proceed to trial. The Claim seeks circa £2.3 billion in damages plus interest.

Case details