Today, Germany’s Federal Cartel Office (Bundeskartellamt) announced it was initiating formal abuse proceedings against Facebook for its controversial policy of requiring new Oculus device owners to use a Facebook account.

Germany’s Federal Cartel Office, the competent authority when it comes to regulating national competition, today announced that it’s opened an inquest to examine “the linkage between Oculus virtual reality products and the social network and Facebook platform.”

Andreas Mundt, President of the Federal Cartel Office, says that since all new users of Oculus devices must also have a Facebook account, forcibly linking its VR products and its social network “could constitute a prohibited abuse of dominance by Facebook.”

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“With its social network Facebook holds a dominant position in Germany and is also already an important player in the emerging but growing VR (virtual reality) market,” said Mundt. “We intend to examine whether and to what extent this tying arrangement will affect competition in both areas of activity.”

Back in September, Facebook halted sales of all Oculus products in Germany. At the time, it wasn’t clear whether it was the Federal Cartel Office or Facebook itself that initiated an anticipatory halt in sales ahead of litigation proceedings.

This isn’t the first time Facebook has found itself in hot water in Germany, Europe’s largest economy. In early 2019, the Federal Cartel Office imposed extensive restrictions on Facebook regarding the processing of user data, and its role in creating so-called ‘super profiles’, which aim to collect and merge user data from its various products. Litigation is still pending in that country, however the next hearing is set for March 26th, 2021 at Düsseldorf’s Higher Regional Court.

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Should a similar situation happen regarding Facebook’s VR devices in Germany, it’s very likely customers there won’t be able to directly buy Oculus headsets for some time. Customers in Germany are currently only capable of purchasing Oculus products from neighboring countries and importing them for personal use.

In the meanwhile, Facebook is also now dealing with United States Federal Trade Commission, which announced yesterday that it had filed a lawsuit with the Washington, D.C. US District Court alleging similar anticompetitive practices, which would constitute an illegal monopoly on “personal social networking.”

A possible outcome of the suit could include spinning out Facebook’s larger social networking properties, Instagram and WhatsApp. Oculus wasn’t named directly the suit, however it’s clear the case’s outcome could have wide ranging repercussions for all of Facebook’s business segments.

Thanks goes out to MIXED (German) for pointing us to the news.

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Scott Hayden
Well before the first modern XR products hit the market, Scott recognized the potential of the technology and set out to understand and document its growth. He has been professionally reporting on the space for nearly a decade as Editor at Road to VR, authoring more than 4,000 articles on the topic. Scott brings that seasoned insight to his reporting from major industry events across the globe.

  • Good.

  • ale bro

    The rules on unfair competition and abuse of a dominant position are the same across all of the European Union, so Facebook could be in hot water everywhere in Europe.

    • Sven Viking

      I’m told there are some related Germany-specific laws on top of the EU laws, but I’d hope they’re still similar enough that it’d have a wider effect if they win.

  • FrankB

    if this results in Facebook removing the mandatory FB login perhaps its worth buying a headset now whilst the price is still being subsidized by the sale of your personal data.

    • Andrew Jakobs

      Don’t expect the price to go up without a mandatory FB Login.. The headset isn’t subsidized…

      • Hivemind9000

        I agree the price probably won’t go up, but not sure about your “not subsidized” statement. Do you have a link or reference to support it? Like console manufacturers, I would expect that they drive down the hardware price to cost or less, and make their money on their walled garden store cut (30%). It’s a basic loss leader strategy normally adopted by those with deep pockets who can withstand the initial hit in order to beat out smaller competition and make more money in the medium/long term. That’s what I would have expected at least.

        • Andrew Jakobs

          Well, do you have a link or reference to support your claim? Even the last generation of consoles and the new generation of consoles are sold with profit from the start (although marginally, but not at a loss)..

          • I know many headsets manufacturers and they all confirm that it is impossible to have a sustainable business at that price, so yes, they are subsidizing VR business with the data business

          • alxslr

            And also the VR hardware businnes with the VR software/marketplace business

          • Andrew Jakobs

            If it were their only business, yeah I can imagine it not being sustainable, but that’s not what it was about, it was about selling the headset at a lower price than the cost of it, and THAT’s something I don’t think..

          • Christian Schildwaechter

            It probably doesn’t make a lot of sense to break this into a yes/no answer. It is quite possible that through clever engineering and buying in large quantities, the production of a Quest 2 costs less than what Facebooks gets from the customer purchase, even including all costs of distribution, retail margins, service etc. By that definition, they aren’t selling under cost.

            It is also possible that no other company could compete, even if Facebook completely open sourced both the hardware and the software, because Facebook can negotiate prices that smaller companies couldn’t not. But this is unlikely, simply because the Quest 2 still relies mostly on technology developed for smartphones, and smartphones dwarf VR in orders of magnitude, so there are much larger buyers out there than the Oculus devision of Facebook. You can bet that some company in China would be able to roll out a Quest 2 clone based on these open sourced plans for less money within a few weeks, simply due to the gigantic logistics advantages of being in Shenzhen.

            So if someone in Shenzhen could manufacture a Quest 2 for even less, why is the HTC Focus not only more expensive, but also inferior, even though HTC set up a USD 160M VR venture fund in Shenzhen two years ago? Because at the current state of VR with rather low sales numbers, the hardware is only a tiny part of the costs. The real costs are the years of development, platform building, support for VR developers and necessary advertising, all for just a few million customers, not spread over tens or hundreds of millions to billions like with smartphones.

            HTC cannot afford to lose a lot of money per headset, so the price must be higher than the combined costs of hardware production, distribution, development and related costs. Facebook can. Let’s be very optimistic and assume that Oculus/Facebook sold five million headsets, and every single headset owner bought software for USD 200, with Facebook getting a 30%/USD 60 cut. Let’s also assume Facebook actually made USD 50 per headset based purely on hardware and production costs. So each HMD made them USD 110 for a total of USD 550M.

            Even with these extremely unrealistic numbers, just based on the purchase price of Oculus (USD 2B) and the initial extra investment (USD 500M) this means that every single HMD Facebook has sold so far has been subsidized with USD 390 for development etc. costs. In reality the development costs were much higher, sales numbers and earnings much lower.

            That is still fine, this is a strategic, long term platform investment for which it makes little sense to compare the total development costs to the sales from a few years. But it also means that saying that Facebook sells that Quest 2 at cost/unsubsidized just because it can be manufactured at that prices doesn’t make a lot of sense either.

          • Mradr

            Many of them are not in the customer business either or doing a good job either at it. So not sure how the “many” would have much say if they are not at least facebook level of commercial power.

          • Hivemind9000

            Data mining on a few million users playing games is not a huge revenue generator (compared to the billions of others already using their platform in more information-rich ways). They will however make their money back on the games sold on their platform (30% per game, over several years, adds up – just like on consoles).

          • There’s this:

            To help secure its position in the market, Facebook is selling the Oculus headset at a loss, according to Stan Larroque, the founder and CEO of Lynx, a Paris startup that promotes its virtual-reality headset to businesses. Engineers at Lynx, whose headset uses many of the same components as Oculus’s Quest headset, estimate that Facebook sells the latest version of the headset, the Quest 2, at a $50 loss per device, said Larroque. That makes it impossible for smaller device makers to compete, he said.

            Source: Facebook Accused of Squeezing Rival Startups in Virtual Reality

          • Andrew Jakobs

            Nope, that’s not a fact, that is what that CEO THINKS.. Lynx will never be able to buy in such large quantities as facebook can. And because Lynx can’t make it for a specific price point doesn’t mean Facebook can’t.. I won’t say Facebook is making any real profit on the hardware itself, but I really doubt if they sell it at a loss..

          • Boogieman

            Facebook makes money on a lot of stuff
            – addons till Quest 2 quickly add up the price to that of the superior hp reverb g2
            – But mostly, personal data is the new GOLD and Facebook had been stacking for a LOONG time and with quest 2 can now also add cameras to the tracking.

            To say its not subsidized would make me ask, where you get that information from?

            Facebook/Oculus might not state it publicly (that would be suicide) but when you create a product like this and force facebook and tracking on people its really obvious ;)

          • Andrew Jakobs

            Facebook/Oculus might not state it publicly (that would be suicide) but when you create a product like this and force facebook and tracking on people its really obvious

            Well assumption is the mother of all fuckups….
            Why do you think it is more expensive with all the extra’s like the (if you read the reviews) needed deluxe strap? That’s something done due to be able to sell it as cheap as possible. Again, I’m not saying they sell it with real profit, but I think it is about the price of what they have to pay for the hardware itself (and maybe a couple of bucks extra). And yes their intention is to get the real money from the games (and looking at the sales for the original quest so far it’s a good bet), and if you have your facebook account locked tight down the last option disabled, there isn’t much data for them to sell (also in many countries there is a limit on what they can actually sell in regard to your data)..

          • Mradr

            They are not selling at a loss, even if they did, they are doing it from the store front and not at the data mining. Data mining in this case would just be another source of income than their main. They can get away with these lower prices because they are making the product cheaper over all. They remove many high end designs for much cheaper ones. While clever design is going to make up for a few of them, other have real impact to the cost. From moving away from dual screens to single, using fast switch LCD over OLED, and removing as much plastic and white space as possible to fit more per volume for shipping.

          • Hivemind9000

            Plenty of articles over the years, here’s just one. A simple search will show up plenty of others:

            https://www.gamesindustry.biz/articles/2017-06-15-xbox-one-x-selling-at-a-loss

            I’m in the games industry and it’s is a well know fact in the biz that the console manufacturers make their money from software margins. Apparently Nintendo don’t sell their consoles at a loss (except Wii U), but they are the exception it seems.

            So, can you provide a link/reference for your claim?

    • ShaneMcGrath

      That’s the only thing stopping me, Was ready to upgrade from Oculus Go to a Quest 2 and was hyped for several months until hearing about needing a Facebook account.
      Now I am just waiting for a competitor, Maybe a new Samsung Odyssey will come out next year.
      If they dropped the account part I wonder how many people would buy it, I know I would. The headset seems great.

  • jimmy

    I hope Facebook win the lawsuit they are a private company if you’re not happy don’t buy their products

    • DanDei

      Keep that mindset in America, where predatory business practice is unregaluted because naive people like you believe the market will sort itself out! Here in Europe we just know better that you have to set and enforce rules because monopolists would break the market and not act in the best interest of consumers.

      • Except the US just filed a major lawsuit against Facebook that, ideally, will result in Facebook being torn to pieces: Federal government and 46 states file antitrust suit seeking to split up Facebook

      • kontis

        Here in Europe our politicians are so desperate by the dominance of a much more efficient American market they try to come up with new forms of taxation and limitations.

        I hate Facebook, but don’t get me started about the “EU industry”. It’s a joke. All EU does is making more regulations, limitations and abuse everyone who is productive.

        It’s not a surprise, though. Above the entrance of the EU parliament we proudly put the name of a communist who created this mess.

        Soviet era 2.0.

        • Azreal42

          Yes and yes ! In which country are you living ?

      • jimmy

        without america europe would still be under soviet union so go easy on your high horse

    • Jistuce

      I hope Facebook loses the lawsuit, just because they are a private company doesn’t mean they can do anything they want.

    • Darren

      Facebook is not a private company. It’s publicly traded under the symbol FB on the Nasdaq. If a company is listed on an exchange, then it is a public company. That is why Mark Zuckerberg’s title is CEO and not “owner.” He might own 29.3 percent of the shares, but he still has to follow all of the federal rules for pubic companies. To become private again, he would need to offer to purchase all the outstanding shares. Until then, he has to answer to the board and shareholders.

      Examples of private companies would be Cargill, Publix Super Markets and PricewaterhouseCoopers. You can not buy shares on the open market. They are owned by private individuals or family members. They own the company and can make decisions without federal oversight (ex; the SEC) or having yearly meetings for all the stock holders (ie: the owners).

      • jimmy

        they defitently are a private company in the sense they dont have to answer to the anyone else but the shareholders also mark zuckerberg own 51% of the voting shares he can do WHATEVER HE WANT with the company so if your not happy go buy something else and stfu

        • User_Name_24601

          You don’t know what you’re talking about. They are a public company. Anyone can buy their stock.

          • Azreal42

            If you buy a car with three mates, it doesn’t make your car “public”. For the same reason, being able to buy stocks of FB doesn’t make it a public company at all.

          • jimmy

            Exactly

          • Kevin White

            No, you are mixing up the terms “private company” and “privately-held company.” You can be a “private company” and have publicly-traded stock or be privately-held. On the other hand, you can be a public utility (i.e. not a “private company”) and also have publicly-traded stock or no stock.

          • jimmy

            This

    • Valve is a private company. Facebook is not.

      • jimmy

        yes it is i work in the stock market a private company mean any company owned by a particular individual and not by a government facebook only answer to their shareholders and mark zuckerberg who own the majority of the shares they dont have to answer to you or anyone else

    • Mradr

      They are not a private company and I did not buy the latest products because of the change. On the other hand, they are buying out software creators to release on their platform first or only them and that results in major problems as well.

      • jimmy

        you are wrong

    • enoch arden

      You probably have never heard of anti-monopoly legislation. Which is necessary for protecting free market competition.

  • flamaest

    Good!

  • Facebook should be banned.

    • Kevin White

      Well, it’s banned in my house and on my devices. Be the change you want to see.

  • duked

    Way to go, Germany! This should be obvious to all countries.

  • enoch arden

    Two ways to deal with this monster: to nationalise or to break it up. Otherwise it is a threat fo the principles of democracy. As we saw in the recent US elections.

  • oomph

    Thumbs up to Germany.

  • TimmyP

    100 percent a vertically monopolistic move