In Google we distrust: Anti-trust in the time of big data
‘It was the best of times, it was the worst of times’: an accurate saying to characterise the predicament of ‘Big Tech’ companies this year. With ever expanding market-size, growing consumer reliance, and no discernible challengers it would appear big tech is experiencing the best of times. But this is only half the picture. These structural advantages have brought about transatlantic scrutiny from antitrust enforcers. Central to this onslaught of investigations is a plethora of concerns regarding their usage of data, earning the attention of Makan Delrahim, Margarethe Vestager, the US Congress and the German Federal Cartel Office (FCO). However, these inquiries are doing little more than revealing anachronistic laws unfit for the modern age. For a healthy digital economy to exist, anti-trust law must modernise.
Consumer Welfare
Consumer welfare concerns related to data are sometimes questioned: are they part of the proper remit of competition law, or do they belong solely in the competencies of data protection laws? However, it is wrong to see these areas of law as completely separate concerns. They stem from the same ‘creative energy’[1], and stem from the same belief in protection of the private realm, and the exercise of freedoms and rights.[2]Giovanni Buttarelli points out the influential role of Louis Brandeis in pioneering both privacy laws and antitrust doctrine in the US from the common position of ensuring the role of democracy and individual rights.[3] The synergies and interconnected nature of these two areas of the law, and their overlapping common concerns, is best exemplified by the recent attempt by the FCO to penalise Facebook for their abuse of a dominant market position.[4] The FCO found Facebook had abused their dominant market position for improperly combining user data collected from various sources, by tracking the online activity of its users when visiting websites with built in Facebook features for liking and sharing, despite not connecting to these websites via Facebook, or Facebook being an obvious or dominant aspect of the website they were visiting.[5] The FCO ruled that Facebook was required to unbundle their different data pools.[6] This is a prime example of an overlap between data protection and competition law. It depicts how the dominant position of a firm in a market can lead to data protection concerns, and provides a clear example of how anti-trust law is an effective course of action to combat these concerns when they stem from the dominant position of the firm in a market. The Higher Regional Court of Dusseldorf eventually struck down the decision of the FCO for stepping outside of the remit of current German anti-trust law. But this is more a damning indictment of the current state of German Law, which is currently up for change, than of the reasoning of the FCO.
Further concerns relating to consumer welfare are the possibilities of open price discrimination. Price discrimination based on data gathered can occur when a firm utilises their data gathered on income, purchase history and browsing history to determine what their willingness to pay is. They are then able to differentiate the prices they charge customers in e-commerce transactions on this basis. This means data collected on person A and person B could lead to A paying a 20% premium over B owing to data revealing their higher willingness to pay. Price discrimination has already been documented as being used based on browsing history by Lensbest and Shoplet, on the basis of location and customer loyalty by Amazon, and by area code for online tutoring from The Princeton Review.[7] As data sets become larger, and data science more sophisticated, the potential for this form of pricing in ecommerce is tremendous. But it remains unfair discrimination between consumers, not driving prices down but up in many cases.
Market Structure
Data is vital to companies and their capacity to operate effectively in a competitive marketplace. It allows them to effectively understand the needs of consumers, targeting ads effectively and producing products to correctly fit a market. We live in the information age, making data more vital than ever. Because data is so essential and beneficial to businesses and commerce, it also provides multiple opportunities to erect barriers to entry.
This is why data can provide so many barriers to competition, because it reduces the ability of new firms, in particularly small and medium sized enterprises, to enter the market. This is because the lack of access to data denies them the ability to compete effectively and on an even playing field. This was recognised by the UK’s Competition and Market Authority who required established retail banks to share data on customers with new start-ups, providing consent was given.[8] This lack of information by start-ups meant they were facing market barriers to entry, ultimately to the detriment of the consumer who was paying more than they would in a working marketplace. Similarly, companies who have access to vital datasets can, and have, withheld access to these datasets to other companies who were customers of their rivals. In France, the French Competition Authority dealt with a case where a company refused access to their datasets to another business that used a competitor’s software, thus giving rise to concerns related to the bundling of data[9]. Moreover, even though data is non-rivalrous and can be copied infinitely, the actual accumulation of the data can be arduous or impossible for smaller rivals.[10] This means those in a dominant market position can still entrench their position in the ownership of data, and by virtue of their ownership of data, can erect barriers to competition. This was a key motivating factor of the requirement in the Thomas/Reuters merger to divest copies of databases to rivals to gain regulatory approval.[11]
Data also allows firms to easily enter similar markets. Lina Khan highlighted how Amazon’s data collection in their Marketplace data was capable of allowing them to advance their retail sales, whilst their vast amount of information gathered from e-commerce also provides them with a significant advantage in entering the advertisement business.[12] This highlights the effect data can have in entering new markets and solidifying the position of dominant firms. Without access to data, breaking into the market becomes almost impossible. With access, being displaced becomes similarly improbable. Moreover, mergers and acquisitions are one avenue as firms that are already dominant can expand and increase their dominance and control over data; in essence, an oligopoly of data is created. This is evident from the Facebook/Instagram/WhattsApp, Microsoft/LinkedIn/Skype and Google/Doubleclick acquisitions. Each acquisition brought not just a new platform, but a whole repository of data and avenues that continue to generate fresh data. These mergers have the effect of creating a group of firms in established market positions that decrease choice and keep competitors out, thus reinforcing their position.
Where should the Law go?
It is argued that these firms provide massive benefits to the consumer by virtue of their size, synergies and ability to effectively utilise data. Whilst there is undeniable truth to this argument, it is ultimately myopic. It fails to comprehend the long term impact the barriers to entry will have on innovation and, ultimately, on consumer choice. However, this leads us to a pressing issue, do we favour competition or data protection? If one of the issues facing the digital economy is the lack of access to data for potential rivals, it makes it a logical conclusion that what should follow is easier access. But easier access in terms of allowing rivals to access our data in the manner that the CMA required from banks as an aspect of Open Banking places a remedy for anti-competitive behaviour that conflicts with our need to protect our data from being passed from one party to another without our consent. It places our rights as a consumer in conflict with our rights as a private citizen. However, whilst this may appear dichotomous, I would argue that a strengthening of both competition law and data protection, both working in tandem from their common goal of protecting the individual is what is needed. If we impose strict oversight over how our data is shared, only ever in the name of competition and to trustworthy competitors, whilst combatting the asymmetry of information that plagues the exchange of a consumer’s information for access to services, then we will succeed in reconciling our rights and two halves. By breaking down barriers to competition, but erecting them to strengthen our rights, we will create a digital economy suitable for the age of information: a digital economy that serves to protect both our rights as consumers and our rights as citizens.
[1] Giovanni Buttarelli, ‘This is not an Article on Data Protection and Competition Law’, (2019) CPI Antitrust Chronicle, < https://edps.europa.eu/sites/edp/files/publication/19-03-11_cpi_buttarelli_en.pdf > accessed 7/12/2019, 1
[2] ibid.
[3] ibid.
[4] FCO, Decision of 6 February 2019, Case B6-22/16 – Facebook.
[5] Thomas Hoppner, Philip Westerhoff, ‘Abrupt End to “Hipster Antitrust”? Tackling Facebook’s Expansion Following the First High Court Ruling in Germany’, (2019) < https://www.hausfeld.com/news-press/abrupt-end-to-hipster-antitrust-tackling-facebook-expansion-following-the-first-court-ruling-in-germany > accessed 7/11/2019
[6] ibid.
[7] David Birget, ‘Big Data and Price Discrimination’, (June 1) SSRN, 16 < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3096457 > accessed 7/12/2019
[8] Thorsten Mäger, Phillip Neideck, ‘European Union – Data Related Abuses of Dominance’, E-commercee Competition Enforcement Guide, (Law Business Research, 2019) < https://globalcompetitionreview.com/insight/e-commerce-competition-enforcement-guide/1177726/european-union-–-data-related-abuse-of-dominance > accessed 7/12/2019
[9] French Competition Authority, Decision of 8 July 2014, 14-D-06 – Cegedim. The English press release it available at < www.autoritedelaconcurrence.fr/user/standard.php?lang=en&id_rub=592&id_article=2403. >
[10] T. Mäger, P, Neideck
[11] Ibid
[12] Lina Khan, ‘Amazon’s Antitrust Paradox’ (2017) Yale Law Review 712, 785-786
About the author:
Alexander Reay is a second-year law student at the University of Warwick. He is an aspiring solicitor with a keen interest in legal research and writing with a focus on international and domestic economic regulation and political economy.
Connect with the author on LinkedIn.
