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< | Antitrust as a short-term vehicle to combat the Big Data Conundrum? | >
> | Combatting the Big Data Conundrum using Antitrust Laws | | | -- By BalajiVenkatakrishnan - 07 Oct 2019 | |
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< | The advent of digitalization and data analytics has transcended the traditional understanding of markets and their regulation. Data-driven business models have become crucial to gain efficiencies, and create customer benefits, but have also been deployed to gain competitive advantages and market power. The latter could result in competition foreclosure, exclusionary practices, and several other anti-consumer effects. In fact, 79.4% of participants in a survey feared displacement by competitors with ‘data cultures’. This is extremely concerning, as the game of big data capitalism is in any case dominated by few companies like Facebook and Google. Further, the penumbra and domino effects of data-driven technologies on the economy and every stakeholder in society has left legislatures around the world struggling to devise comprehensive regulations. | >
> | The advent of digitalization and data analytics has transcended the traditional understanding of markets and their regulation. Data-driven business models have become crucial to gain efficiencies, and create customer benefits, but have also been deployed to gain competitive advantages and market power. The latter could result in competition foreclosure, exclusionary practices, and other anti-consumer effects. In fact, 79.4% of participants in a survey feared displacement by competitors with ‘data cultures’. This is concerning for two broad reasons - (1) the game of big data capitalism is dominated only by few companies like Facebook and Google; and (2) legislatures around the world are struggling to devise comprehensive regulations vis-a-vis data, given its overarching effect on every stakeholder in society, and the economy. Despite this, regulators like the European Commission (EC) and the German Federal Cartel Office (FCO) have used antitrust laws to regulate the impact of data-driven businesses on not only competition, but also consumers' privacy and data protection rights. In this brief paper, I attempt to highlight important instances of such regulation, and thereafter argue that competition regulators must embrace enforcing antitrust laws to regulate the impact of data, as opposed to waiting for comprehensive regulations. Lastly, based on global experiences in regulating data using antitrust laws, I aim to provide some recommendations to the Indian competition regulator. | | | | |
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> | Global Experiences - Using Antitrust to Regulate Data | | | | |
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> | Regulators struggle balancing the pro-competitive effects and anti-competitive conduct arising from the use of data, as they are traditionally price-centric in evaluating markets while data is difficult to value. However, increasing number of data-related transactions have made regulators deviate from conventional methods to ensure data’s minimal impact on competition. For instance, in 2014, the EC analyzed whether Facebook could use WhatsApp? as a data source to augment its position in advertising (post-acquisition) and noted an absence of competition concerns, as Google dominated data collection. This recognized the possibility of defining markets solely based on data, and potentially set the stage for enforcing antitrust laws to regulate data related concerns. Nevertheless, the EC's conclusion had some drawbacks. For instance, it assumed Google's data to be substitutable with Facebook's data. This seems erroneous, as Google would most definitely use its data in ways different from Facebook. Additionally, the analysis was limited, as it ignored the privacy-concerns that consumers could experience on account of the acquisition. | | | | |
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> | This latter concern regarding consumers' privacy was later resolved in the EC's analysis of Microsoft's acquisition of LinkedIn? . Specifically, the EC recognized that, Microsoft’s intention to integrate LinkedIn? into its products (post-acquisition) could - (1) result in severe data-related network effects, which could foreclose competition and create entry barriers in the professional social networking market; and (2) reduce consumers' privacy-protection. Consequently, the EC approved the transaction _only after_ Microsoft offered behavioural commitments addressing these concerns. | | | | |
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< | Such concerns have prompted regulators to contemplate data’s impact on competition. However, regulators in India remain unresponsive to this emerging challenge. In this essay, I aim to identify global experiences in the competition and data intersection that may provide meaningful lessons for India. | >
> | Further, Germany and Austria also amended their antitrust merger law to detect acquisitions of companies (with low turnovers) in the digital sector, by requiring notification of transactions based on value. A similar amendment is being considered across the European Union (EU). | | | | |
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< | Global Experiences | >
> | In 2017, privacy-related concerns in antitrust received renewed attention from the FCO. This was extremely significant, as the FCO was not posed with a merger analysis, but was required to examine a potential abuse of dominance by Facebook. The FCO preliminary assessed Facebook’s practice of merging data generated through Facebook users’ use of third-party applications (like Instagram, WhatsApp? , and embedded applications on Facebook) with their respective Facebook user accounts to be an abuse of dominance. It stated that users could not have effectively consented to this practice, given Facebook’s dominance, and even viewed this as a potential data protection violation. In February 2019, the FCO, in line with its preliminary assessment, _issued a prohibition order against Facebook_ for abusing its dominant position. In its order, the FCO explicitly held that Facebook used its dominance to impose a data processing policy that consumers could not have effectively consented to. More importantly, the FCO consulted with several data protection authorities, and assumed jurisdiction over enforcing aspects of the EU's General Data Protection Regulations (GDPR), and held that Facebook also violated the GDPR. Presently, Facebook has moved to appeal this case. | | | | |
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< | Data analytics helps . Conversely, companies strive to acquire data to gain market power, which could foreclose competition, or lead to collusive and exclusionary practices. Thus, regulators struggle balancing pro-competitive effects and anti-competitive conduct, as they are traditionally price-centric in evaluating markets while data is difficult to value. | >
> | Compared to such experiences in the EU, U.S.A. has generally refrained from commenting on data-related transactions. However, in 2014, the Department of Justice successfully challenged a consummated merger between two online ratings and reviews platforms, on grounds that it could result in severe data-related network effects, creating unscalable entry barriers and increased switching costs. Consequently, the acquirer was made to divest the target’s assets to restore competition. | | | | |
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< | However, increasing number of data-related transactions have made regulators deviate from conventional methods to evaluate and ensure data’s minimal impact on competition. For instance, in 2014, the European Commission (EC) analysed whether Facebook could use WhatsApp? as a data source to augment its position in advertising (post-acquisition) and noted an absence of competition concerns, as Google dominated data collection. This significantly contributed to the development of the competition and data intersection, as the possibility of defining markets solely based on data was recognised. Nevertheless, the analysis was limited and ignored privacy-concerns consumers could experience as a potential competition issue.
This position was later clarified when the EC evaluated the Microsoft/LinkedIn transaction. The EC recognised that, Microsoft’s intention to integrate LinkedIn? into its products (post-acquisition) could result in severe data-related network effects, which could foreclose competition and create entry barriers in the professional social networking market. In this scenario, the EC acknowledged the reduced privacy-protection that consumers could experience as a competition issue, and approved the transaction only after Microsoft offered behavioural commitments addressing these concerns.
In 2017, privacy-related concerns in competition received renewed attention from Germany’s Federal Cartel Office (FCO), as the FCO preliminary assessed Facebook’s practice of merging data generated through Facebook users’ use of third-party applications (Facebook’s subsidiary companies like Instagram, WhatsApp? etc., and embedded applications on Facebook) with their respective Facebook user accounts to be an abuse of dominance. It stated that users could not have effectively consented to this practice, given Facebook’s dominance, and even viewed this as a data protection violation. In February 2019, the FCO, in line with its preliminary assessment, issued a prohibition order against Facebook for abusing its dominant position vide its data policy. More importantly, the FCO also assessed the ...
Further, Germany and Austria also amended their merger law to detect acquisitions of companies (with low turnovers) in the digital sector, by requiring notification of transactions based on value. A similar amendment is being considered across the European Union (EU).
Compared to such experiences in the EU, U.S.A. has generally refrained from commenting on data-related transactions with multisided markets (Facebook/WhatsApp). However, in 2014, the Department of Justice successfully challenged a consummated merger between two online ratings and reviews platforms, on grounds that it could result in severe data-related network effects, creating unscalable entry barriers and increased switching costs. Consequently, the acquirer was made to divest the target’s assets to restore competition. | >
> | On account of the preceding discussion, it is evident that antitrust law can be used to regulate data related concerns, including consumers' privacy and data protection. Given the GDPR, the latter must not be considered as only viable in the EU. This is because, even prior to the FCO's enforcement of the GDPR, the EC acknowledged privacy-concerns to be part of competition issues in the Microsoft/LinkedIn case. Consequently, it is imperative that competition regulators across the world commence using antitrust law to regulate data. This is pertinent, as legislative and long-term solutions to the data conundrum are truthfully difficult to evaluate, as the threat model is not only subject to continuous evolution, but also has an overarching impact radius that is difficult to account for comprehensively. Until this innovation has been devised, it is evident that antitrust law is the global vehicle to address this issue, before world economies lose sight of the curve. | | | Lessons for India |
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