Antitrust Is Not the Solution, Constitution Is

-- By EdyGlozman - 01 May 2015

Introduction

Scholars have been debating in the recent years over whether privacy should become an antitrust law concern. Some voices argue that antitrust agencies should incorporate privacy consideration into the analysis of industries that depend on intensive use of consumer information, while others believe such incorporation would be undesirable. In this brief note, I would like to suggest that this debate is redundant to some degree. While the parties focus their arguments on the normative level, i.e., what is appropriate, the real focus should be on the practical question, i.e., to what extent this is at all possible. I will then move on to show that the nature of antitrust and privacy differ on a very basic level, and an attempt to mix them would be like trying to mix oil and water.

Background – The Google Doubleclick Merger

The starting point for the debate was the 2007 FTC decision to clear Google’s acquisition of Doubleclick, an internet ad-serving services developer and provider. The decision however did not pass smoothly. Among pure economic concerns (which are beyond the scope of this note), critics also offered novel opposition from a privacy perspective (see the dissenting statement of FTC chairman Harbour, or Peter Swire’s note). They alleged that while Google often has “deep” information about individuals’ searching, it has much less information about where they go after leaving Google sites. Doubleclick however, through cookies it sets on individuals’ computers, has “broad” information about individual’s actions, with a leading ability to pin point where a person surfs. Thus, the merger created a giant with both “deep” and “broad” abilities for collection of information, and for individuals with medium-high privacy preferences, it caused a significant reduction in the quality of the search product. Put differently: before the merger, a consumer was able to surf subject to one level of tracking, kept in a database of one magnitude. Pursuant to the merger however, searching or surfing carries with it a significantly higher level of tracking, across a larger database.

Some commentators disregarded this position, suggesting that: (1) conceptually, the analogy between privacy and quality of product begins to break down once we recognize that unlike selection of lower quality level to enjoy lower costs, firms invest in collecting data (also) to improve content and enhance matching between sellers and consumers; (2) an antitrust rule that limits the firms’ ability to collect and analyze data is likely to trigger First Amendment scrutiny; and (3) allowing antitrust enforcers to consider privacy would inject some level of subjectivity into antitrust enforcement decisions (see James Cooper).

Without picking sides, I would like to suggest that this debate is somewhat redundant and is likely to eventually hit a wall. This, I believe, is primarily due to two fundamental reasons that stand at the heart of the difference between antitrust and privacy concerns.

Reason #1: The State Paradox

In the game of power between the state and its citizens, privacy and competition play opposite roles. While promoting competition and ‘breaking’ trusts and concentration increases the state’s power, promoting the privacy rights of its citizens may lead (as least from the state’s perspective) to the decrease of its power. In the context of a merger between two ‘consumer data bases’ such as Google and Doubleclick, privacy-related considerations may actually lead the state to believe that the consolidation of databases is a good idea, as it would lock the information about consumers, easily accessible in one location, facilitating surveillance.

Thus, my proposition goes as follows: in a situation of a merger that is not likely to cause substantial harm to competition, but at the same time has a substantial effect on consumers’ privacy, government (senior) officials have no incentive to take the privacy consideration of the consumer into account. In other words, whether privacy would be officially introduced into antitrust analysis, or left out, it would not play a significant (or possibly any) role in practice, due to this conflict of interest. This would be like leaving the cat with the cream – highly impractical.

Reason #2: The International Aspect

While companies such as Google, Facebook and others have an effect on the privacy of parties on a global level, antitrust tools (at least currently) are national. This means that even if a particular country decides to incorporate privacy into its antitrust analysis, this would only take into account the privacy of this country’s citizens. This kind of privacy protection however, is highly impractical. The network connects the entire human race together (see Eben Moglen), and a protection of privacy should either be global or technically change the shape of the network.

A counter-argument would be that antitrust merger analysis is global to some degree, as a transaction between two international companies can progress only if antitrust regulators in all jurisdictions where these companies have activities approve it. However, the response to this is two-fold: (1) companies can still pursue a merger and just give up business in a particular jurisdiction (that decides to incorporate privacy); or (2) companies can comply with the privacy requirements of that particular jurisdiction however, given the connectivity of the global system, this compliance would not really remove the negative effect of the merger on privacy.

Conclusion

This note may seem to support those against incorporation of privacy into antitrust but actually it is not quite so. It merely suggests that privacy, when packaged in antitrust, would not provide privacy supporters with the protection they wish for. Adversely, it may reach the following result: the false notion, that antitrust regulators protect privacy (while in fact they don’t), may dissuade privacy supporters from looking for other means of protection. Such means are located in their natural habitat – the constitution. Unlike antitrust laws, which are primarily a governmental tool to regulate people’s power, the constitution is the people’s tool to regulate governmental power. Privacy supporters should thus aim their efforts to shaping the constitution, rather than exhausting them in superfluous fights in the antitrust arena.

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