Continuing the analysis from Part I with how data is a resource
Data as a resource
The primary reason as to why data should be treated as an asset/resource of the firms in question is that it serves as a source of market power for the firms. In markets of online advertising, essentially ones behaivoural in nature, the access to data is important to compete on the markets, and the possession of the same can even act as a barrier to entry if new entrants are unable to collect similar data. This can be illustrated through an example, say, for instance, big, established online services like Google are able to collect huge amounts of data generated by transactions online. Smaller companies, on the other hand, may be able to collect data, or acquire ‘third-party data’. However, this collected or acquired data is not as significant as the one being collected by larger platforms on a day to day basis, thereby increasing the gap between the said platforms, gradually converging towards a monopolization of data related markets.
Secondly, the collection of data can give rise to anti-competitive results. This can be seen in merger cases. For instance, in the Google/DoubleClick case, DoubleClick used a state of the art DART (Dynamic Advertising Reporting & Targeting) ASP/SaaS ad-serving technology which allowed clear targeting and reporting of ad-serving per media property for websites within its network and technology sectors.[1] Acquisition of DoubleClick by Google allowed to gather information and technology to serve the most personalised advertisements. This acquisition was approved by both the European Commission and the FTC, with one dissent based on network effects of the firms not being taken into consideration.[2] Consequently, this acquisition has produced certain barriers to entry owing to the fact that no competitor can manage to offer a service of the same quality, because of the tremendous amount of user-data, that Google owns.[3]
The acquisition of WhatsApp by Facebook[4] is also illustrative of such shortcomings. WhatsApp is a paid online messaging service, which was acquired by Facebook recently. It is evident that Facebook was interested in obtaining information generated by WhatsApp so as to be able to target ads more efficiently. A changed business model of WhatsApp can be observed today. Firstly, it doesn’t charge for its services anymore, experimenting with the same. Secondly, WhatsApp’s privacy policy has been amended to share data specifically with Facebook.[5] This merger has drastically affected the market. End-users had two routes, one of a paid service with privacy of data (WhatsApp messenger), another, with less privacy protection, but free services (Facebook messenger).[6] Today, consumers are at a loss of alternate routes and multi-homing is equally difficult in this sector[7], owing to the mass usage of WhatsApp messenger. Consequently, the users who valued their privacy over charges for a service, have seen a decrease in their welfare. It is understandable that the data acquired in form of a merger gives firms a stronger market position as compared to the firms with zero to lesser personal user data collection.
Firms like Google and Facebook provide their services free of cost, while collecting user-data in exchange of the same. It is clear that personal data is used for creating revenues for an online platform. Otherwise if the online platforms would not be collecting user data it could not be offering its platform services for free. Users allow companies to use cookies and in other means collect data if they consider that the advantage they receive from the platform provider surpasses the total costs incurred to the consumer, which includes the user data.[8]
Change in approach
The EC has established in its earlier decisions[9] that web browsers, social networks and communication services create user markets albeit the services are offered without monetary compensation and there is no legal duty to offer the services.[10] Therefore, this indicates that the exchange of data can be compared to exchange of money. The markets are changing and modernizing, in which normal payment methods are not always used, instead other things are becoming valuable to undertakings. Undertakings provide ‘free’ services, however it is not really free, since the data collection is used as a payment for the services. Because of the peculiar nature of ‘free’ services provided in exchange of user data, there is a need for a revision of this anticompetitive framework.
This need for revision of the anticompetitive framework shall only be fulfilled when started with consideration of personal data as a resource of a firm, especially in markets relating to online advertising. The same shall be achieved with certain changes to the application and approach of competition law regime. The nature of the Internet economy is highly dynamic, and anything beyond effective monitoring is not warranted as long as there is new evidence pointing towards market power by some players. Further, the competition authorities need to take into consideration the behaviour adopted by the suspected firms when making acquisitions of smaller firms, as they may point towards motive of incumbent firms towards acquiring the personal data collected by the smaller ones. The amount being spent on such firms is a major criteria of determining the same. Lastly, the relevant market definition in the digital economy may be more cautiously enforced. A line may be drawn between the various modes of advertising used by firms in question and markets may sub divided on the basis of the same.
Conclusion
The use of data is not a new process, as can be illustrated by the past assessments by competition authorities in non-digital markets. Customer databases, surverys etc. have been staples of markets since a long time. However, the nature, extent and volume of data collected have multiplied owing to technical advancements. The economic relevance of data as an input has already been considered and, in several instances, acknowledged by competition authorities. To date, the risk of foreclosure associated with the concentration of data in digital industries has mostly been looked at in the context of merger control. This does not exclude the use of antitrust enforcement tools to tackle behaviour related to the collection and processing of data, similarly to what has already occurred in some non-digital markets. There are several possible “data-based” conducts, whether exclusionary or exploitative, which could, depending on the circumstances of the case, lead to enforcement action.
Now, collection of data, in itself is not a barrier in market. However, accessing this data in the first place may be subject to capacity of a firm to build sufficiently large customer base, which in turn depends on the extent to which a firm’s network and scale effects act as barriers to entry.
The ongoing digitalization of the economy and deployment of connected devices capturing offline activities have dramatically increased the amount of data available to an extent where it is a common notion that “data is everywhere”, and cannot be called an input prone to foreclosures and lock-ins. However, this can hold true if and only if the said data is in-fact accessible. This accessibility of data can be a neutralizing factor for the intangent barriers that have created in the market, leading to disguised monopolies like that of Google.
Numerous arguments may be raised towards how data accessibility is open for all. But the fact that data today is being collected from every user activity, and every bit of that collection tends to give incumbents a higher edge over small, new entrants. Therefore it is important to keep a check on the data exchanges that take place in any merger, or inter-firm availability of personal user data, which may result in concerted practices and incumbents’ activities which have a likelihood of creating barriers on smaller firms, rendering them unable to collect the relevant user data.
This is the final part of the post authored by Aryan Mohindroo a second year student of the West Bengal National University of Juridical Sciences, Kolkata.
[1] DoubleClick: Early Developments, Wikipedia, the free encyclopedia (Sep. 15, 2017), https://en.wikipedia.org/wiki/DoubleClick#Early_developments.
[2] Commissioner Pamela Jones Harbour;s dissent in Google/DoubleClick, available at https://www.ftc.gov/sites/default/files/documents/public_statements/statement-matter-google/doubleclick/071220harbour_0.pdf
[3] The Data-Driven Economy. Challenges for Competition, Autoritat Catalana de la Competència, available at http://acco.gencat.cat/web/.content/80_acco/documents/arxius/actuacions/Eco-Dades-i-Competencia-ACCO-angles.pdf (Last visited Oct. 26, 2017).
[4] In re: Shri Vinod Kumar Gupta, Chartered Accountant And WhatApp Inc., Case No. 99 of 2016 (Competition Commission of India), available at http://www.cci.gov.in/sites/default/files/26%282%29%20Order%20in%20Case%20No.%2099%20of%202016.pdf; Facebook/ WhatsApp, Case No. Comp/M7217 (Oct. 3, 2014) (European Commission).
[5] Natasha Lomas, WhatsApp’s privacy U-turn on sharing data with Facebook draws more heat in Europe, TechCrunch (Sep. 30, 2016), https://techcrunch.com/2016/09/30/whatsapps-privacy-u-turn-on-sharing-data-with-facebook-draws-more-heat-in-europe/.
[6] The Data-Driven Economy. Challenges for Competition, Autoritat Catalana de la Competència, available at http://acco.gencat.cat/web/.content/80_acco/documents/arxius/actuacions/Eco-Dades-i-Competencia-ACCO-angles.pdf (Last visited Oct. 26, 2017).
[7] Justus Haucap & Ulrich Heimeshoff, Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolization, 11 Int. Econ. Econ. Policy 49 (2014).
[8] John Newman, Antitrust in Zero-Price Markets: Foundations (2014), Research paper No. 151, University of Memphis- School of Law, 17.
[9] Microsoft (Tying), COMP/39.530, 6 March 2013, para 17 (European Commission); Microsoft/Skype, COMP/M.6281, 7 October 2011, para 10 (European Commission); Facebook/WhatsApp, 0COMP.M7217, 3 October 2014, para 45 (European Commission).
[10] Thomas Hoppner, Defining Markets for Multi-Sided Platforms: The Case of Search Engines, 3 World Competition 38, 355 (2015).
Comments