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Antitrust

Inclusion of Privacy as a Non-Price Competition Parameter

By Vishal Pathania

In a digital economy or data-driven economy, data occupies the central position in new data-driven businesses. Collecting, storing, analysing, and working with data play an important role in the data-centred markets. In fact, data has become a significant source of market power.[1] This is the reason why many data-driven companies such as Facebook, Google, etc are providing free services to the consumers to acquire valuable data in return which can be used for target advertisement. Consequently, these firms are amassing unprecedented magnitude of data which is referred as Big Data. Big data pose significant challenges to regulators, especially from the competition law and data protection law perspective. Big data may raise privacy risks and concerns about consumer harm.

In this post, I will be elucidating potential anti-competitive conduct due to big data and how privacy is to be included as a non-price parameter in competition analysis.

1. Collusion

It is argued that big data and algorithms could facilitate cartel agreement. These data-driven companies employ an algorithm to fix the price and regulators often find it difficult to prove the existence of cartel agreement as parallel pricing is not prohibited under competition law. Further, the Canadian competition commission and European Union have warned that a pricing algorithm may cause tactic collusion as it allows collusion to take place without the need for any communication, thereby allowing any scrutiny concerning collusion to escape from the traditional legal framework. [2] Thus, it is argued that the pricing algorithm would help in effectively enforcing cartel agreement by detecting and preventing deviation and hence reduce competition.

2. Abuse of Dominant Position

It is argued that there may be an abuse of dominance. Once, a company acquires a dominant position in the relevant market due to the winner- takes- all nature of the digital economy, monopoly is created. Further, due to network effect, lock-in and high switching costs ensure companies remain in a dominant position. In the data-driven economy, data is a valuable raw material and a prerequisite for competing in the market. The dominant firm has a significantly high market share, and consequently has access to a large volume of consumer data. It is unimaginable that the new entity would have access to such data. Thus, big data creates barriers to entry. Further, the dominant entity may refuse access to data, such conduct could be regarded as anti-competitive if such data is unique and not replicable. Also, the dominant entity can abuse its dominant position by entering an exclusive agreement with the third party, thus reducing data access to the third party. The dominant entity may tie access to data with data analytical service, in order to reduce competition in the data analytical market. The dominant entity may impose price discrimination as they became aware of consumer behaviour, purchasing habit, etc. The dominant entity may also leverage its dominant position in the online market to attain dominance in the adjacent market.

3. Data-Driven Merger

It is argued that both horizontal and vertical data-driven mergers could cause potential competition concerns. In the former case, a merger between two or more undertakings could preclude the competition, especially in a concentrated market where there is no effective substitute for data. In the latter case, a merger between the dominant undertakings could lead to foreclosure.

Position of Privacy in India

In the case of Vinod Kumar Gupta v. WhatsApp Inc,[3] CCI noted that any privacy concern was outside of its purview and had to be dealt with exclusively under the Information Technology Act, 2000.[4] On the other hand, in a similar case, In Re Matrimony.com vs. Google,[5] the CCI noted, “it would not be out of place to equate data in this century to what oil was to the last one. The Commission is not oblivious of the increasing value of data for firms that can be used to target advertising better. Moreover, the data can be turned into any number of revenue-generating artificial-intelligence (AI) based innovations.”[6]

Position of Privacy in the EU

In the case of TomTom/Tele Atlas,[7] The dimension of privacy was considered and the commission noted that privacy could be used as a quality component in competition assessment merger. Similarly, in the case of a merger between Microsoft and LinkedIn,[8] the commission in its merger review, explicitly noted privacy as a significant factor of quality, that can be considered as a parameter of competition analysis. Further, in the case of Apple/Shazam,[9] The commission noted that data is a source of market power, which is an important consideration in competition law. Further, the antitrust authority of Germany, the Bundeskartellamt against the Facebook held “that Facebook is abusing this dominant position by making the use of its social network conditional on its being allowed to limitlessly amass every kind of data generated by using third-party websites and merge it with the user’s Facebook account.”[10] In doing so, the commission explicitly held that data protection violation, infringement of fundamental rights and loss of control over data constitutes harm to the consumers. Concerning the jurisdiction, the commission noted that in those situations access to personal data is crucial for its market position, competition authorities have jurisdiction and competence to investigate how personal data is processed by the entity. Furthermore, the commission held that amassing personal data of users enables Facebook to offer personalized advertisements efficiently, thereby, cementing its leading position as a supplier of advertising on social networks.[11]

Conclusion

Traditionally, the competition authority in India focuses on both prices as well as non-price factors such as quality, innovation, and choice in competition analysis. It is argued that in today’s digital market businesses are working on a zero pricing model, and so, quality as the parameter for competition analysis assumes significance as competition is increasingly focusing on a non-price element such as quality. It is argued that the concept of quality includes privacy protection and thus privacy can be viewed as a parameter of non-price competition. It is also argued that privacy policies and the corresponding processing of personal data can be taken into consideration if they affect competition. Further, it is pointed out by Ohlhausen and Okuliar that, ‘privacy protection has emerged as a small, but rapidly expanding, dimension of competition among digital platforms’.[12] The degradation of privacy can be conceived as a reduction in the quality of goods and services. Further, if an online service provider, post-merger, where to start requiring more personal information from its users or supplying their data to third parties as a condition for offering its “free” product, this could be seen as a degradation in the quality of the product and depriving consumers of meaningful privacy choice.[13] Thus, it is argued that data privacy is a concern so far as it affects the competition, that is, reduces privacy protection as a form of quality or deprives consumer choice in relation to privacy or diminishes innovation.

Therefore, it is suggested that an amendment be made to include privacy as parameter in competition analysis.  

The author is a 2nd year law student at Hidayatullah National Law University, Raipur.


[1]AUTORITE DE LA CONCURRENCE AND BUNDESKARTELLAMT, COMPETION LAW AND DATA, at 11 (2016).     

[2]CANADA COMPETITION BUREAU, BIG DATA AND INNOVATION: KEY THEMES FOR COMPETITION POLICY IN CANADA, at 10 (2017).

[3] Vinod Kumar Gupta v. WhatsApp Inc, 2017 CompLR 495 (CCI).

[4] Id.

[5] In Re Matrimony.com v. Google, 2018 CompLR 101 (CCI).

[6] Id.

[7] Case COMP/M.4854  TomTom/Tele Atlas, Commission decision (2008).

[8] Mergers: Commission Approves Acquisition of LinkedIn by Microsoft, Subject to Conditions, (2016), https://ec.europa.eu/commission/presscorner/detail/en/IP_16_4284 (Last visited April 27, 2020).

[9] Mergers: Mergers: Commission clears Apple’s acquisition of Shazam, (2018), https://ec.europa.eu/commission/presscorner/detail/en/IP_18_5662 (Last visited April 27, 2020).

[10] Bundeskartellamt prohibits Facebook from combining user data from different sources, (2019), (https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/07_02_2019_Facebook.html?nn=3591568 (Last visited April 28, 2020).

[11]Maximilian N. Volmar & Katharina O. Helmdach, 14 Protecting Consumers and Their Data through Competition Law? Rethinking Abuse of Dominance in Light of the Federal Cartel Office’s Facebook Investigation, Eur. Compet. J., 195–215 (2018).   

[12] John M. Newman Antitrust in Zero-Price Markets: Foundations, 164 U. Pa. L. Rev., 149 (2015).

[13] M.C. Wasastjerna, The implications of big data and privacy on competition analysis in merger control and the controversial competition-data protection interface, 30(3) Eur. Bus. Law Rev., 337-365 (2019).



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