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Consumer Data Collection by Big Tech Companies:  A Need for Reform in Competition Policy

Introduction

The rise of personal data as an asset for tech giants raises both competitive and data protection concerns. Since data is becoming more important in the digital economy, there are connections between these two types of law. Many, if not all, people believe that a firm has a competitive advantage if it has more data than its rival. This could give the firm the chance to act in a way that hurts competition by denying rivals access to its data. Data is vital for “production, logistics, targeted marketing, smart products and services, and Artificial Intelligence.[1]  The goal of competition law is to ensure a healthy marketplace where consumers may make the most of their purchasing power. Improving productivity and the standard of living for consumers need strict enforcement of competition laws and policies.[2] From the various case laws and other sources discussed hereinafter, it will be showcased that it is not enough to look for policy solutions in just one area of the law, like competition law or data protection law. Instead, lawmakers need an integrated approach that looks at the problem from different regulatory points of view.

This blog will attempt an evaluative analysis of the relationship between Competition Law and consumer data protection.

Significance of Consumer Data in Today’s World

Today, consumer data is the new raw material of the global economy and acts as the fuel for online commercial activity.[3] Companies’ heavy reliance on data is nothing new. Businesses relied heavily on client data to do things like target advertisements, anticipate consumers’ buying habits and expenditure levels, and evaluate staff productivity before the advent of the internet as well. Consumer analysis is the backbone of marketing, and it entails the methodical gathering, organizing, and evaluation of consumer information.[4] Every business wants to know as much as it can about its clients so it can tailor its goods and operations to them and provide them more relevant commercials. Nevertheless, the digital economy’s technical advancements have radically altered the scope of industries that may gather, analyse, and profit from data.[5] For instance, In Colorado v. Google,[6] the plaintiffs contend that Google’s business and consequent monopolies are based on information about search engine users. These statistics are gathered by constantly monitoring and analyzing each user’s search activity.

Data-driven marketplaces are often characterized by network effects in which the amount of data (scale) and diversity of data (scope) favour a platform’s market share. A dominating operator may effectively utilize network effects by preventing competitors from achieving data scale.[7]

This behaviour can impede competition by undermining data protection and privacy and increasing market entry barriers. Autonomy and human dignity underpin the fundamental right to privacy. Safeguarding privacy and personal information should be reinforced from an economic viewpoint to solve privacy market failure concerns.

In order to address the difficult link between competition and privacy and the protection of personal data, competition authorities have lately started to take big data mergers into account. It is vital that associated legislative frameworks make the required adjustments concurrently.

How does access to Information lead to Anti-Competitive Practices

It is often said that data is “non-rivalrous” and widespread to describe the fact that numerous organizations may gather and utilise identical information. However, from the viewpoint of competition law, this is not true.[8]

Having access to data and using it for creating or enhancing new goods or services is a major differentiating factor in the market. On the other hand, such features may erect obstacles to entry, making it very difficult to challenge the dominance of existing data owners who are now depending on “data advantages.” As a result, there may be market failures due to data saturation and aggregation.[9]

The essential criteria for competition law reasons are who gathers the information and about what; whether similar information is accessible through numerous sources, etc.

 The organisations where data gathering and utilisation are frequently considered crucial—including, for example, search engines and social networking—tend to be highly consolidated, as a handful of companies control vast majorities of the market.

Since new companies in the market or relatively small organisations lack the resources to acquire or purchase rights to information as existing organizations, competition law regulators believe that this might create entry barriers. For instance, the Department of Justice’s case against the merger of Bazaar voice and its chief competitor Power-Reviews demonstrated how data might operate as an entry barrier for “rating and review sites”.[10] The concern is that these traits might reinforce one another and lead to a monopolisation of businesses that benefit economically from big data.

The European research identified the following forms of behaviour around data that it believes might be “exclusionary”: “refusal to offer access to data, discriminatory access, exclusive contracts, connected sales and cross-usage, and discriminatory pricing.”[11]

Consequently, several policy studies throughout the world like the one aforementioned, are considering competitive interference in enforcing Business – to – business information exchange as a means of addressing such marketplace failures.[12]

However, there are limitations to the application of competition law to the digital market. This is because they are “zero-price markets” and they defy the conventional rules and understanding of economical and legal parameters that are used to gauge anti-competitive practices.

For example, in the case of United States v. Microsoft,[13] Internet Explorer was “free,” even though Microsoft wanted to eliminate competitors with it.[14] Google and Facebook both have free services available. Society has come to depend on them, but competition regulators have been slow to act because they cannot be priced.[15]

Relationship between data protection and competition law: Its Recognition by the Competition Commission of India

There are social drawbacks to exchanging data. There might be friction caused by exchanging information. It is crucial to strike a balance between, the right to privacy concerning one’s own data and, the liberty to operate a business. Information security concerns are being used by major data owners as a reason for not sharing data with other parties, and the veracity of these statements is complicated to assess.[16]

The CCI released a report on the telecom industry in January 2021,[17] highlighting the overlap between data privacy and competition rules. It classifies data usage as a kind of non-price competition, suggesting that businesses might gain an edge over rivals by turning consumer information into actionable insights. The commission notes in another assessment[18] that network impacts arising from vast volumes of acquired data enable corporations to compete on a degree unrelated to price, leading to a “winner takes all” scenario.

The CCI has issued an order against WhatsApp[19] that initiates an inquiry under Section 26(1) of the Competition Act which views data as a non-price competitive element. The commission noted that considering its ubiquity and extensive use, and its distinctive aspects, WhatsApp seems dominant.

Conclusion

From multiple points of view, online platforms make it harder to enforce competition laws. Providers of search engines, social networking sites, and e-commerce channels depend more on accessing data to give users and advertisers the services they expect. By using online platforms, users let providers collect information about their profiles, interests, and how they use the Internet. You can tell the difference between data that users share voluntarily, data that you get from watching what users do, and data that you get from analyzing the information that users share voluntarily or from monitoring what they do. This could cause competitors’ foreclosure, which would impact the market. Stricter regulatory constraints on the incumbent might help open the market to new participants. If personal data is portable between platforms, customers may easily switch between businesses’ offerings and act more rationally.

Author(s) Name: Prerita Bhardwaj (Symbiosis Law School, Pune)

References:

[1] Jacques Cremer et al., European Comm’n, Competition Policy for the Digital Era (2019).

[2] ABIR ROY & JAYANT KUMAR, COMPETITION LAW IN INDIA (Eastern Law House 2018).

[3] Priyanshi, Utilization of Consumer Data: A Growing Concern for Competition Law Enforcement, 4 INT’l J.L. MGMT. & HUMAN. 919 (2021).

[4]BUNDESKARTELLAMT, https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Berichte/Big%20Data%20Papier.pdf;jsessionid=930D9A112F6BD5CA4D673490D0E1C699.2_cid387?__blob=publicationFile&v=2 (last visited Jan. 24, 2023).

[5] Ibid.

[6] Colorado v. Google, 1:20-cv-3175 APM (D.D.C., Dec. 17, 2020).

[7] Kathurist & Globocnik, Exclusionary Conduct in Data-Driven Markets: Limitations of Data Sharing Remedy, J. OF ANTITRUST ENFORCEMENT 2 (2020).

[8] NORTON ROSE FULBRIGHT, https://www.nortonrosefulbright.com/en-in/knowledge/publications/64c13505/antitrust-risks-and-big-data (last visited Jan. 24, 2023).

[9] 48, THOMAS TOMBAL, IMPOSING DATA SHARING AMONG PRIVATE ACTORS: A TALE OF EVOLVING BALANCES (Kluwer Law International 2022).

[10] United States v. Bazaarvoice, Inc., N.D. Cal. Apr. 22, 2013

[11] Supra, Note 4.

[12]Bjorn Lundvist, An access and transfer right to data—from a competition law perspective, 17 JNAC (2022)

[13] United States v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001).

[14] 86 COMPETITION, DATA AND PRIVACY IN THE DIGITAL ECONOMY: TOWARDS A PRIVACY DIMENSION IN COMPETITION POLICY? (Kluwer Law International 2020).

[15] Richard Blumenthal and Tim Wu, What the Microsoft Antitrust case taught us, NEW YORK TIMES (last visited Sept. 11, 2022), https://www.nytimes.com/2018/05/18/opinion/microsoft-antitrust-case.html.

[16] 48, THOMAS TOMBAL, IMPOSING DATA SHARING AMONG PRIVATE ACTORS: A TALE OF EVOLVING BALANCES (Kluwer Law International 2022).

[17] COMPETITION COMMISSION OF INDIA, https://www.cci.gov.in/images/marketstudie/en/market-study-on-the-telecom-sector-in-india1652267616.pdf (last visited Jan. 24, 2023).

[18]  COMPETITION COMMISSION OF INDIA https://www.cci.gov.in/economics-research/market-studies/details/18/6  (last visited Jan. 24, 2023).

[19] COMPETITION COMMISSION OF INDIA  https://www.cci.gov.in/antitrust/orders/details/100/0 (last visited Jan. 24, 2023).