The interaction between data protection and competition laws

This aritcle is written by Vishal Singh.

The Competition Act, 2002 has been enacted to prevent the activities that have an adverse effect on competition in the Indian Market. The Preamble of the Act states: An Act to provide, keeping in view the economic development of the country, …which unambiguously enunciates the role of ‘Economic Efficiency’ in the Competition Law. The goal of competition law is to build a competitive market and thus foster economic growth of the nation. However, with emergence of digital economy, the issues relating to ‘Big Data’, ‘Big Analytics’ & and their implications on Competition Policy have been raised in Business Literature.

‘Big Data’ has been described as a voluminous amount of data which is mined by business entities for commercial gain and other purposes. Big Data has been characterized by the four V’s :

• the volume of Data;
• the velocity at which data is collected, used, and disseminated;
• the variety of information aggregated; and finally
• the value of the data.

After collection of such data, what comes into picture is ‘Big Analytics’: a term referring to the complex process of examination of Big Data using specialized algorithms to uncover hidden patterns, extracting useful information such as consumer preferences, market trends etc. Such information helps business entities in planning their future business policies.

The interaction between data protection and competition laws

The emergence of Big Data as an asset for market players does not only raise data protection issues but also leads to competition considerations. The rapid growth of data application in this digitalized economy unveils the scope of data protection in the realm of competition law. The interaction between data protection and competition laws started to gain attention from policy makers and academician after the announcement of Google’s proposed acquisition of DoubleClick in 2007. The concerns were raised mainly owing to the information which would have been in the hands of Google after the completion of acquisition.

Most notably, Peter Swire argued in his testimony on behavioral advertising that “combination of ‘deep’ information from Google on search behaviour of Individuals with ‘broad’ information from DoubleClick on web-browsing behaviour of individuals could significantly reduce the quality of Google’s search engine for consumers with high preferences.”ⁱⁱ

However, despite calls to oppose the acquisition on the grounds of privacy considerations, the Federal Trade Commission of US stated that it lacks the legal jurisdiction to tether conditions that do not associate to anti-trust. In its view, the sole purpose of merger review is to identify and remedy transactions that harm competition. It was contended that FTC could have depended on a different hypothesis to combine privacy issues in competition analysis of the transaction by the then-commissioner Paula Jones Harbour.

The discourse got revitalized when Facebook announced acquiring Whatsapp in 2014 which was approved by both the US FTC and the European Commission. European Commission reiterated that any privacy related concern as a result of the transaction do not fall within the scope of EU competition law but within the ambit of EU data protection laws.

In spite of oppositions to both Google/DoubleClickⁱⁱⁱ and Facebook/Whatsapp^iv acquisitions, the US FTC as well as the European Commission deny to include privacy-related concerns into competition law and state that privacy-related concerns should rather be resolved under data protection laws.

Data has been recognized as a non-price parameter in competition assessment in the Microsoft/Linkedin^v merger, if it is a significant factor in the quality of services rendered. In the digital era, Big Data helps the enterprises in improving the services rendered by them, providing more customized options based on the individual preferences, however, at the same time, it raises privacy-related concern which should not be ignored.

DATA PROTECTION INTERESTS IN MERGER REVIEW

Data-related competition issues cannot always be identified using the current distinction made between horizontal, vertical and conglomerate mergers. Even if a merger does not lead to horizontal or vertical overlap and does not give rise to conglomerate effects in terms of the product and services that are offered by the merging parties, a combination of datasets may still have a competitive impact. The obtained datasets provide an opportunity to an enterprise to improve existing products and to develop new products i.e. entering into another relevant market. Since no real market for supply and demand of data exists, it becomes quite difficult for competition authorities to tackle such issues. However, by defining a potential market for data as an asset, authorities would be able to tackle competition concerns relating to datasets or data concentration in merger cases. This might be considered as a big step in merger review as the datasets act as a super asset in the combination cases in the online market. In a March 2016 speech, EU Competition Commissioner stated “Sometimes, what matters are its assets. That could be a customer base or even a set of data”. Need of potential relevant market for data can be illustrated by reference to the Google acquisition of Nest in 2014. Nest, a producer of smart home devices and Google, a search engine, were not competing in any relevant market. Nevertheless, this acquisition benefited Google as it acquired the access to data on the behaviour of consumers, which in turn, must have benefited Google in developing the services rendered by it or in developing a new product. The US FTC, which cleared the deal, would have been able to assess such concerns in more detail had it defined the potential market for data.^vi In a data-driven economy, such merger has the potential of restricting the concentration of relevant data and create entry barriers for new companies as they don’t have access to such amount of relevant data leading to obstructing their expansion and in turn to eliminating competition. Merger in the data-related economy can also lead to vertical or conglomerate effects if a large enterprise has obtained the ability to restrict upstream or downstream competitors’ access to data. More generally, Vertical integration can entail discriminatory access to strategic information with the effect of distorting competition.

DATA PROTECTION INTERESTS AND ABUSE OF DOMINANCE

Data may play a significant role in establishing dominance. It is argued that “a serial disregard for the privacy interest of consumers forms a indication that an undertaking has the power to behave independently in the market and thus posses a dominant position”.^vii However, it is not necessary that existence of Data is always detrimental to consumer welfare if privacy forms only one aspect of quality and works as a currency for more relevant end-products and services. Nevertheless, a dominant position can be establised if data protection is the only aspect of quality and does not interrelate with other product dimensions.

With regard to the role of data protection in establshing abuse, Buttarelli^viii states in a 2015 speech that “we should be prepared for potential abuse of dominance cases which also may have involve a breach of data protection rules”.

From a competition perspective, the question which arises is that, What amount of data is to be considered as excessive to establish dominance? An approach which can be followed involves the use of data protection benchmark against which the existence of abusive behaviour can be tested. By using this principle, data protection can be integrated in competition law for assessing abuse of dominance [such approach was used by Bundeskartellant (German Competition authority) when they announced the opening of proceedings against Facebook]. Data can also facilitate price discrimination as a large amount of data helps in analysing the preferences and reservations of the consumers which helps the companies in adapting the prices to individual customer groups.

CONCLUSION

Even though competition authorities is currently reluctant to integrate data protection into competition, it is submitted that greater consideration should be given to data protection. The competition authorities need to go beyond the school of thought of justification of competition i.e. the concept of ‘Economic Efficiency’ while assesing the merger and abuse of dominance cases which involve data on a large scale. Competition authorities need a balanced approach between ‘Economic Efficiency’ and ‘Data Protection’. However, at the same time, it should be noted that competition and data protection law are two different legal regimes having different causes of concern. This implies that pure data protection issues should be considered by Data Protection authorities. Considering that the utilization of data as an advantage by showcase players may interfere with fair competition, it is presented that the Competition Commission of India has a specific level of duty to advance the use of the right to data protection as well when acting in its ability as a competition authority.

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