French and German competition authorities publish joint paper on data and competition law

Background

The joint paper,^[1], is the outcome of the initiative taken last October by the French Competition Authority (Autorité de la concurrence) and the German Competition Authority (Bundeskartellamt) to analyse jointly the potential competition law issues raised by the increasing use of data in today's economy.

So-called “big data” has indeed become a very hot topic for competition authorities. Before the publication of this joint paper, the Bundeskartellamt had already launched an investigation into Facebook to assess whether it has abused a possible dominant position in the market for social networks through its specific terms of service on the use of user data. The Autorité de la concurrence, for its part, has taken the opportunity of the publication of the study to announce that it will soon launch a full-blown sector inquiry into data-related markets and strategies.  The UK Competition and Markets Authority published a study on the commercial use of consumer data in 2015.

In this context, the joint study provides a useful overview of the relevant competition issues raised by the use of data and a state-of-play of the on-going debates. In this study, the two authorities go beyond a mere description of the importance of collected data – including personal data – in the modern economy. They also consider (1) whether the collection, processing and use of data may lead to market power; (2) the types of data-related conduct that are potentially anticompetitive; and (3) whether personal data protection rules take precedence over competition law rules.  

Data and market power

The premise of the analysis is that the accumulation of data is only problematic if it gives market power to the company which owns the data. While the study acknowledges that the “data-advantage” is not limited to companies like Google or Facebook, it recognizes that the issue is particularly sensitive in digital markets which are driven by the collection and use of large volumes of data. The study stresses that market power is dependent on the availability of the data and the scale/scope of data.

Regarding the availability of data, the study notes that although it is a well-known argument that data "is everywhere" and substitutable (data being “non rivalrous”, meaning that access to data by an operator does not preclude access by other operators), the right data may not always be available on the market, despite the development of data broker activities. Indeed, firms having access to very specific data may be reluctant to share their data advantage with competitors. The study also questions whether data is always substitutable, pointing to differences between types of data (between mobile and static data, data retrieved from search queries and data retrieved from social networks, etc.).

Regarding the size of the datasets that are likely to provide market power, the study indicates that the relevant size level will vary depending on the type and purpose of the data. For example, an operator will typically have an interest in collecting as much socio-demographic data (age, name, address etc..) as possible, but may no longer have an interest in collecting data used for inference purpose (to feed search engine algorithms or, more generally, to make predictions) once it has assembled a dataset with sufficient statistical relevance.    

Data-related anticompetitive conducts

Aside from merger control, the study identifies two types of data-related competition issues: exclusionary conducts and price discrimination. Regarding exclusionary conducts, the study  indicates that competition can be weakened or excluded by firms denying competitors access to data. Such exclusionary practices can take the form of:

• refusal to give access if the data is an “essential facility”, i.e. if the data is indispensable;
• discriminatory access;
• entering into exclusive contracts with customers; or
• tied sales and cross usage of datasets.

The study also indicates that data can facilitate price discrimination, since companies use data about their clients to assess their willingness to pay for a given good or services. However, the study questions whether price discrimination is always problematic and, most of all, whether it is an issue to be addressed by competition law, if discrimination is limited to Business to Consumer sales.  

Competition law vs. personal data protection

The paper also analyses the interaction between data protection rules and competition rules, and concludes that the existence of specific data protection mechanisms does not make competition law irrelevant. The paper states that competition authorities should be allowed to consider privacy policies from a competition standpoint whenever these policies are liable to affect competition.

What’s next

Although the paper provides a valuable overview of potential competition law issues relating to big data, it provides relatively limited practical guidance. In particular, it is written in sufficiently wide terms so as to leave sufficient margin of discretion to the French and German authorities in their on-going or future investigations into the potentially problematic use of data in digital markets. However, it shows that the competition authorities are keeping a close eye on big data, in an effort to keep pace with the development of the real economy. Companies would be well advised, in turn, to keep an eye on the future legal developments in this area, in particular on the outcome of the pending Facebook case in Germany and on the sector investigation in France.