Big data, small problem. Is the antitrust toolkit compatible for data?

EU Commissioner Margarethe Vestager recently weighed in on the role of Big Data in the field of competition law. During a speech held at the Digital Life Design conference in January 2016, she stated that she was aware of the growing relevance of data in competition law, but that, while keeping a close eye on Big Data, the Commission has not found a competition problem yet^[1]. The Commissioner, however, did not exclude the possibility that problems may arise in the future.

The main questions under consideration are what role data can play in competitive analysis and whether or not European legislation should be developed. If indeed legislation is required, should this entail amendments of existing competition laws, or the creation of sector-specific regulation for online/data-rich sectors?

Data and competition law – possible concerns

The rise in the use of the internet for not only research but also e-commerce, online viewing of TV programs and social media have allowed companies to gather large amounts of data and have triggered the need for authorities to understand the effect of this in more detail.

Not only the European Commission, but also national competition authorities have decided to study the role of Big Data and competition law. The German and French Competition Authorities recently prepared a joint study^[2] that examines whether the collection and/or exploitation of data can harm competition in digital markets and discusses in particular under which conditions data can be a source of market power.

This note discusses different types of data-related conduct that may be anti-competitive, including acquisitions of data-rich companies, the limitation of access to data, the use of data as a vehicle for price discrimination and violations of data protection rules by companies with market power. 

Acquisitions of data-rich companies

In recent years the number of mergers and acquisitions in data-related sectors has increased from 55 deals in 2008 to almost 164 in 2012^[3]. This illustrates the growing understanding that the acquisition of innovative companies with large datasets can offer a competitive advantage. However, to assume that this advantage automatically gives rise to competition law risks would be too hasty.

Both the European Commission and the US Federal Trade Commission have analysed in recent merger control cases the advantages which may be created when combining two companies’ access to personal user data and whether this may squeeze out competitors.

The most important M&A transactions which raised these questions have been the acquisition of DoubleClick by Google as well as the Facebook/WhatsApp transaction.

In Google/DoubleClick^[4], the European Commission analysed whether the acquisition of DoubleClick and the subsequent combination of Google’s database and the customer-provided data collected by DoubleClick would lead to an unmatched competitive advantage in the advertising-intermediation market.

The Commission found that the combination of the merging parties' data collections on search and web-browsing behavior would not create a competitive advantage that cannot be replicated by competitors. It noted that a number of Google's competitors (including Microsoft and Yahoo!) already have access to data about both searches and web browsing behavior and that competitors can also purchase data or targeting services from third parties.

The Commission considered a similar theory of harm in the Facebook/WhatsApp^[5] transaction. It analysed whether the acquisition would strengthen the market position of Facebook by allowing Facebook to use WhatsApp data for its advertising activities or alternatively by introducing advertising in the WhatsApp service.

The Commission ultimately concluded that regardless of how the data would be used by Facebook, there would still be a very large amount of internet user data available for advertising purposes which would not be within Facebook's exclusive control as a result of this transaction.

Restrictions to the use of data

Competition can also be weakened by conduct that deprives competitors from access to data. The joint report of the French and German Competition Authorities discusses the possible exclusion of competitors through refusal of access or discriminatory access to data, exclusive contracts with third-party data providers and tied sales. The limitation or refusal of access to data violates competition law if (i) the data constitute an "essential facility" for the activities of competitors and if (ii) the refusal prevents the emergence of a new product for which consumer demand exists.^[6]

Also the UK Competition and Markets Authority found in a report^[7] that tied sales could raise competition law concerns when data on a given market are used to develop or increase market power on another market, for instance when a company owning a large amount of data, ties access to the data to the use of its own data analytics services.

Data as a vehicle for price discrimination

The joint French-German report points out that data can facilitate price discrimination. It explains that a company collecting data about the purchasing habits of its clients can better assess how much they are willing to pay for certain products. If the company has market power, it could then use this information to charge different prices to different customer groups. However, the report notes that such price discrimination does not have a negative impact per se and can also improve social welfare and reinforce competition.

Violations of data protection rules and competition law

Lastly, much has been written about privacy concerns and competition law (see chapter 3 above). It should be underlined that data protection in itself is not a competition law matter. In the 2006 CJEU judgment in the Asnef-Equifax^[8] case, the court noted that:

"…any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law, they may be resolved on the basis of the relevant provisions governing data protection."

This position was confirmed by the European Commission in the Facebook/WhatsApp decision where it stated: 

"the Commission has analysed potential data concentration only to the extent that it is likely to strengthen Facebook's position in the online advertising market or in any sub-segments thereof. Any privacy-related concerns flowing from the increased concentration of data within the control of Facebook as a result of the Transaction do not fall within the scope of the EU competition law rules but within the scope of the EU data protection rules."

The joint French-German report takes a more differentiated view, noting that violations of data protection rules by a dominant company can constitute an abuse of its dominant position. The German Competition Authority therefore recently initiated proceedings against Facebook to investigate whether its terms regarding the use of user data constitute an abuse of its dominant position in the market for social networks.

Synthesis

The interplay between data, market power and competition law is a complex matter in a world of rapidly evolving technologies. As more and more national competition authorities are investigating this question, a certain degree of guidance or harmonization at an EU level would be desirable. 

Nonetheless, to introduce specific EU competition legislation would probably be a step too far, since the existing competition law rules and tools are sufficient to address anti-competitive effects of the collection and use of data. The Commission has the possibility to investigate cases that raise important issues itself (even if a proceeding was initially opened by a national competition authority) and it can make active use of its right to review and provide input on decisions of national competition authorities to ensure a uniform application of the EU competition rules in the area of Big Data.

^{This paper was written within the European Union TOREADOR project (“TrustwOrthy model-awaRE Analytics Data platfORm””).
Granting authority: European Union.
Call: H2020-ICT-2015. Topic: ICT-16-2015 (Big data - research). Type of action: RIA.
Grant agreement no.: 688797, Starting date: 1st January 2016, Ending date: 31st December 2018.}

1. MLex, "Vestager keeps close eye on use of Big Data, but sees no antitrust cases yet", Matthew Newman, http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=758178&siteid=190&rdir=1 
2. Competition Law and Data, 10 May 2016, http://www.autoritedelaconcurrence.fr/doc/reportcompetitionlawanddatafinal.pdf 
3. OECD, Data-Driven Innovation: Big Data for growth and well-being (OECD Publishing 2015) 94 http://dx.doi.org/10.1787/9789264229358-en
4. Google/Double Click (Case No COMP/M.4731) Commission Decision of 11/03/2008 [2008] OJ C(2008) 927 final
5. Facebook/WhatsApp (Case No COMP/M.7217) Commission Decision 03/10/2014 [2014] OJ C(2014) 7239 final
6. Case C-7/97, Bronner GmbH&Co KG v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH&Co KG and Others [1998] ECLI:EU:C:1998:569, §44-45
7. Competition & Markets Authority, The commercial use of consumer data: Report on the CMA's call for information (CMA 2015)
   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/435817/The_commercial_use_of_consumer_data.pdf
8. Case C-238/05, Asnef-Equifax etc v. Asociación de Usuarios de Servicios Bancarios [2006] ECLI:EU:C:2006:734