Antitrust and Unfair Competition Law

Competition: Fall 2018, Vol 28, No. 1

ANTITRUST, PRIVACY, AND DIGITAL PLATFORMS’ USE OF BIG DATA: A BRIEF OVERVIEW

By Eliana Gams and Daniel Fanaras1

The role of data in the provision of services on digital platforms has been attracting a lot of attention by consumers, businesses, and regulators alike. Data collection and usage is becoming central to many digital platforms, some of which reach and connect hundreds of millions of users. While these businesses have become significant conduits for commercial and social interactions, there are concerns that the access and management of user data is further cementing their power over many aspects of business-to-consumer relations. This article discusses the current challenges that extensive data collection and usage pose for antitrust regulators that aim to preserve competition and service quality for users. After describing the factors underpinning the success of many digital businesses, which include the efficient use of data, we discuss the relation between data, market power, and market entry as well as the implications for merger review. We also assess the relation between data, foreclosure and monopolization. Finally, we discuss the extent to which antitrust regulation may be useful in addressing online privacy concerns. We conclude that the impact of data collection on the competitive environment is not subject to generalizations and must in all instances be subject to a case-by-case assessment. Moreover, because data collection simultaneously affects a variety of interdependent activities on a platform, regulators should take into account the multi-sided nature of digital businesses. We also find that antitrust is probably not the right instrument to address issues raised by privacy concerns.

I. THE ROLE OF DATA IN PLATFORM VALUE CREATION

Online digital platforms are businesses that rely on technology to aggregate content and services and connect users for the purposes of communicating, transacting or sharing.2Examples of platforms range from ones with diverse offerings—such as Amazon, Google Android, or Facebook—to those with narrower functions such as PayPal, Uber, YouTube or Booking.com. Digital platforms have dramatically reduced transaction costs in a large number of markets. They have reduced the search costs, information costs, and costs of service delivery compared to their offline counterparts by creating efficiencies that usually are idiosyncratic to platform design and technology.3 Well-designed platforms provide instantaneous, large-scale connectivity between users, thereby providing a multitude of possible counterparties for transacting or sharing information within the same environment. They can also organize vast amounts of information in a tractable and useful way. This connectivity and level of service is typically provided at little or no cost to the end-user. As platforms grow in size, so does the number of interconnections that are possible between users and the number of valuable potential exchanges among them. Having a large number of interconnected users makes it attractive for a platform to diversify its offerings by expanding into new areas over time. Platforms often benefit from economies of scope, meaning that they obtain efficiencies through offering multiple services simultaneously. Examples of such efficiencies are the provision of content delivery and communication services, retailing and payment services, or professional networking and recruiting services. Examples of growth with diversification are pervasive and include Amazon—then solely a shopping platform—launching video content in 2006 or Uber’s expansion from a ride hailing service to offering food delivery services in 2014.4

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