Innovation has always required a constant iteration of trial and error as Companies use data about current performance to improve future performance. So it should come as no surprise that companies in the information age want to use ever more data to hone their products. But there is an emerging debate over the competitive implications of big data. Some observers argue that companies amassing too much data might inhibit competition, so Antitrust regulators should preemptively take action to cut “big data” down to “medium data.” Others say there is nothing new here, and existing competition law is more than capable of dealing with any problems.
Among those advocating for an expansion of antitrust reviews around data are law professor Maurice Stucke and antitrust attorney Allen Grunes, who voice three interrelated concerns in Big Data and Competition Policy. First, they argue that allowing companies to control large amounts of data raises barriers to entry for potential rivals that lack enough data to develop competitive products. By this logic, deals like Facebook’s acquisition of WhatsApp should be fought, because allowing a dominant company to acquire even more data will increase its market power.
Second, proponents of this view assert that existing antitrust law is inadequate for the competitive threats stemming from large collections of data. One reason why is that much of traditional antitrust analysis focuses on the prices of goods and services, because companies with market power face incentives to limit supplies and charge more. With the profusion of “free” services, authorities may have a much tougher time adequately evaluating the implications of competition other than price, such as degradations in product quality or privacy protection.
Finally, some who worry about big data from an antitrust perspective claim that consumer protection laws are inadequate, because privacy protections are themselves a function of how much competition companies face, so antitrust regulators must step in to protect privacy.
But other antitrust scholars are much less worried that a company possessing large amounts of data automatically confers market power. For example, economists Anja Lambrecht and Catherine Tucker recently examined the use of data and found “little evidence that the mere possession of big data is sufficient protection for an incumbent against a superior product offering.” This is because there is a vibrant market in the collection and sale of all sorts of data, and new technologies have made it easier for market entrants to gather, store, and analyze the data they need. Moreover, if the possession of large amounts of data were necessary for an entrant to compete successfully, that would not necessarily constitute an unfair competitive advantage. Many industries have high entry costs; we do not say that Ford and Daimler have an unfair advantage just because companies must build an expensive factory before they can sell a single car.
With regard to free services, while companies such as Facebook, Google, and Twitter may have a very large share of the consumer markets for their narrow service offerings, the markets themselves are two-sided — and the side where they earn most of their revenue is advertising, which is characterized by fierce competition, powerful counterparties, and constant evaluation of the relative performance of different advertising outlets. So in this case traditional concerns of abuse, such as pricing below marginal cost and product tying, don’t really apply, and can actually benefit competition and consumers.
When it comes to privacy, those who don’t believe that merely possessing lots of data is anticompetitive suggest that antitrust regulators should leave that to privacy and consumer protection regulators. In the United States, that principally means the Federal Trade Commission, which to date has largely acted on a case-by-case basis to deal with bad conduct stemming from the use of data. There is no evidence that the mere possession of more data provides any greater risk to privacy. But data does drive many of our most important emerging technologies, including autonomous cars, language translation, and other artificial intelligence–based innovations. Nor is there evidence that consumers are demanding more privacy protection in the products they use. Most consumers are willing to share large amounts of personal data in return for free services they value. Consumers tend to object only when their data is actually misused, something regulators already take action to address.
There is no question that diligent antitrust enforcement remains critical to ensuring competitive markets. Data-rich companies, like all companies, are capable of engaging in anticompetitive behavior. They are also capable of trying to use mergers to amass enough market power to affect prices and squeeze out competitors. Wherever this happens, antitrust agencies need to take action — and existing law gives them adequate power to address these threats. However, regulators must demonstrate a clear threat to competition to justify their actions.
Antitrust law is not meant to protect weaker companies from the consequences of fair competition or to pursue noncompetitive goals, such as privacy. Moreover, the mere possession of large amounts of data is never a cause for concern. And, in most cases, neither is using this data to produce a better product. Data-rich companies are not an economic threat, but rather are an important source of innovation. If the simple possession of data were to become a new factor in antitrust analysis, it would depress innovation when policy makers should be encouraging it.