In the last decade, out of the web has emerged a new consortium of tech giants that are thriving by amassing data and putting themselves as an indispensable digital intermediary prism in consumers’ lives. In the short run, their mere existence is not a problem, as their innovative nature is not disputed. However, in the long run, these data-opolies are enjoying an unprecedented clustering of several competitive parameters that may create high barriers to entry for competitors.
These key characteristics or layers are extreme returns to scale, network externalities and the growing importance of data and the positive feedback loop it triggers. As noted by a panel appointed by the European Commission, these characteristics might form a digital boarder that cannot be crossed. Besides, thanks to these strong economies of scope, once a market is conquered, it may be impossible for competitors to reach the critical mass of customers required to be a real challenger and by the same token, less chance to see competition flourish.
On that matter, policymakers face the risk of nipping innovation in the bud by either over- or under-regulating. Antitrust authorities wonder if antitrust law should include some privacy concerns within its realm – as these market players entrench market power through the accumulation of personal and non-personal data.
Amongst the scholars, this is now a hot topic.
Has the laissez-faire stance, notably in the United States, enabled regulation of the market by the market and fostered competition and innovation? What role should data protection rules play? What is the adequate tool to monitor the internet giants?
The antitrust drums are now beating at the tech giants' doors. For example, after the US Federal Trade Commission (FTC) closed a case against Google in 2013, following the European Commission’s fines amounting to US$9.4 billion, the Department of Justice decided to open an antitrust probe against the digital behemoth.
At the same time, Amazon is under FTC scrutiny. Japan’s FTC is also probing the practices of the tech giants and has already raided Amazon’s offices. South Korea’s FTC was reported last year to be looking into whether Google Korea was abusing its market position to pressure local gaming companies to upload their products only onto the Google Play platform. The head of the Competition Commission of Singapore, Toh Han Li, stated they were looking at the use of big data. Indonesia’s Business Competition Supervisory Commission (KPPU) will continue to prioritize the digital economy with a dedicated team.
More substantially, the question of revamping competition law remains. Over the last decade, the big five tech firms have made more than 400 acquisitions globally, with over half of these in the past five years. Only a handful of these cases have been reviewed by the antitrust authorities, which raises questions about the risk of killer acquisition and the potential impact of the transferred data.
Furthermore, despite the initial skepticism, there is a growing consensus that privacy could be subject to antitrust law. In the Facebook/WhatsApp merger, the European Commission indicated that in markets for consumer communications, data privacy and data security constituted key parameters of non-price competition. The European watchdog further affirmed this stance regarding Microsoft and LinkedIn, claiming that information privacy, which could be negatively affected by the merger, is “a significant factor of quality” in the market for professional social networks.
This development brings competition policy closer to digital reality by acknowledging that market power may be exerted by reducing information privacy and foreclosing competition on a digital market, as boldly affirmed by the German antitrust body in a case against Facebook. Thus, while data protection law remains the main tool to tackle privacy, competition law appears far more suitable to correct its implications on a purely economic level.
Moreover, the two policies share some objectives. These objectives lend further support to the case for their coherent application when both policies are affected by anticompetitive practices. For example, under the European General Data Protection Regulation (GPDR), which requires firms to implement protective measures corresponding to the risk level of their data processing activities, market power could be a parameter.
Similarly, the (new) right to data portability captured by the GDPR, enables the user to control their information. This may only appear as an effective implementation of a fundamental right, but this is also a tool that empowers consumers and fosters competition by lowering the cost of switching from one provider to another. Nonetheless, this is not the case everywhere. For example, Indonesia, which hosts most unicorn companies in Southeast Asia, lacks a comprehensive data protection legal framework.
In any case, as noted by the KPPU, robust enforcement is needed to oversee these new and often confusing markets and competition authorities should also “adapt to a new model”. Nonetheless, how market power affects data collection practices remains unclear. This is partly because microeconomic theory offers little help in predicting how market power or the lack thereof (i.e. intensity of competition) affects the quality – and choice or innovation- including the level of privacy. Given such a lack of clear evidence, market structure analysis could shed light on how market power should be calculated in these markets.
All in all, in this information age, data protection can act as a normative benchmark for competition law, and the two policies should be applied holistically when their material scopes intersect. This cooperation could be undertaken by broadening the scope of the antitrust assessment either through the approval of the privacy watchdog for mergers involving a huge amount of data or by introducing within the antitrust field privacy matters on an economic level. Hence, through the widening of its scope by including data privacy as an economic parameter and via fitted digital regulations, a gentle antitrust revolution could occur in the digital age.
Édouard Bruc is a qualified lawyer (Paris Bar), alumni at the School of Law, Queen Mary University of London (LLM in competition law) and Magister DJCE of Montpellier.
Antonius Alexander Tigor is a legal technology expert, LLM in computer and communications law and Chevening Alumni at the School of Law, Queen Mary University of London, admitted to practice in Indonesia.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.