18 May, 2018
* This piece was first published in the February 2018 issue of the Practical Lawyer (2018) PL (Comp. L) Feb 75
The boom in the technology and internet arenas has globally accelerated the growth of the digital economy. This has significantly aided the mechanism of collecting, processing and commercially exploiting the data in the hands of large corporations and even start-ups. Commonly referred to as ‘big data’, the concept refers to large volumes of a variety of data which is collected at high velocity and is then processed by computing softwares to produce unique datasets which has significant commercial value.[1] While the collection and use of personal data falls under the domain of data protection laws, a question that is now being examined by several competition law regulators is whether the use of big data can impact competition in the markets.
Before we delve into this question, it is pertinent to consider the advantages and efficiencies which result from the commercial exploitation of big data. Consider the modus operandi of any frequently used search engine. It would use self-learning computing algorithms which would observe, record and analyze search terms keyed in by the users, the websites ‘clicked on’ and combine it with data collected from its other applications and services such as e-mail or data processing services to create detailed user profiles. It would then use, and maybe even sell, these unique and individualized information assets to various online advertisers and retailers for targeted advertising.[2] Consider also the personalized recommendations of products and services that a user receives on various e-commerce platforms or on social networking websites based on the purchasing history, the keywords typed, and the general and personal information provided to these websites. Therefore, by closely tracking and analyzing the users’ needs and studying the consumer demand pattern, big data immensely assists in improving the quality of goods and services and their targeted advertising. It also improves the decision-making on the supply side by improving market predictions and the operational efficiency of manufacturers.[3]
From a competition law perspective, a pertinent question that arises is whether the access and use of big data by enterprises can confer them with market power and a competitive advantage over their competitors. To put it differently, given that data analyzing instruments and the development of complex self-learning computing algorithms require significant investments, can access to big data result in highly concentrated markets with high entry barriers?[4] In addition, recent mergers and acquisitions in the technology and communications sectors have also raised the issue of whether consumer privacy can be a relevant non-price competition parameter in competition assessment.[5] In the Microsoft/LinkedIn merger,[6] the European Commission (EC) had noted that although privacy concerns fell under data protection laws, it could be seen as a non-price competition factor in merger control assessments to the extent that consumers saw it as significant factor in the quality of the services offered. Recently, the EC had also imposed a fine of USD 132.26 million on Facebook for failing to disclose that post its acquisition of WhatsApp, it would be able to establish reliable automated matching between the users’ Facebook and WhatsApp accounts.[7]
Even under the enforcement provisions, the access to big data could result in exclusionary conduct. For instance, dominant enterprises may enter into exclusive agreements with third party data analytics and data providers to gain a data-related competitive advantage.[8] They may also foreclose the market by making it difficult for their users to use or adopt the platform of their competitors.[9] However, while examining the potentially abusive conduct one cannot lose sight of the principles governing dominance which inter alia include determination of whether the enterprise in question alone owns/controls such data, whether the data is proprietary to such enterprise or a critical input for downstream players or whether the data is unique or its substitutes are available. In the same vein, horizontal agreements such as digital price fixing cartels may be facilitated by the use of self-learning pricing and profit-maximizing algorithms.[10] Data analytics may also be used to monitor compliance with both horizontal and vertical agreements such as cartels and resale price maintenance by a seller. In light of these potential anti-competitive concerns arising from the use of big data, many antitrust regulators have published detailed studies on the subject by identifying and discussing the various scenarios in which big data may become amenable to antitrust scrutiny.[11]
In the Indian context, innovation and technology-driven markets such as e-commerce, ride hailing apps, online wallets, etc. have been growing swiftly and witnessing a progressive surge in M&A activity rendering such markets exposed to potential competition law concerns. Superior technology and ‘internet of things’ has permeated our social relationships, shopping habits and even societal norms to an extent making the Indian consumer digital savvy but not privacy sceptical just yet. Therefore it may be an opportune time for the Competition Commission of India (CCI) to follow suit and as a preliminary step, conduct a study whether the rife issue of big data is really a big deal! With regard to privacy concerns, although the CCI in its WhatsApp order,[12] had held that any breach of the Information Technology Act, 2000 did not fall within the purview of the Competition Act, 2002, it remains to be seen if and to what extent it will take clues from the EC in considering privacy concerns as a relevant parameter of quality of the goods or services offered in its competition assessment. Nonetheless, corporate giants are encouraged to follow the debate/ enforcement activity in this sphere closely. It would be prudent for such enterprises to consider assessing their data driven business models/compliance policies against the continuously evolving competition law standards.
* The authors were assisted by Anmol Awasthi, Associate.
For further information, please contact:
Anshuman Sakle, Partner, Cyril Amarchand Mangaldas
anshuman.sakle@cyrilshroff.com
[1] See Organization for Economic Co-operation and Development (OECD), Big Data: Bringing Competition Policy to the Digital Era, November 2016, Page 5.
[2] See OECD, Big Data: Bringing Competition Policy to the Digital Era, November 2016, Pages 8 and 10.
[3] See OECD, Big Data: Bringing Competition Policy to the Digital Era, November 2016, Page 8.
[4] See Autorité de la concurrence and Bunderkartellamt, Competition Law and Data, May 2016, Pages 12-13.
[5] See Google/Double Click, Case COMP/M.4731; Microsoft/Yahoo! Search Business, Case Comp/M.5727.
[6] See Case Comp/ M.8124; See also Microsoft/Skype, Case Comp/M.6281.
[7] See EC, Press Release, Mergers: Commission fines Facebook €110 million for providing misleading information about WhatsApp takeover, 18 May 2017, available at: http://europa.eu/rapid/press-release_IP-17-1369_en.htm .
[8] See OECD, Big Data: Bringing Competition Policy to the Digital Era, November 2016, Page 21.
[9] In April 2016, the EC initiated formal antitrust proceedings against Alphabet, Google’s parent company, with regard to its business practices related to Android, whereby Google would impose restrictions and financially incentivize android device manufacturers and mobile network operators to pre-install Google Search and Google Chrome browser on their devices, as a condition to license certain Google proprietary apps. It would also prevent the manufacturers from selling android devices which ran on competing operating systems based on the android open source code. See EC Fact Sheet, Antitrust: Commission sends Statement of Objections to Google on Android operating system and applications, April 2016, available at: http://europa.eu/rapid/press-release_MEMO-16-1484_en.htm .
[10] See OECD, Big Data: Bringing Competition Policy to the Digital Era, November 2016, Pages 22-24; See also United States v. David Topkins, 2015, US District Court (N.D.C.).
[11] Studies on the potential competition concerns arising from the use of big data have been conducted by the competition authorities of France, Germany, Canada, Singapore and also OECD. See Autorité de la concurrence and Bunderkartellamt, Competition Law and Data, May 2016; Competition Bureau, Canada, Big data and Innovation: Implications for Competition Policy in Canada, 2017; Singapore Competition Commission, Data: Engine for Growth – Implications for Competition Law, Personal Data Protection, and Intellectual Property Rights, August 2017; OECD, Big Data: Bringing Competition Policy to the Digital Era, November 2016.
[12] See Vinod Kumar Gupta v. WhatsApp Inc., Case No. 99 of 2016.
