Digital markets, DG Comp’s policy on data / privacy and some crystal-ball gazing


A perhaps under-publicised resource on DG Comp’s website are its periodic Competition Policy Newsletters and Competition Merger Briefs, which discuss notable legal developments (from the Commission’s perspective) over the preceding period.

I happened across one such without entirely meaning to (only a competition lawyer could say such a thing…) an evening or two ago, which discusses “lessons learned” from last year’s Facebook/WhatsApp merger clearance. That was obviously an important decision, both in the sense that the Commission took on a merger which fell below the usual “bright line” jurisdictional thresholds, and in which it had to grapple with new business models set in a multi-sided market context, characterised by pervasive network effects.

While the competitive importance of ‘big data’ was clear from the merger decision itself, the potential significance of such matters as privacy as a parameter of competition were perhaps less clearly enunciated. The Commission’s Policy Newsletter notes that, while the CJEU has held that personal data issues do not fall to be considered as matters of competition law (thanks to the Asnef-Equifax ruling), issues such as data privacy, as well as online security, may increasingly become a parameter of competition in the digital world.

Merger analysis, which involves an element of crystal-ball gazing at the best of times, is obviously a particularly challenging area for the competition authorities. The recent report prepared at the behest of the European Parliament on ‘Challenges for Competition Policy in a Digital Economy’ raises the bar by speculating as to the dangers posed by “pre-emptive” merger activity in which an incumbent aims to prevent a (potential) competitor from disrupting [its] business model by acquiring the company”, while also noting the obviously high risks of false positives in any such analysis. In fact, the EP report concludes that “in digital markets, the traditional step-by-step analytical approach [(1) market definition, (2) analysis of market power, (3) competitive effects] does not work because of strong dynamic feedback effects running from firm behaviour to market structure”. On the specific question of the impact of data on mergers, the report speculates that amendments to DP law may be in order, to mitigate potential future competition problems. For example, a consumer right to data portability could be introduced to increase switching between platforms and, potentially “multi-homing” (using multiple platforms).

Such conundrums are not only relevant to merger analysis, but may also play a role in future abuse of dominance cases. It is to be hoped that the competition authorities will not resort to a more static – and thus unrealistic – market analysis when looking at past or continuing alleged abuses…