Competition for and with data

Carmelo Cennamo opened the workshop by highlighting the role and the importance of data in the digital economy. Data impacts several dimensions of digital markets, from firm-level competition and dominance to customer-oriented value creation.
Data is, in essence, codified information. While this concept is not novel, the combination of data with powerful technologies is strikingly relevant for several reasons. First, firms that have plenty of data can enjoy returns to scale from amassing data which leads to, for example, data-enabled learning or the creation of barriers to entry. Second, the possession of data enhances firms’ competitiveness in the digital economy, with data-poor firms facing growing challenges. Finally, data enables firms to offer their consumers a more compelling (because personalized) value proposition.
Prof. Cennamo also pointed out to additional important aspects: users’ privacy and data value. There is potentially a trade-off between the protection of users’ privacy and that of the collective interest, which may benefit from the aggregation of data and innovation. The other aspect is the distribution of the value created by user data. If few firms have large amounts of data, they will appropriate most of the value created at the expenses of actors that are nonetheless fundamental in the value creation process (e.g., users).
Prof. Cennamo also highlighted that the creation of data in the digital economy is an increasingly decentralized phenomenon, where individual users are responsible for a large part of the created data. Hence, the emergence of organizational forms like digital platforms and ecosystems, that can centrally manage the decentralization, is a natural response to the struggling of traditional firms. It is important to remind that digital platforms and ecosystems come with advantages but also darker sides, particularly concerning anti-competitive and exclusion practices, aspects discussed during the event.

Giuseppe Colangelo pointed out that privacy and antitrust have often been commingled due to some sort of posited “complementarity” between the two disciplines. Proponents of the complementarity argue that, for example, potentially anti-competitive mergers between firms possessing large databases could as well violate user privacy, thus calling for an integration of the two disciplines.

Prof. Colangelo argued that the posited complementarity is not as clear as proposed and, in order to avoid confusion, each case can and should be classified according to the antitrust discipline with some nuances of privacy discipline or vice versa. Privacy violations have been used for years as an instrument to investigate anti-competitive conducts, but this confusion only risks endangering the operations of antitrust authorities which should instead make clear distinctions between privacy and competition violations.

Mariateresa Maggiolino built on Prof. Colangelo’s speech to argue that it is often wrongly thought that antitrust policy should not limit its action to what concerns market activities, but instead also intervene to protect societal values and fundamental rights. This misconception has often led authorities to use privacy arguments as instruments in antitrust and competition cases. For example, the German Federal Cartel Office (FCO) has recently stated that a privacy violation by a dominant player (in this case, excessive data collection by Facebook) is equivalent to unfair competition.

Prof. Maggiolino clarified that privacy can (and needs to) be included in the antitrust doctrine, but it should not be used as an instrument to understand whether a certain market activity is pro- or anti-competitive. Following this line of reasoning and keeping competitiveness and privacy separated, it can be said that Apple’s ATT might severely damage competitiveness by restricting firms’ access to user data, while at the same time increasing user privacy.

Barbara Veronese recognized that antitrust economists initially discarded privacy and focused on other aspects of user data, especially those aligned more to competitiveness and less to consumer protection. It is now acknowledged that market competitiveness might increase when firms have access to more user data, but at the same time, concerns on user privacy may reduce the potential social benefits of enhanced competitiveness.

Dr. Veronese showed how the UK’s Competition and Markets Authority (CMA) highlighted that many app developers, whose main source of revenues comes from advertising, have been damaged by the introduction of Apple’s ATT. This example highlights how deeply intertwined privacy and competition might be, whence market activities that seem to impact only one area eventually impact both.