The Myth of Data Monopoly: Why Antitrust Concerns About Data Are Overblown

Joe Kennedy March 6, 2017
March 6, 2017
Data-rich companies are not a threat to competition, but rather an important source of innovation, which policymakers should encourage, not limit.

With the increased power and decreased cost of collecting, transmitting, and storing data, as well as an increase in machine-readable data, more and more companies are using more and more data to help them provide goods and services.

However, some commentators have begun to argue that, in the case of companies aggregating large amounts of data, competition policy should be extended to incorporate concerns about the collection and use of data beyond clear examples of anticompetitive behavior. The general argument is that the mere act of collecting large amounts of data, such as the large quantities of personal data collected by many Internet companies, gives them an unfair competitive advantage and that competition policy needs to incorporate this analysis.

To date, U.S. and European regulators have not adopted this line of reasoning, nor should they. While it is true that data can be used in anticompetitive ways, competition policy is capable of dealing with such abuses. In fact, when analyzing allegations of such behavior, it is often helpful to imagine whether agencies would object if the activity complained about involved some input of critical importance other than data. This helps clarify whether the threat to competition is truly due to control of an important resource or to ungrounded fears about the uniqueness of data.

Advocates for intensifying competition policy cite a variety of flaws and potential abuses in the current system. However, defenders of the current approach seldom argue that there can be no anticompetitive behaviors when it comes to data. Rather, they admit that, in some cases, data use could trigger competitive concerns. What defenders do argue is that, when it comes to competition policy, the focus should be on abusive behavior and not on structural issues, such as how much data a company holds.

The collection of large amounts of data does not by itself represent a threat to competition. Although use of data might in specific circumstances justify regulatory intervention, in most cases the acquisition and use of data does not reduce competition, and the existing legal framework, including traditional interpretations of existing statutes, gives competition and data protection regulators all the flexibility they need to protect markets and consumers. On the contrary, large amounts of data, including personal information, are increasingly a vital input for some of the economy’s most important innovations, including online platforms, medical diagnoses, digital assistants, language translation, urban planning, and public safety.

This report proceeds by examining the main arguments made by advocates of expanding the scope of competition policy to incorporate possible threats created by the collection of large amounts of data. By and large, these arguments assume that data is somehow sui generis, conferring on its possessors an unfair competitive advantage that preempts competitors and forces unwilling consumers to disclose private data with no protections on how it is used. The report then shows why each of these arguments is not convincing and how adopting them would likely lead to lower consumer surplus and less innovation. The report continues by looking at several recent merger cases between data-rich companies to show how the application of traditional competition policy was able to produce the correct result. It concludes with a brief explanation about why smart competition policy is important to innovation and higher productivity.

The Myth of Data Monopoly: Why Antitrust Concerns About Data Are Overblown