Over the past few years, some scholars, advocates, and policymakers have argued that businesses which possess large quantities of data, such as social media companies, present inherent competition concerns. These concerns are misplaced for a number of reasons, one being that competitors can often obtain similar data from other sources. But in some industries and markets, a small number of firms have exclusive access to particular datasets, and they exploit their market power to limit access to that data through both technical and administrative means without any legitimate business justification. This type of anti-competitive behavior limits innovation and hurts consumers, and when these problematic practices occur, policymakers should intervene.
Businesses, and their associated industry associations, in the real estate, financial services, and air travel industries, have taken steps to limit third-party access to their data in ways that restrict competition, reduce market transparency, and harm consumers.
In the real estate market, both individual brokerage firms as well as the Multiple Listing Services (MLSs), the regional organizations that maintain exclusive access to property listings on behalf of real estate agents, restrict Internet-based competitors, such as Zillow, Redfin, Open Listings, and HomeSnap, from accessing data about property availability and sellers. For example, MLSs will often prevent these types of companies from using property data by creating strict data-use policies, denying access to non-brokers, or by keeping the data fragmented and unstandardized. These restrictions have no legitimate business justification, but do undercut the business models of online services that allow consumers to be less reliant on brokers for buying a home and to gain better insights into the homebuying process.
In the banking industry, some traditional financial institutions, such as banks and brokerage firms, prevent financial data aggregators, such as Yodlee and Plaid, from accessing customer account information via financial institutions’ online services or application programming interfaces (APIs). Some financial institutions have an incentive to block financial data aggregators from downloading their users’ data because these services are used by many fintech companies—businesses using innovative technology to improve financial services—to show consumers ways to reduce the fees they pay for financial services. But without the data, these fintech businesses have a much harder time providing online tools to allow users to more effectively manage their finances.
In the air travel industry, some airlines, such as Delta and Southwest, block certain third-party sites from posting flight availability and pricing information on their sites. Airlines have also targeted both specific online travel agencies (OTAs), such as BookIt.com and OneTravel, and meta-search engines, such as TripAdvisor and Hipmunk, which let consumers easily compare fares across multiple airlines. Again, these actions have no legitimate business justification, and without these online comparison shopping tools, many consumers might pay higher prices for airline tickets.
In all three of these industries, established firms or industry associations are using their exclusive control of a particular dataset—information about property listings, customer financial transactions, and airline tickets, respectively—to limit competition by restricting access to the data by third-parties. Unless policymakers intervene, this behavior is likely to continue to limit innovation and hurt consumers. In some cases, anti-trust authorities should intervene if a company’s actions unreasonably restrain competition. In other cases, especially in regulated industries like real estate, banking, and airlines, industries policymakers should take proactive steps to introduce rules that would prevent this type of conduct.
One way to prevent this behavior is to require the data holders in each of these industries to maintain open application programming interfaces (APIs) that provide access to the relevant information. APIs are software functions that allow developers to access data stored in computer systems in a pre-specified, machine-readable format. APIs are routinely used within organizations, but open APIs allow third-party access to information as well. Providing third parties with access to this information serves consumers by increasing market transparency and by allowing them to make more informed choices.
To promote competition, innovation, and consumer benefits in these three industries, policymakers should take the following steps:
- In real estate, anti-trust regulators at the Department of Justice (DOJ) and the Federal Trade Commission (FTC) should investigate whether MLS actions to block data from online listing companies are collusive and exclusionary, and state policymakers should require brokers to provide open access to their real estate listings;
- In the financial services, the Consumer Finance Protection Bureau (CFPB) should establish guidance for financial institutions to allow third parties to access customer data, securely and with the customer’s permission, through open APIs;
- In the air travel industry, the Department of Transportation (DOT) should establish rules requiring airlines to make all ticket pricing information publicly available in a standardized format and prohibit unfair marketing practices that limit distribution of this information to certain companies.