Big Data in a Competition Environment

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Deborah Feinstein, May 29, 2015

The U.S. Federal Trade Commission is one agency with two missions: promoting competition and protecting consumers. Of course, competition and consumer protection laws have at their core the same fundamental goal: to promote consumer welfare through fair and vigorous competition unaltered by false, deceptive, or unfair tactics. In some circumstances, a particular set of facts may raise both competition and consumer protection issues. One area in which the two missions seem most likely to converge is in the world of big data.

To be clear, these would be distinct concerns. Despite calls to use the merger review process to improve privacy protections for consumers, the FTC continues to examine competition and consumer protection issues separately, examining the facts to determine if there is a potential violation of any law the FTC enforces. On the competition side, the inquiry remains focused on whether a merger is likely to create or enhance market power or facilitate its exercise, which can harm consumers by reducing competition along price and non-price dimensions such as quality or service. We examine the extent to which the merging parties compete, who else competes, and whether others are likely to enter into the market. Since the decisions firms make about consumer privacy can lead to a form of non-price competition, the FTC has explicitly recognized that privacy can be a non-price dimension of competition.

Although the FTC has yet to challenge a merger on the basis of a reduction in non-price competition over privacy protections, in some transactions involving data markets the FTC’s challenges clearly lay the foundation for that potential case.