Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

On Privacy, Big Data and Competition Law (2/2) On the nature, goals, means and limitations of competition law

with 4 comments

In my previous post I outlined the content of the main part of my presentation at the European Data Protection Supervisor’s recent workshop on Privacy, Consumers, Competition and Big Data, held in the wake of the EDPS preliminary opinion on the subject.

Today I’ll provide you with my views on the great question underlying both the workshop and the opinion: should data protection considerations be incorporated to competition law’s substantive assessments?

The (preliminary) view implied in the EDPS’ opinion is that they should. In essence, the opinion posits that competition law is or should be about consumers’ welfare, and that this comprises much more than only the narrow set of economic considerations that competition law currently looks at. The EDPS tends to believe that public interest would be better served that way. Some lawyers and the companies they represent also hold these views but perhaps for different –less public interest oriented- reasons.

The somewhat anticlimatic view I conveyed to the participants at the workshop on this point was the following (as in the last post, I’ll basically sketch my conference notes):

Competition law is certainly a most tempting instrument given both its flexibility to accommodate creative theories of harm and the ample remedial powers it offers. These reasons explain the recent use (or instrumentalization) of competition law to pursue other public policy goals [I also talked about the latter yesterday at another conference, but I might develop that in another future post].

But just because competition authorities have a hammer, that doesn’t mean they should view every problem –even if unrelated to competition law- as a nail.

In my view, competition law and competition authorities are not well-suited to factor into their analysis (perhaps more important) public policy considerations alien to the specific matters they are supposed to deal with. Competition law is a legal regime of last resort, which means that their existence is premised upon the assumption that, in those areas where regulation doesn’t say otherwise, competition is the best way to allocate resources. When this is not the case, I think the solution may lie in regulating more or in a smarter way, but not in blurring the already blurred contours of a legal regime that –let’s not forget- is of a quasi criminal nature.

Other reasons why competition law might not be well-suited to deal with privacy/data protection issues relate to the fact that it’s only triggered in very specific circumstances; that it is about conduct and not structure; that if authorities are reluctant to intervene in cases of apparent direct harm to consumers in the form of excessive price it’s not easy to see why they should focus on direct harm through lower privacy alternatives (when moreover there is an additional ad hoc legal regime precisely to establish minimum standards). And on top of those there are institutional factors: if competition authorities struggle to strike a balance between strictly economic factors, how would they be supposed to trade-off economic factors with fundamental rights or other public policy objectives? (environment, industrial policy, labor standards, effects on jobs …)

Coming back to the data protection world. The gap (if any) does not lie in competition law not reaching where it should, but on data protection law lacking adequate regulation and remedies. Accordingly, the way to fill in that gap would require devising an effective data protection regime with its own and more effective rules and principles, but not extending competition law beyond its natural limits.

Some person I very much appreciate personally and intellectually (can’t give names because Chatham rules applied) raised the point that the Charter of Fundamental Rights may perhaps be a game changer in that the European Commission would be bound by it and therefore should not only not violate those rights but also facilitate their exercise by citizens. I tend not to agree. In my mind the argument that the Commission would have any obligation not only to comply with the negative obligations Charter but also to positively ensure that private companies comply with it to an extent that goes beyond that required by specific ad hoc legislation –and that may moreover clash with the fundamental rights of others- is stretching the reach of the Charter too far.

I certainly don’t think public policy should be only or mostly about efficiency and competition (as an admired colleague often says, a world exclusively governed by competition would make a great subject for a dystopian novel). There are values, fundamental rights and public interests which might very well trump economic considerations. But my point is that even if one doesn’t trust market forces to promote optimal levels of privacy (due to consumers’ apparent indolence or for whatever reason), one shouldn’t entrust competition law with that task either.

If you ask me, there are issues far too important to be left to competition authorities and competition lawyers.

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Written by Alfonso Lamadrid

6 June 2014 at 12:18 pm

4 Responses

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  1. Alfonso
    Is it possible to give a clear example of where competition law and data protection clearly “clashes”,ie where people think it would be reasonable to bring a decision with a view to factors beyond “classic” consumer welfare?i have a feeling that this debate is not different from the old debates about whether competition policy should pursue industrial policy,environmental,social,etc goals…would you agree?

    Asimo

    6 June 2014 at 2:32 pm

  2. Hi Asimo,

    You’re right in that the debate can certainly be incardinated within wider -and endless- discussions on the goals of competition policy (in fact, you’ll see above in the post that I dropped a mention to environmental, social and industrial concerns).

    I also concur with you in that it’s not so obvious to think of cases where this clash would take place.

    Proponents of views contrary to mine would probably give you the example of a service provider X that benefits from very significant scale effects [they'd probably say network effects and they'd probably call this service a search engine or a social network] that enables them to offer a service which is better than everyone else’s. In such a scenario, they’d say, users would need to “stick” to X because no one can offer a comparable service. And in doing so they’d be de facto forced to accept the privacy policy of X, thereby not having a “meaningful choice” with respect to alternative privacy policies. They’s say that competition law should intervene here to grant users privacy choices even if X abides by data protection rules.

    In my view, if X’s privacy policy were to infringe data protection rules, then those rules should apply. And if there were a competition problem, then the competition rules could apply regardless of privacy considerations.

    And by the way, from the competition law standpoint any such claim would also ressemble in a way the theories brought up in the previous cases concerning Microsoft but, as you know. However, as I explained in a recent post, in Microsoft/Skype the General Court reinterpreted those cases and stated that scale effects don’t impede switching, and that only economic or technical constraints matter. In the light of this precedent I’d suppose the theory underlyng the example wouldn’t fly anyway.

    Alfonso Lamadrid

    6 June 2014 at 4:08 pm

  3. Thanks a lot!I think I fully share your views on this…ensuring “privacy choices” (which term is anyhow not so easy to capture) does not appear to present a reason for competition law intervention.

    Asimo

    8 June 2014 at 8:46 am

  4. I have been following the recent posts on this blog regarding the relationship between data protection and competition laws when it comes to addressing major players online whose business models incorporate the collection of (inter alia) users’ personal data with great interest. It’s a subject close to my heart given my forthcoming PhD thesis (at the European University Institute) addresses this very issue (among others), and so the European Data Protection Supervisor’s Preliminary Opinion on the matter couldn’t have come at a more opportune time.

    My own views on the matter are complex. I see competition law (in its current, neoclassical-economics-influenced form at least) primarily as a system which is best suited to pursuing the ‘consumer welfare’ standard, and not being very adept at incorporating other, ‘non-economic’ goals such as the protection of fundamental rights. However, I find the gathering, analysis and control of vast amounts of data from and about Internet users by large monopolistic (in certain markets at least) transnational corporations troubling on many levels – yet a problem that should be addressed by more profound changes to law, regulation and practice. (I talk a bit about what I mean by all of this here [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2429129] – but bear in mind competition lawyers were not the intended audience of the chapter!) Nevertheless, in the interim (as there doesn’t appear to be much – if any – political will to make these changes), I also see certain avenues for convergence between data protection and its ideals, and competition and its practical enforcement.

    Firstly, it would seem prudent that when faced with a competition investigation or case that also raises potential data protection issues (such as the Google DoubleClick merger), there should be collaboration between DG Competition and relevant data protection bodies, especially the European Data Protection Supervisor, even if the latter only act in an advisory capacity. Surely this kind of cross-institutional collaboration would aid DG Comp in its consideration of personal data-intensive markets, as well as possibly uncovering data protection concerns for consideration by national data protection bodies.

    Secondly, in terms of applying data protection norms to competition investigations and analyses, one model to look to might be the ‘constitutionalisation’ of private law in certain Member States, which demonstrates one method of how fundamental rights might be accommodated in the application of other areas of law. For those unfamiliar with the phenomenon, in certain domestic legal systems (notably the UK, Germany and the Netherlands), fundamental rights have some effect in private law proceedings between two private (i.e. non-state) parties. For instance, in a breach of contract case, it could be argued that if there are various avenues open to the court, it should adjudicate the dispute in the way which protects fundamental rights when deciding whether the breach was wholly unlawful or could be justified. In a similar way, if a competition investigation also raises data protection issues, it should be resolved in a way which upholds the rights to data protection and privacy if that is an avenue open to the authority. At the very least, this development in domestic legal systems could be looked to for guidance as to how competition law might also incorporate the protection of fundamental rights in the most efficacious manner given the current legal and regulatory framework.

    Thirdly, both data protection and competition may well benefit from increased transparency over the markets for data, which has also been called for by the FTC in a recent report (although I must confess that I’ve only had a quick glance at it). While data is an important input (as well as output) of various major Internet players, and is collected, analysed and traded in the course of their business activities, an overall picture of the value chain and its constituent parts in terms of individual markets is not so clear. Increased transparency would benefit consumers/data subjects, and also enlighten both competition and data protection authorities. This enlightenment might involve uncovering practices in these markets that are anticompetitive and/or also infringe data protection laws.

    angeladaly

    14 July 2014 at 8:30 am


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