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In a recent interview, European Commissioner for Competition Margrethe Vestager indicated the commission would begin to pay closer attention to a company’s consumer data holdings when examining mergers or violations of EU competition laws. As she noted, “In some areas, these data are extremely valuable. They can foreclose the market — they can give the parties that have them immense business opportunities that are not available to others.”
It is even reported that the EU is reconsidering its merger laws to reflect the importance of data holdings even when corporate revenue shares are low.
Although the interview and potential legal amendments are news, the consideration of data concentration as potentially harmful to competition is not new to US antitrust authorities. In analyzing mergers, the Federal Trade Commission and Department of Justice (DOJ) consider whether the merger would foreclose opportunities for rivals to compete for the market. Foreclosure might come in many forms — the merger might tie up essential assets or key labor. Foreclosure might come from accumulation of patents or other key inputs or from sheer domination of the entire consumer base. Adding consumer data holdings to the list of potentially key assets to review in mergers is not a difficult task for antitrust authorities. This is because US antitrust merger review is based largely on economic principles. In the merger context, for example, economics may be applied to predict whether foreclosure will occur or not, whatever the source may be. If foreclosure is predicted, and if the degree of foreclosure is determined to be legally unacceptable, the merger will be denied or permitted with conditions that fix the foreclosure issues.
Arguably, the DOJ challenged the merger of Bazaarvoice Inc. and PowerReviews Inc. based on the problematic market power of the merged entities’ data holdings. The data were consumer reviews. Even though the merger did not meet the criteria that requires premerger approval (these were relatively small companies), the DOJ challenged the merger after the fact and won. (It didn’t hurt the DOJ’s case that the companies had highly provocative, anticompetitive internal documents that looked terrible in the light of day.)
Although consideration of data holdings in merger reviews might be similar, there may be a growing divergence between US and EU antitrust authorities’ treatment of data that US companies would be wise to keep in mind. Outside of the merger context, where data are found to “be unique or essential, European regulators have considered requiring dominant companies to share information with rivals.” This approach is largely antithetical to US antitrust law. It is not that the theory behind such a move is untested in the US, it is rather that it has been tested and so far rejected by the Supreme Court.
A strong default principle in US antitrust jurisprudence is that no company has a duty to deal with a rival company. The most relevant exception to that principle is the Supreme Court’s decision in Aspen Skiing. In that case, the Court found that a large ski resort company did not have the right to foreclose its rival from purchasing access to its several ski slopes. In other words, the Court found that the dominant firm had an affirmative duty to deal with its rival. In a later case, Trinko, Justice Samuel Alito noted that Aspen Skiing was a true exception to the default rule and that it was at the outer reaches of antitrust law. The rationale to limit affirmative duties to deal is both substantive and procedural. Procedurally, if the court orders rivals to deal with each other, the antitrust enforcer becomes a regulator. Pricing decisions, for example, usually determined by various market considerations, may become highly contentious when one party does not want to sell at any price. In the context of forced selling of data holdings, consider that such holdings may be used for internal revenue generation only, the data may have never been sold on the market — now the antitrust authority must decide the “right” price with no historic data and will have to monitor the transaction.
Substantively, forcing the sale of data holdings may ultimately harm competition — the very thing antitrust laws are intended to protect. Data, for example, are often only valuable because of the added value a company’s algorithm has added to it. If it is feared that the successful firm will be “punished” and forced to give over the fruits of their innovation (often times with imperfect consideration of their costly failures), the incentive for investment and innovation is dampened. Competitive vigor is thereby lessened.
It is the later concern that is particularly established in US antitrust case law and policy. By forcing companies to lease data to rivals, the EU may risk the growth and development of entirely new markets in exchange for more participants (not necessarily more competition) in the old market.
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