TR Daily Competitive Online Market Would Deliver Privacy, Panel Told
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Friday, October 18, 2019

Competitive Online Market Would Deliver Privacy, Panel Told

The privacy of consumers could be enhanced if the privacy practices of large online platforms factored into antitrust review of their acquisitions, a House subcommittee was told today.

Amazon.com, Inc., Apple, Inc., Facebook, Inc., Alphabet, Inc. (Google’s parent company), and Microsoft Corp. have acquired more than 400 companies globally over the past decade, the Judiciary Committee’s antitrust, commercial, and administrative law subcommittee was told.

None of the acquisitions were blocked and some received scant attention from antitrust regulators, despite increasing concerns about the privacy practices of some of the platforms, according to Tommaso Valletti, an economics professor at Imperial College Business School in London who was the chief competition economist for the European Commission from September 2016 until August 2019.

“There has been a sort of antitrust immunity in the technology sector for far too long,” Mr. Valletti told the subcommittee.

A healthy competitive environment can be reflected in the prices firms are able to charge, their willingness to innovate, or the quality of their products or services, Mr. Valletti explained. “And since consumers seem to care about privacy, I would say this is one of the things that a healthy competitive market should have.”

Using price to evaluate the health of competition in digital markets is difficult, given that consumers often pay nothing to use online services, Mr. Valletti said.

“It does not make much sense to focus the competitive assessment on prices, as these have been set at zero by choice. Quality, however, will often be the relevant locus of competition,” he noted in his written testimony. “In the context of ‘zero’ prices, the reduction in quality due to monopolization can become even more pronounced. A reduction in consumer data protection and consumer privacy is precisely a fitting example of such a reduction in quality.”

In a more competitive market, Mr. Valletti suggested, consumers might actually receive compensation for the use of their data.

“Diminished competition on privacy quality should therefore be taken into account in any assessment of the state of competition and market power of digital online platforms,” he added. “With more competition (including competition over privacy terms), it would probably become clear that consumers are currently ‘underpaid.’ If there is competition, it may ensue that the competitive price for personal data would not be zero, but that consumers should actually be compensated to permit the collection of their personal information,” he said.

Other witnesses agreed. Jason Furman, an economics professor at the Harvard Kennedy School, testified that the take-it-or-leave-it terms of service and privacy policies of big online platforms are themselves a reflection of an unhealthy competitive market.

“Many consumers want more privacy. Right now with so few platform choices they have limited options in this regard. A consumer can delete Facebook, for example, but will not have another place to go to connect with her friends. More choice would create more incentives for privacy protections,” he said.

“Merger enforcement needs to be more robust in the digital sector,” where growth has not been “organic” but has resulted from acquisitions, Mr. Furman told the subcommittee.

Using privacy to evaluate mergers and the competitive environment also would create a space more welcoming to new entrants, the witnesses said, and those entrants could enhance their attractiveness to consumers by offering more privacy.

Federal Trade Commissioner Rohit Chopra said he would support imposing conditions on technology mergers to make them more privacy-friendly but noted that requiring merging firms to limit their use of data or give customers the right to see or delete their data would be difficult to enforce.

“Companies are collecting millions of data points at every moment, and the government doesn’t have the resources or the technical expertise to monitor whether data is being used solely for its intended purpose,” Mr. Chopra said. “Violations of these requirements are usually only detected when a large-scale disaster happens or when problems are intermittently brought to light by journalists and whistleblowers.”

Mr. Furman suggested that requiring big online platforms to adhere to data interoperability standards and allow customers to take their data to another provider would improve the competitive health of the ecosystem and enhance the privacy of consumers.

“It enables consumers to have more choices to switch more easily and to use multiple services,” he told the panel. “It also enables new entrants to come in.” He cited e-mail services as an example of how interoperable data standards help consumers and competition. When someone sends an e-mail, he noted, they don’t worry about which e-mail provider the recipient is using because data flows seamlessly between providers.

Roslyn Layton, a visiting scholar at the American Enterprise Institute, expressed opposition to the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act, and similar far-reaching privacy laws. Those laws, she said, only further entrench the dominant players in the online ecosystem.

Since GDPR went into effect 18 months ago, the largest online advertising platforms in Europe “have gained market share while their fledgling ad tech rivals have lost ground,” Ms. Layton testified. “Only the largest players can afford the costly requirements of lawyers’ fees, chief privacy officers, audits, impact assessments, software updates, and so on.”

Today’s hearing, “Online Platforms and Market Power, Part 3: The Role of Data and Privacy in Competition,” is part of the antitrust subcommittee’s ambitious bipartisan effort to evaluate the competitive health of the market for online services and potential legislative fixes.

Rep. David Cicilline (D., R.I.), the subcommittee’s chairman, said a healthy competitive market would naturally provide consumers with their desired level of privacy protections. “In a market that has vibrant competition,” he said, “firms have strong incentives to respond to consumer demand by improving the privacy safeguards of their products.”

“But without competition, incumbents have no incentive to deliver user privacy,” Rep. Cicilline said. “People are stuck with bad options or no options at all, which is evidence of a market failure.” —Tom Leithauser, [email protected]

MainStory: Privacy Congress FederalNews

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