Dr. Panayiotis Agisilaou Trojan Economics & Open University of Cyprus Big data: Interaction between data protection rules and competition law and the implications for retailers 2nd Data Forum, 28.02.2019 Dr. Panayiotis Agisilaou Trojan Economics & Open University of Cyprus

big data Collection of data is not a new phenomenon Increasingly important role of data in shaping digital markets devising commercial strategies data-driven business models Big data  often characterized by 5 “V”s Volume Velocity Variety Veracity Value

Pro-competitive effects Growing sales (e.g., targeted advertising and special offers) Better customer analysis (e.g., demand needs and trends) Personalized products / services (e.g., personalized recommendations) Product improvement and development (e.g., identify market gaps, rectify faults/errors, improvement of algorithms) Businesses process improvement (e.g., prompt adjustments to demand trends, simplification of transactions) Free services (e.g., email accounts, social media, apps on mobile devices, search engines)

Product/service quality Potential concerns Customers Customers’ data Product/service quality Barrier to entry / expansion Source of market power Can drive network effects  amplify data / quality gap Winner-takes-all outcome  higher market concentration

Data-driven theories of harm Refusal to access to data Essential input for other firms’ activities Non-replicable and non-accessible from other sources Discrimination (e.g., refusal to access to certain competitors) Discretionary access Amazon case (ongoing investigation by EC) Exclusive contracts with third-party providers of data (i.e., exclusive licensing) Google AdSense case (ongoing investigation by EC)

Data-driven theories of harm Price discrimination Better understanding of consumers’ willingness to pay  apply different prices to different consumers / groups of consumers Negative impact on competition / consumers’ welfare depending on search cost switching cost proportion of naïve (i.e., less price-sensitive to prices) / sophisticated consumers behavioral biases (e.g., consumers’ ignorance)

Data-driven theories of harm Tying Leverage of market power to a related / neighboring market Google Android case Google Search app and Google Chrome browser were tied to Google play app Status quo bias  users more likely to stick to pre-installed apps

Data-driven theories of harm Algorithmic collusion Increased market transparency Facilitates establishment of collusion Firms can more easily reach an agreement (i.e., price, profit sharing) by avoiding costly experimentation in the market Enhances sustainability of collusion Makes detection and retaliation of defections easier / faster (e.g., real time) Enables algorithmic collusion Coordinate and monitor prices of large number of firms Removes uncertainty (i.e., identify intentional deviations and market related adjustments) Integrate price-fixing mechanisms to data-based algorithms (i.e., sophisticated machine learning)

Data-driven theories of harm Data protection and privacy as a non-competition parameter Asnef – Equifax (CJEU, 2006) “… any possible issues relating to the sensitivity of personal data are not, as such, a matter of competition law, they may be resolved on the basis of the relevant provisions governing data protection” Competition law is relevant when privacy is an important parameter of non- price competition  quality parameter of a product / service (i.e., firms compete with regard to the strength of privacy protection) Close link between dominant position, data collection and competition Facebook (02/2019)

FINAL REMARKS Big data play a critical role in digital economy Benign effects (e.g., increase innovation, quality improvement) Source of market power / facilitate maintenance and reinforcement of market power (e.g., barriers to entry, network effects)  Data-driven abusive strategies (e.g., refusal to access, price discrimination, tying, algorithmic collusion, quality degradation) Competition law enforcement more likely when Big data impacts on the competitive dynamics Privacy protection has non-price effects

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