Data Dominance: Can Data adversely affect competition in market?

Digitalization of things has maximized the utility and importance of Data for the development of products, processes and forms of organization. This is because Data has the potential to generate substantial efficiency and productivity gains, for instance by improving decision-making, forecasting and allowing for better consumer segmentation and targeting, with greater speed and in large quantities. Data in its simplest sense means large volumes of information collected and processed by a software to create a dataset which can be exploited by businesses to their commercial advantage.

The bourgeoning growth and success of online platforms, while celebrated by the consumers has raised serious policy questions regarding the use or abuse of Data to gain competitive advantage in the market. Under the Indian Competition law, the Competition Commission of India (CCI) has to be careful that an entity which is dominant in the market does not adopt any anti-competitive activities thereby abusing their dominant position. Thus, becoming a dominant player is not per se prohibited by law but when this position is abused by the entity it will be subjected to greater scrutiny by CCI.

Today, the debate is around- Can Data be an instrument with which an entity can abuse its market position? Take the case of Facebook (1); the German Cartel Office issued restrictions on Facebook’s method of “looting” (collecting) data. According to the terms and conditions of Facebook, it can collect user’s data from outside its platform i.e. via Facebook-owned services like WhatsApp and Instagram and from third party websites who have entered into an assignment agreement to transfer data to Facebook. This third party data assignment agreement works in the following manner:

Third party sources apart from Whatsapp and Instagram are websites which include interfaces such as the “Like” or “Share” buttons. Where such visible interfaces are embedded in websites and apps, the data flow to Facebook will already start when these are called up or installed. It is not even necessary, e.g., to scroll over or click on a “Like” button. Calling up a website with an embedded “Like” button will start the data flow. Even if no Facebook symbol is visible to users of a website, user data will flow from many websites to Facebook. This happens, for example, if the website operator uses the “Facebook Analytics” service in the background in order to carry out user analyses.

This business model though rose concerns regarding Data Protection of personal information- from a competition law perspective this situation can be a matter of concern if Facebook were to enter into exclusive contracts with third parties for the purpose of transfer of data. Facebook is a dominant entity in the market of providing social networking services. If such a dominant player is to enter into exclusive data sharing agreements, such agreements can serve as a barrier for other players to enter the market.

Another instance is that, In April 2016, the European Commission initiated formal antitrust proceedings against Alphabet, Google’s parent company, with regard to its business practices related to Android, whereby Google would impose restrictions and financially incentivize android device manufacturers and mobile network operators to pre-install Google Search and Google Chrome browser on their devices, as a condition to license certain Google proprietary apps. It would also prevent the manufacturers from selling android devices which ran on competing operating systems based on the android open source code (2). These agreements ensure that all the data of an Android user is supplied to Google to the exclusion of other market players.

The dual business model of Amazon has also raised serious competition issues. Amazon provides for a platform for merchants to come and sell their goods on Amazon. At the same time Amazon itself is a retail store which sells its own products.  Amazon’s own retail offerings may directly compete with those of the merchants using the Amazon Marketplace. There were allegations raised by the merchants that Amazon is using the data it collects to identify successful new product offerings on its platform to then market an Amazon-own version. In other words, Amazon is alleged to use the data it collects from the retailers using its Marketplace to compete against them with an own offering (3) If we believe the allegations to be true, Amazon being the largest online retail store leaves no choice for other merchants but to make use of the platform to sell their product and Amazon is taking advantage of this situation, with the use of Data to increase its own sales.

All of the above entities especially Google and Facebook, which are to a certain extent considered as “Pure data” markets(4) are using the data in a way that creates barriers for other entrants; whether it’s through direct exclusive data transfer agreements (in case of Fcaebook) or exclusion agreements (in case of Google) where agreements are not crafted for exclusive use of data but such provisions are inserted in the contract that indirectly makes sharing of data exclusive.

All the situations are instances of abuse of dominant position by different entities in different markets. Since there are different types of Data and every kind of Data has a different effect on different markets the regulatory bodies are facing difficulties in coming up with standard set of rules governing Data and markets. While a bill on Data Protection (personal data) is introduced in the Parliament, the government is yet to define the role of Data and its impact on market competition.