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Europe’s Antitrust authority begins gearing up to privacy

By Simon Davies

The European Parliament’s Privacy Platform organised a fascinating event earlier this week on the subject of privacy and competition law. Complex and arcane as this topic is, it turned out to be one of those rare “Pandora’s Box” moments in privacy.

Any corporation with a dominant position must take a leadership role in pioneering consumer protection.

Competition law isn’t my field, and I would never even pretend to know enough of the basics to offer an informed view of how that law might be influenced by the changing nature of data markets. However the Brussels event did provide me with an opportunity to reflect on some general issues – particularly those relating to the dominance of Google, which I’ve spoken about many times since 2006.

Whatever concerns I’ve publicly had with Google over the years (and there have been many) one underlying theme has been my anxiety that a single company might achieve the critical mass to dominate the world’s information flows. On two occasions I’ve published open letters to Google’s Eric Schmidt warning that any corporation with a dominant position must take a leadership role in pioneering consumer protection. I have not swerved from that position in eight years, and the Brussels event helped sharpen the focus on this argument.

There is a view that Google actively abuses its dominant position to achieve an even greater advantage in the market, indeed the European Commission is currently investigating whether Google has abused its dominant position in search and search advertising to exclude potential competition, raise barriers to entry and cement its dominance. The European consumer umbrella organisation BEUC has also raised concerns, and in a letter to the Commission stated that if claims against Google were substantiated it would mean that the company had “harmed competition, misled European consumers and reduced consumer choice”.

If claims against Google were substantiated it would mean that the company had “harmed competition, misled European consumers and reduced consumer choice”

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This is probably a topic to explore at some point in the future. However the issue that most concerns me right now – and that concerned quite a few delegates at the Brussels event – is more that the nature of Google’s domination and the very nature of the company itself create a dampener on privacy protection across the entire market. There’s a widespread view that Google has created a lowest common denominator of protection toward which other companies – in order to remain competitive – are gravitationally drawn. Some companies resist this pressure and strive to create clear blue water on privacy issues, but as with other industries with dominant players the struggle can be fatally difficult.

This is a view that hasn’t so far been shared by competition regulators, but there appears to be a shift. Regulators have occasionally considered the intersection between privacy and antitrust law, though until now it has to be said that they’ve not prioritised the connection. Most competition regulators have focused on traditional antitrust issues such as pricing and market entry aspects. The way privacy as a market differentiator can be paralysed or distorted because of a failure of open competition is something that has yet to fully emerge.

The way privacy as a market differentiator can be paralysed or distorted because of a failure of open competition is something that has yet to fully emerge.

Search is a particularly critical function because that process is a sort of gateway not just to Internet content, but to the products and services that people want to use. In some respects it’s like a supermarket that leverages its physical locations to funnel customers to other activities in the supermarket family such as insurance and banking.

The way privacy as a market differentiator can be paralysed or distorted because of a failure of open competition is something that has yet to fully emerge. In my speech to the meeting I made the point that historically there is an endemic connection between consumer protection, consumer safety and the structure and nature of industry sectors. A monolithic position by the automobile against mandatory seat belts severely hampered their introduction.

Health and safety standards too were inhibited because of an antagonistic industry-wide position. Where there is a single dominant company in any sector, consumer rights tend to be retarded. This is so regardless of whether the industry in question is chemical production or genetic research.

This translates in privacy terms as follows:

  • Privacy innovation becomes retarded when industry is monolithic
  • Privacy products and services require innovation and competition to become economically viable
  • Privacy thrives in a dynamic environment of ideas and markets
  • For privacy to become a mainstream component of the market, industry must view it as a viable and socially important concept and innovation must thrive so consumers have genuine choices open to them.

Joaquín Almunia, Vice President of the European Commission responsible for EU Competition Policy, seemed to resonate with a couple of these points. He gave a surprisingly frank keynote address, and told delegates “I believe we are only at the beginning of a proper governance of privacy rights and of the commercial use of personal data”.

We are only at the beginning of a proper governance of privacy rights and of the commercial use of personal data

Almunia observed that the market exhibited fast and massive changes in the markets of data that almost inevitably expose the industry to the risk of abuse. “I understand there are and have been many cases of privacy violation involving a large number of firms.”

He continued “Companies evidently try to use their access to personal data to gain commercial advantage vis à vis users. It is necessary to strike the right balance between regulation and competition policy enforcement”.

“But a more comprehensive regulatory process also allows a society to choose the balance it finds appropriate between privacy and commercial freedom”.

Almunia expressed the view that this is a decision that we might not want to leave to markets because consumers are sometimes ill informed of the practices of merchants and may not have alternatives to turn to.

As the single dominant player in search, and with search being the entry point for other data products, there was inevitably going to be a competition question that required attention.

In what seemed – to many delegates – to be a thinly disguised reference to Google, Almunia said “A single dominant company could of course think to infringe privacy laws to gain an advantage over its competitors.”

Google was clearly the elephant in the room at that meeting. As the single dominant player in search, and with search being the entry point for other data products, there was inevitably going to be a competition question that required attention. In my view Almunia was directly referencing the current search dynamics in the market when he observed that elements of data protection went to the “heart” of competition policy.

He did acknowledge that the Commission had decided in favour of the Google/DoubleClick merger on competition law grounds. “However, the decision made clear that it was clearing the merger “without prejudice to the obligations under EU legislation in relation to the protection of individuals and privacy with regard to the processing of personal data”.

“Apart from this case where personal data was analysed as an asset for the first time in a merger, our enforcement work has not had to tackle specific personal-data and privacy issues”.

It was a great pity that Google didn’t accept the invitation to directly participate in the meeting. I would have very much liked to hear their response to Almunia’s observation that a company or a group of companies with exclusive access to personal data in a given market “could give rise to concentration concerns” and to learn how Google views this concern.

Whatever your view on these matters it does seem clear that this nexus between competition law and privacy law will become more apparent in coming years. With luck, the trend will work in favour of strengthened privacy protection.