Big Data Pose a Threat to Competition Law
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I: Introduction
Data are symbols, characters, or quantities that enable computers to perform their various operations. These symbols, characters, or quantities are conveyed as electrically powered signals, recorded on mechanical, optical, or magnetic media. Therefore, big data is the collection of these symbols, characters, or quantities in enormous volume. Big data grows exponentially in due course, and its complexity and enormous size make it difficult for conventional data management tools to process or store it effectively. Take the data generated by Google and Facebook as an example of big data. These companies create enormous amounts of data every day. Statistics like the 2019 Big Data analysis on the use of Facebook data show that over 1000 terabytes of data are ingested into Facebook’s databases every day.1 Tech companies generate big data through video uploads, photos, messages, posting comments, and feed exchanges among other activities. Any form of data that is stored, processed, or accessed in a fixed format is considered ‘structured’ data. Over time, computer scientists have achieved immense success in advancing techniques for maneuvering around big data. In addition, scientists have developed a new technique for deriving value from such data, particularly if the analyst knows the format in advance. Processing big data brings multiple benefits to an organization, including the ability to use data to make intelligent decisions. Social data from sites like Twitter and Facebook and search engines like Google enable these multinationals to calibrate their business strategies.2 These businesses get to improve their customer service with feedback systems designed using big data technologies. Natural language processing techniques coupled with big data technologies read and assess consumer responses. Also, big data help identify business risks and provide organizations with improved operational efficiency. This paper determines the competitiveness of big data, and whether it poses a threat to competition law.
II. Big data is not a threat to competition law
Most studies on competitive law do not offer elaborate content on how to handle big data. The European Commission permitted the union between Facebook and WhatsApp, claiming that the acquisition would provide consumers with a wide variety of communication apps.3 Facebook added an enormous amount of user data into its databases, but it does not have exclusive control because of the stipulation provided in antitrust laws. Likewise, when Google gained DoubleClick, no serious competition issues arose despite the amount of data the company held after the move.4 Despite the lawsuits, big data organizations like Google and Facebook have not brought up any competition concerns, but regulators continue to monitor their developments closely. Experts claim that having large amounts of data rarely means dominant power because data expire quickly.5 Also, it is data is easy to replicate and its presence in enormous volumes has no significance on an organization’s ability to establish a strong market position.
III. Big data is a threat to competition law
Organizations that manage enormous volumes of data could be on the murky side of competition law because big data can be the source of market monopoly and power. A misuse of big data is a breach of competition law. Market monopoly and power is the propensity to act unconstrained by customers, suppliers, and competitors. Big data can confer market power to organizations because it arms them with a competitive advantage drawn from targeted knowledge. Targeted knowledge allows organizations to take business measures in advance before their competitors. If a company like Google or Facebook could manipulate its data to eliminate or damage competitors or prevent other businesses from competing fairly in the market, that amounts to a competition law breach.
Consider the effect of big data on supply chains. Take the example of Facebook discovering a pattern in its data, suggesting that users in the future will prefer using a certain type of plug-in over others. Given that big data is a useful entity for predictive analysis, coupled with the anticipation of user preference, Facebook would increase its affinity for the plug-in. Facebook would have a head start at the expected surge ahead of its rivals. The organization would have breached the law, provided there is an impermissible purpose to eliminate or damage competitors or prevent them from competing in the market. Given the current Australian Competition and Consumer Commission interests in online businesses and their impact on supply chains, the commission has the mandate to investigate the impact of big data on making such decisions.
Where big data is contemplated as information infrastructure, access falls within the provision of the Australian Competition and Consumer Commission under the Commission and Consumer Act. These provisions stipulate that the organization with access to big data should provide its competitors with access to the information on reasonable terms. Similarly, competition law stipulates providing other organizations with access to monopoly infrastructures. The law also considers whether big data has the propensity to tip mergers and acquisitions towards monopoly statuses.6 Provided there is a possibility that when two companies combine they can control consumer data enough to sway competition, then big data become grounds to fight mergers.
Bundeskartellamt, the German antitrust authority takes a critical approach to competition law. In its reports, Bundeskartellamt explains how companies with access to user data can abuse market dominance and foreclose markets. According to the German competition authority, most breaches occur in bilateral markets where one or two groups benefit from a digital platform. The Bundeskartellamt put forward the example of a search engine while offered its users free services and collecting data in return. These platforms make additional profits by providing advertisers with access to their viewers.7 The quality and amount of user data harvested from digital platforms provide valuable information that can help advertisers target precisely the needs of the customers. The ability to offer targeted advertising give some companies market dominance because of their competitive vantage.
IV. Compare how the EU and US differ on their stance on big data and abuse of dominance.
1. The divide
The difference between the United States and the European system concerning big data is that the American system is complainant-driven while the European is competitor-driven. The European Commission rewards complainants while in the American system, complainants file for cases unassisted. Even after the European Union implemented the Damages Directive, the difference in the way the European system and the American system perceive abuse of market dominance and big data remain significant. Issues about cultural difference in the role of the government influencing the allocation of resources between private and public enforcement and policing the economy.8 The structure of private rights in the United States accommodate litigation in its entirety including fee-shifting, class action, treble damages, liberal discovery, and contingency fees, which has increased the difficulty for bringing market monopoly cases. The American judicial system limit complainant rewards by modifying rules governing antitrust laws and the standards to assess the worthiness of claims.
2. Why this is the case
In the United States lawsuits start with complaints driven against a dominant organization while in the European system, this is just an indicator that the justice system is working well. In environments that lack progressive cultures of private action, complainants are tasked with policing the market and bringing infringements to the attention of competition law regulators. In the European system, formal complainants have important rights including access to evidence and unclassified charge sheets, and they can challenge the Commission’s decisions. These rights provide complainants with the incentive to formalize their cases and maintain public interest. Litigators report infringements the government might find excessively difficult or impossible to uncover without input from consumers or competitors. In the European Union, complaints drive cases against multinational tech giants like Facebook and Google.9 For instance, the AdSense case continued even though Microsoft had withdrawn its complaint two years before the European Union issued its infringement decisions. A case like Qualcomm proceeded without formal complaints. Note that most of the European Union’s tech antitrust actions have little similarity to the original complaint. Many tech cases in Europe are ex-official driven by the enforcement agenda and some originated from the United States. Informed enforcers take over and develop cases with third parties like competitors and decisive targets. The European Commission’s organization conduct laws broaden the space of conduct prohibited by antitrust regulations than the stipulations used in the United States.
Politicians run the European system that is why their decision system seems more structured and calculated in ways that promote politics over technical value. The European system takes impartial action and commissioners do not impede the recommendations of the Commissioner. The European Competition Commissioner makes recommendations based on reports submitted by the Directorate-General for Competition, which is carefully reviewed by a panel of a senior official from the directorate. Note that in the European Union, the Competition Commissioner is the equivalent of the head of the American antitrust agency.10 The Commissioner is an effective politician who makes formal enforcement decisions backed by other politically appointed administrators with different agendas and portfolios. This position is different in the United States because member states have individual competition agencies that run independently from the government. Although at times commissioners and heads of authority in the United States are political appointees, most of them lack technical business relations and competition expertise. In Europe, the Competition Commission make decisions across the board, including controlling mergers. Historically, the Commission has shown recurrent willingness to confront parochial interests. In 2019, the Commission under the directive of the Commissioner blocked the merger between Siemens and Alstom regardless of the support Germany and France had extended towards the move.
In the United States, most competition law regulators have vast antitrust experience, but most are politically motivated and frequently from the executive and judiciary branch. Although there is a degree of political involvement in the European Union, the engagement is not unique to the Union because the European System was designed to be regulation as opposed to law enforcement. Persevering competition provisions as regulation or law enforcement shed insight on the difference between the European Unions and the United States approach to technology. Even though the debate is largely academic, it is inaccurate to describe the European system as regulation. Legal prohibitions in Europe have a general fundamental structure, unlike the prohibitions proscribed in the United States. In the Treaty on the operations of the European Union, Article 102 prohibits companies from dominating internal markets.11 The Sherman Act forbids monopolization and abusing prominent positions in the market. While in Europe the main concepts are dominant position and abuse of power, in the United States the measure of competitiveness lies in the meaning of monopolizing. Even though the two territories use broadly similar methods, courts in both regions interpret a wide variety of open-textured prohibitions covering economic and policy thinking prevailing at the time of the complaint. The courts have also been responsive to the facts and arguments presented in each case. However, the European system would approach an antitrust problem differently from the United States system of competition regulation.
V. How the US reacted to Google Shopping Case
Google face various antitrust inquiries that include lawsuits filed in the United States. Several government agencies continue to scrutinize the organization, with the European Union has cracked down on the company well before the United States. The European Commission levied hefty fines against the multinational in competition cases, but Google appealed. Countries like Australia also embarked on Google’s issues in its competitive practices, with News Corp, Google’s top critic having a major presence in the country. Private complainants like Epic Games also sued the company for anti-competitive patterns that include charging outrageous fees in their app markets. Publishers like The Nation and Genius Media lodged a lawsuit claiming that the company destroyed their business by subduing advertising competition.12 These publishers filed for a class-action lawsuit. Even under intensive scrutiny, Google denied taking part in any misdemeanor and repudiated all anti-competitive charges. The company maintained that all its decisions were made in ways that benefited its consumers.
In the United States, the major competition lawsuits against Google include the Department of Justice’s lawsuit. This case has a close resemblance to the lawsuit the Justice Department filed against Microsoft in the 1990s.13 The case filed against Google is about its efforts to sustain market monopoly by controlling distribution channels used in its respective industry. The Justice Department also claimed that the company used exclusionary contracts to secure default conditions for its technologies on devices. The lawsuit was brought to court with 11 attorneys general alleging that Google used ostracism to control product distribution.14 The suit provided the example of Apple’s contract with Google that allowed it to be the main search engine on Apple devices.
Texas led nine other state attorneys general to file a case in advertising technology claiming that Facebook had entered into an anti-competitive agreement with Google. The suit alleged that Google used its dominance in the market to control publishers and advertisers to use tools created by the company in the entire ad-buying process. The attorneys claimed that ultimately Google’s move would be detrimental to consumers. The suit also claimed that Google entered the deal when it realized that Facebook was creating an ad exchange platform that could rival the one it had established. According to the states, Google rigged auctions on Facebook’s behalf intending to contain the impending competition threat.15 Google claims these accusations were inaccurate because the company had its exchanges outside Facebook’s platforms.
A bipartisan alliance composed of 38 attorney generals including New York, Colorado, Nebraska, and Iowa launched another case against Google. The lawsuit reiterated most of the allegations that were presented by the Justice Department concerning the provision of exclusionary contracts. However, the 38 attorneys had complaints that went beyond the Department of Justice’s initial lawsuit.16 The state used examples like the smart speakers to allege that Google locked up upcoming distribution channels. They also claimed that Google had limited vertical search provisions like those provided by Tripadvisor and Yelp. The claim meant that Google used discriminatory tact on its search engine. The allegations also touched on the company’s advertising instrument, claiming that it was unfair and disadvantageous to advertisers because it denied them the opportunity to operate with tools from competitors and its own interchangeably.
Although Congress does not have the power to enforce laws, the House Judiciary subcommittee issued an antitrust report hoping for lasting changes. The report contained investigations into Google, Amazon, Facebook, and Twitter showing how these companies held market monopoly power over competitors.17 The report claimed that Google dominated an ecosystem of interlacing monopolies reinforced by tying up enormous volumes of user data with different services. Like other lawsuits, the House of Judiciary subcommittee found Google maintained its market monopoly through issuing anti-competitive contracts. Members of the subcommittee are working on updating antitrust laws to make them accommodate problems raising from modern business platforms. The report claimed that American courts have weakened competition laws, and it was the duty of Congress to revert them to their original purpose.
VI. The EU on Google Shopping Case
In 2017, the European Commission penalized Google $2.7 billion after it found that it violated antitrust laws. The Commission found that Google abused its search engine dominance to promote its shopping comparison engine over those of competitors. Back then, the $2.7 billion fine was the largest the regulator has ever issued in a market monopoly case.18 Although Google challenged the fine, the regulator had the power to decide even before Google could appeal the penalty in court. Note that in the United States, the process of litigation is flipped because agencies require regulators to request approval before subjects can settle antitrust fines.
Also, in 2018, the Commission fined the company an additional $5 billion in an antitrust case that targeted the Android operating system. The $5 billion fine was imposed because Google used its market power to favor its services.19 Regulators claimed that the company violated antitrust laws by forcing Android-powered devices to install their apps exclusively. Google also found itself on the murky side of the law when the Commission alleged that the company sniffled online advertising competition. For this misconduct, the Commission fined Google approximately $1.7 billion in 2019.20 The regulator claimed Google used its AdSense platform and exclusive contracts to restrict competitors from showing their advertisements.
VII. Facebook Abuse of Data
The European Commission continues to press Facebook on allegations of sharing user data. The Commission presses the company demanding answers on whether citizens’ data featured in the information illegally harvested by Cambridge Analytica. These allegations came after United States regulators claimed that they were investigating Facebook’s privacy practices. Consumer protection regulators in the United States went public with their investigations into how the company allowed Cambridge Analytica to have access to its data generated by 50 million users.21 After the investigations went public, the company apologized for sharing personal data that targeted American voters. Following the apology, the European Justice Commission sought to know whether the scandal had affected its citizens. The Commission pressed Facebook to disclose how it intended to inform users and the authorities about its privacy breach.
The United States and the European Commission felt disappointed because its citizens’ relationship with Facebook was based on trust that diminished the moment it shared private user data with the British political consultancy firm. Although Facebook claims it remains steadfast in its commitment to protecting user information, these governments wanted the company to explain what it knew and respond to the allegations concerning its abuse of data.22 The major concern is whether the breach of trust had the propensity to be repeated in future and whether stricter rules were necessary for such platforms. The regulators thought it necessary to push for rules similar to those implemented in traditional media platforms.
According to Facebook, the company was working towards addressing the abuse of data issue, prevent future instances of abuse, and give the user more control over data. However, countries like Germany called for stringent rules when it was uncovered that the company fed data into algorithms based in Europe that were targeting voters.23 Facebook’s scandal came before the enactment of the European data protection law, which stipulates a fine of 4% turnover for companies found in breach.24 Current privacy regulations are stringent, and Facebook would have lower suctions today.
VIII. Conclusion
Although Google and Facebook’s violation of competition law provisions poses a threat of impending disintegration, it will take years for regulators to reach significant resolutions. The bid to resolve these antitrust cases does not guarantee that courts will make drastic rulings regulating market monopoly. Arguably, the courts will be more favorable to their respective governments. However, their rulings do not pose an immediate threat to these multinationals. This is the reason the lawsuits filed against Facebook and Google have not affected the companies’ eminence in the market and their stock prices. More baffling is that profits from these companies rocketed after regulators accused them of antitrust violations. Investigators are now used to probing these trillion-dollar organizations with the threats already integrated into their bottom lines. However, as long as these cases last, Google and Facebook among other market powers will remain under scrutiny for every acquisition and move they make. Although the case against Microsoft diverted regulators’ attention from Google and Facebook’s threats, an emerging monopoly could as well thrive under the current circumstances.
Besides the difference between the European system of competition law and the United States, other factors that could motivate Europe to bring technology cases include transparent decision-making processes, shorter court proceedings, and competition remedies that reflect facts. These elements influence the nature of cases filed by state attorneys general and commissioners against multinational tech giants like Facebook and Google. The United States Judicial Department seems to focus more on issues regarding consumer welfare, calling for action against tech giants that invoke countless social issues. While customer welfare engrosses the United States system, the European Commission is focused on market integration as well. The European system has been steadfast in keeping the goals of market integration and consumer welfare separate. The commission has cautioned against using antitrust sanctions for purposes such as data protection violation, environmental protection, consumer protection, and labor considerations. It does not indicate that the European system and the United States use similar competition laws or follow the same procedure when evaluating an organization’s conduct. The United States places greater importance on market forces, and its antitrust laws recognize fewer circumstances in a powerful company is considered a monopoly or liable for competition abuses. Without competition laws, companies would lack a standard way of assessing risks associated with market dominance.
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