The economic value of personal data: a new leaf in EU competition law

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18 March, 2016

Recently, the waters of competition law within the European Union have begun to stir. Mere days after the German Bundeskartellamt issued a press release stating that it will use its competition law powers to go after dominant companies who it suspects breach data protection rules, POLITICO ran the story that the European Commission is considering broadening its criteria for merger reviews in order to better capture data-driven companies.

The European Commissioner for competition, Margrethe Vestager, has expressed concern that the mergers in the past such as Facebook and Whatsapp were not subject to a merger review by the EU under the general guidelines, despite in case of the example mentioned, a bid of $19 billion and the enormous user-bases involved. In fact, the Commission only reviewed (and cleared) the merger after national competition authorities requested it to do so.

Vestager stated that it is no longer just a company’s turnover which makes an attractive merger partner or which influences competition. Its total assets, including its userbase and its collection of personal data on these users, may also play a significant role. This statement may mark the Commission turning over a new leaf to look more closely at the actual economic value of personal data.

However, the Commission has not always had eyes for personal data as an economic asset. Particularly in its Merger Decisions throughout the years, the Commission has been reluctant to consider personal data as a relevant factor at all, despite the increasing role personal data plays on the digital marketspace in particular. For example, the Commission has held that a large userbase and the accompanying dataset are only relevant factors for determining a company’s dominance if they bar potential competitors from entering the market. In addition, the Commission has ruled that the network effects of large datasets are insignificant. They do not make it more difficult for new competitors to arise, because it is easy for consumers to switch to a different service provider. The Commission held that data-driven companies often offer their products for free, either online or as a free smartphone app. Consumers can also use multiple services at the same time, and can easily convince their friends to switch services as well, building up a new network one person at a time.

The Commission may now be considering a new approach, but what are the legal implications if it moves towards accepting personal data as asset to be considered under competition law? If one accepts that personal data has a value as an asset, that may change the overall analysis of any market which is driven by data-based business models, such as social media, Voice over IP, and search engines. For example, if the Commission accepts personal datasets as a valuable asset for a company, the next logical step would be that a consumer can also ‘pay’ with his personal data for access to an otherwise free product or service. Particularly in that event, the Commission’s old stance that personal data and privacy protection has no place in competition law may no longer be valid for future cases. After all, if the Commission takes the view that personal data itself has an economic value, how free is a service for the use of which consumers still have to share their personal data? How likely is it that a consumer will use his personal data to pay many companies at a time for the same service, and how likely is it that he will be able to convince his friends to do the same? Indeed, it will be difficult for the Commission to stay the course set out in its previous Merger Decisions if it decides to set personal data in a different light.

The statement by Commissioner Vestager marks the first time the European Commission has indicated large sets of personal data as an economic asset to be considered in competition cases. Considering the ever increasing prominence of personal data in a wide variety of business models, it is not surprising that the Commission would choose to turn over this new leaf now. However, accepting an economic value of personal data may have far-reaching consequences for the future application of competition law to our increasingly digital economy.

Peter van de Waerdt graduated from the University of Groningen with a thesis on the relation between EU competition law and personal data protection. 

Jonathan Toornstra

Legal Consultant

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