Modifying antitrust law to protect privacy would do more harm than good | American Enterprise Institute
This Friday, the House Subcommittee on Antitrust, Commercial and Administrative Law will hold its third hearing on online platforms and market power, this one focused on “The Role of Data and Privacy in Competition.” The hearing (where my colleague Roslyn Layton will be testifying) comes amidst a broader national conversation about the conduct of online platforms and the role of antitrust law in policing the behavior of tech giants. But as our friends at the Information Technology and Innovation Foundation (ITIF) noted in a blog post yesterday, data and privacy raise few antitrust concerns. Using antitrust law as a vehicle to address these issues is likely to cause more harm than good for consumers and for competition.
Antitrust law protects consumers by promoting competition. It guards against companies that abuse market power in ways that harm consumers. By promoting a robust competitive marketplace, antitrust regulators shield consumers from anticompetitive business practices such as price–fixing and monopolization.
advocates have called for changes to antitrust law that would limit the ability
of companies such as Google and Facebook to gather significant quantities of
data about their users. But the fact that a company has amassed huge amounts of
data, by itself, does not threaten competition. It tells us little about
whether that company has market power, let alone whether it is misusing this
power for anticompetitive ends.
To be sure, such a company could use large troves of data in anticompetitive ways. But the likelihood of such behavior is not as high as these advocates suggest. Like other inputs, data can be a valuable input into a company’s product. But ITIF notes that data is non-rivalrous, meaning that one company’s possession of data does not come at the expense of another’s ability to gather and use the same data in competition. So possession of such data alone does not constitute a barrier to entry. And while better data on customers may allow providers to engage in price discrimination, the International Center for Law and Economics (ICLE) explains that despite its ominous-sounding name, price discrimination is not necessarily harmful and antitrust regulators know how to determine whether a particular practice is anticompetitive. More generally, ICLE explains, data is no different than any other input, and existing antitrust law is well-equipped to guard against the misuse of big data without needing to regulate the collection of such data overall.
Others argue that platforms are unique because they offer their services to consumers for free, which makes it difficult for traditional antitrust tools to use price as an indicator of harmful practices. But this, too, is not a foreign problem for antitrust regulators. Perhaps most obviously, broadcast radio and television have long offered a zero-price product to consumers in exchange for their willingness to be connected to advertisers. Yet antitrust regulators have not hesitated to police competition in such markets. These are examples of two-sided markets, and the Supreme Court’s recent decision in Ohio v. American Express illustrates how existing antitrust law can police such markets by considering both sides of the platform.
The nexus between antitrust and privacy seems even more tenuous. From a public policy perspective, the privacy debate revolves around a vague notion that big tech firms know too much about us, and do not do enough to protect that data. To be sure, there are legitimate policy implications of this behavior. For example, overcollection of consumer data increases the likelihood of a data breach and the magnitude of the harm to consumers in the event of such a breach. But these are not concerns related to competition, and are better solved by adopting privacy legislation than by smuggling privacy into an antitrust framework. The problem with shoehorning these other policy priorities into antitrust law is that it undermines what antitrust regulators do best: conduct empirical analysis of specific business practices to protect consumers from competitive harm. To the extent that data accumulation threatens competition, existing antitrust law is sufficient to address this harm, just as it does other anticompetitive practices throughout the economy. To modify antitrust law to enact other social goals such as protecting data privacy compromises its ability to do so. These social goals are better addressed with specific legislation tailored for them.