It has now become commonplace to acknowledge that data is an increasingly valuable asset for businesses. The capture and commercialisation of large data sets (or ‘Big Data’) is creating new business opportunities, services, and ways of generating growth:
- The pure volume is astounding – in 2014, the International Data Corporation predicted that the digital universe is doubling in size every two years and by 2020, the data we create and copy annually will reach 44 trillion gigabytes.
- The value of data is increasing as well. References are often made to companies such as Uber, a ride share platform, which has a market capitalisation of around USD70 billion – which is attributed in part to the value of its data. In 2014, Facebook purchased WhatsApp (a comparatively small business offering instant messaging services to consumers) for USD16 billion. This is in sharp contrast to its revenue the year before of USD10.21 million.
‘Big data’ is not only changing the ways in which businesses interact with consumers, but is also changing the way in which businesses compete with one another, prompting many to ask the question: can the use of ‘Big Data’ be anticompetitive?
The answer is a long way from being settled, but governments and regulators around the world, including in Australia, are grappling with these questions with an increasing sense of urgency.
This article seeks to provide some context to this debate, give an overview of what is happening in Australia, and discuss how businesses might start thinking about and engaging with the issues in this new environment.
Big Data: why do competition authorities care?
The net economy has seen the proliferation of businesses that manage and control vast amounts of data (particularly, personal data). While embraced by consumers, the sheer size and importance of these businesses have led many to raise concerns as to the long term impact that these businesses might have on the economy and society at large. For example, social network sites such as Facebook have been variously criticised for a number of social issues, ranging from the decline of traditional forms of media (eg, newspapers), to, more broadly, the undermining of democratic processes at large.[1]
Some of these concerns directly relate to the impact that these businesses may have on competition. As a result, competition authorities around the world have started to increasingly pay attention, investigate and, in some cases, intervene and penalise behaviour that may be considered a threat to competition.
The responses to these problems are still evolving and there is some debate as to whether these businesses should be left alone (to avoid stifling innovation and competition) or should be regulated. While the debate continues, it seems to be clear that the trend is likely to be towards more intervention rather than less.
What are competition regulators doing?
Australia
In Australia, the Government and the Australian Competition and Consumer Commission (ACCC) are committed to understanding the impact of Big Data on competition, and to taking action where it appears needed.
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New regulation |
In November 2017, the Government announced the introduction of the consumer data right (CDR). The CDR can be thought of as a data portability right granted to customers, who will be able to direct holders of their data to share that information with a nominated third party. The CDR will first apply to the banking industry (an initiative also known as ‘open banking’), and the ACCC will have a lead role in its implementation. It is expected that open banking will increase competition in the provision of retail banking services. |
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Independent inquiries and commissions |
On 4 December 2017, the Australian Government directed the ACCC to conduct an inquiry into digital platforms. The Digital Platforms Inquiry (DPI) focuses on the impact of digital platforms on choice and quality of news; the extent to which digital platforms are exercising market power against media content creators and advertisers; the extent that digital platforms benefit from unfair competitive advantages (due to unequal treatment of regulation); and finally whether consumers are adequately informed about how personal data is collected. The preliminary report is due by 3 December 2018, with the final report due by 3 June 2019. Possible outcomes include increased transparency for consumers, law and policy recommendations to Government, and enforcement action where appropriate. The CDR is also the culmination of a number of Government reviews and inquiries which recommended expanding consumers’ access to data. |
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Merger review |
The ACCC has announced that it will “expand its work on data, algorithms and digital platforms, and increase the use of its powers to gather evidence in complex merger investigations”. For example, on 30 August 2018, the ACCC announced that it would not oppose the consortium acquisition of WestConnex (a toll road) on condition that the purchaser would undertake to provide access to toll road traffic data to third parties (thus creating a data sharing regime to mitigate what the ACCC otherwise identified as a potential competition issues). |
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Enforcement action |
The ACCC has also announced that it will expand its work on data and has made a start at looking at the impact of algorithms on the consumer experience. |
Internationally
Regulators internationally are also looking at data-driven competition issues:
- the European Commission fined Google EUR2.42 billion in June 2017 for abusing market dominance as a search engine by giving an illegal advantage to its own comparison shopping service;
- the German Federal Cartel Office plans to take action against Facebook after finding the company abused its market dominance to gather data on people without their knowledge or consent; and
- the US Federal Trade Commission and the European Commission examined data and privacy issues when reviewing the Facebook/WhatsApp merger, ultimately clearing the transaction.
How could this affect businesses in Australia?
Businesses are already relatively familiar with the privacy impacts of Big Data. While privacy issues are here to stay, the discussion above shows that competition laws have the potential to add an additional layer of regulatory oversight, one which will represent opportunities for some and new regulatory controls for others.
The full extent and impact of these new regulatory approaches is still in development. Some potential impacts to start considering are set out below.
- If business is subject to criticism because of its data capabilities (or practices around data management), these concerns may be expressed as competition issues (and directed to the ACCC)
- ACCC may want to know more (focusing on either particular industries or individual businesses) (eg, DPI)
- In some cases, sharing of data may be mandated (eg CDR)
- In any event, data is likely to be significant factor in all interactions with the ACCC (eg, how data is collected and commercialised, how data impacts interactions with competitors, how data would impact any acquisitions or large transactions)
If there are plans to commercialise data in the future, it is worth considering:
- if any competition law issues may apply; and
- if there may be third parties likely to be interested in access to data held by the business.
- Can data be accessed through mandated arrangements?
- Could lack of access to data potentially give rise to a competition issue (eg, misuse of market power)?
- Can the sharing of data be encouraged by other informal means?
*The authors acknowledge the assistance and contribution of Claire Green and Arda Reznikas in the preparation of this paper. The views expressed in this paper are the authors’ and the authors’ alone.
[1] See, eg, News Corp Australia, Submission to the ACCC, Digital Platforms Inquiry, 20 April 2018, 1-2 <.
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