Big Data in 2018: In the grip of the antitrust and data protection authorities?
In 2018, Big Data is likely to become a permanent feature of antitrust headlines. This frequently used phrase refers to the collection, processing and analysis of large and complex data sets from a variety of sources as fast as possible (often summarised as the 3 Vs – volume, variety and velocity) plus business models based on such applications.
Data-based business models have become a key success factor and competitive parameter in many industries. For example, even companies in the ‘old economy’ are using Big Data applications more and more to optimise business processes, cut costs in production and distribution and boost product quality.
Big Data in the sights of the European competition authorities
The European Commission as well as many competition authorities of EU Member States are closely monitoring the analysis of personal data linked to Big Data and in particular looking closely at the transparency of data collection and use.
In Germany, the legislator acknowledged the growing importance of data as a competitive parameter with the 9th Amendment to the Act on Restraints of Competition (ARC), which came into force on 9 June 2017, and adapted the previous antitrust regulatory framework to fit the challenges of Big Data.
Thus in the area of market dominance, the amended law now explicitly provides that a competitively relevant market can also exist for free-of-charge services, i.e. even if consumers use a free online offering. In addition, the criteria to be applied for measuring market power were expanded to include criteria tailored to the digital economy. In particular, network effects and access to competitively relevant data gain a prominent position.
In 2018 there are likely to be more reviews at European and national level of the effects of Big Data on competition, e.g. as a barrier to market entry, especially once the European General Data Protection Regulation comes into force. It would not be surprising if related market abuse proceedings were to be initiated. The fact that access to data particularly for smaller or newly set up companies can be a significant competitive advantage in comparison with established companies was already the subject of the paper Competition Law and Data published in May 2016 jointly by the German Federal Cartel Office (FCO) and France’s competition authority, Autorité de la Concurrence. The European Union’s Competition Commissioner, Margrethe Vestager, also announced several times – most recently in January 2018 in an interview with the Wall Street Journal – that in future there would be more examination of whether and how large companies use Big Data to exclude competitors from a market. As the outcome of such proceedings, a market-dominant company could even be required to give competitors access to its own data sets.
Facebook proceedings by the German Federal Cartel Office
According to the preliminary assessment published in December 2017, the FCO deems Facebook a dominant company in the market for social networks. The FCO is further of the preliminary opinion that Facebook is acting abusively by making the use of its network dependent on gathering all types of user data from its group’s own and other third-party sources – which Facebook can access via interfaces – and combining them with the user’s Facebook account. The FCO alleges that the users have not validly consented to this use of their personal data and thus Facebook would be in violation of mandatory data protection provisions.
Before adopting a final decision, Facebook now has the chance to respond and make its case with the FCO. Facebook may also elect to stop the collection of data as criticized by the FCO or to propose commitments in order to prevent an unfavourable decision.
The outcome of the proceedings will be pioneering in many ways. Facebook could be forced to adapt its data privacy provisions to the requirements of (German) competition law. But what would be more serious would be the establishment of strict conduct requirements linked to market domination, which could be the starting point of future abuse proceedings.
Will data privacy laws be enforced in future by antitrust authorities too?
The Facebook case will give an initial indication of the extent to which infringement of data privacy law can simultaneously qualify as an abuse of a dominant market position. To date, the European Commission and the national competition authorities have not thought themselves responsible for prosecuting purely data protection-related violations. The consequence of the Facebook proceedings could now be a dual review by data protection and antitrust authorities. This gives rise to questions of jurisdiction. But perhaps even more important may be the prospect of potentially facing a double fine for a breach of data protection provisions.
Will there be international cooperation between antitrust and data protection authorities?
In 2018 we will see a further rollout of cooperation between antitrust and data protection authorities in Germany and the kick-off of greater cooperation at European level once the GDPR comes into force. With the 9th Amendment to the ARC, cooperation between data protection and antitrust authorities in Germany has been standardised. But there is no explicit arrangement (yet) for cooperation with data protection authorities outside Germany.
Initial applications for the transaction value-related threshold
Besides the provisions on market dominance, the 9th Amendment to the ARC also adapted the provisions on merger control to the challenges of the digital economy. In particular, a further threshold for merger control was introduced, which is not based solely on the turnover of the participating undertakings but especially on the value of the transaction. Transactions in the digital economy in which the target company has not (yet) generated any significant turnover but which constitutes an attractive target due to its stock of user data and an innovative business model are to be covered by this too. The new threshold raises many questions of application. The FCO and the Austrian Federal Competition Authority have announced that in the first half of 2018 they will publish a joint guideline with instructions for interpreting the transaction value threshold.
The introduction of a transaction value-based threshold is being discussed at European level too. The related consultation procedure was completed in January 2017 but no related action plan has yet been published.