Don't break up digital giants, force them to give users data access, says report
A landmark report produced for the European Commission "Competition policy for the digital era" co-authored by an Imperial academic has been published
Published on Thursday, the report analyses three key characteristics of the digital economy: the extreme returns to scale available to digital service providers, the network externalities inherent within them—the need for new entrants to markets (e.g. social media platforms) not just to offer superior services, but to attract coordinated migration of users to the service; and the role of the large amounts of data including personal data that underpin digital services.
All of these characteristics, the report says, make "large incumbent digital players… very difficult to dislodge" and "strongly favour the development of ecosystems"
The authors go on to argue that although there is "no need to rethink the fundamental goals of competition law in the light of the digital 'revolution'", the enforcement of competition needs to be "adapted and refined" for the digital age.
The report makes several recommendations, including:
- The need to protect competition for the market for the benefit of consumers. While a case-by-case analysis is always required, actions by digital platforms to prevent switching between them and multi-homing—users using several platforms at the same time—such as data lock-ins (which prevent easy switching) "should be suspect under competition law".
- Platforms should move away from being both the judge and the jury. Dominant platforms are effectively running a market. The report argues that it is essential that competition on dominant platforms is fair and unbiased, and that platforms don't use their power to determine the outcome of the competition—such as by giving preferential treatment to their own product or services owned by the same ecosystem.
- User-centric data interoperability. The report argues that "requiring dominant players to ensure data interoperability may be an attractive and efficient alternative to calling for the break-up of firms". The idea of breaking up digital giants has received much public debate recently, with US Presidential candidate Elizabeth Warren campaigning on the issue. The report argues that the interoperability approach would allow for competition on merit, while "allow[ing] us to continue to benefit from the efficiencies of integration."
- Access to large datasets owned by existing market leaders may be essential for innovative startups to compete with the digital giants in AI. The report concludes that a thorough analysis will be required to properly assess whether data access is truly indispensable to compete and to consider the legitimate interest of both parties. It also considers the potential for innovative market-based solutions to put users in control of how their data are being used.
- Finally, it calls for more transparency in the functioning of platforms saying that "actions by platforms to actively prevent research in the public interest [...] should be viewed with great suspicion" and that "more proactive ways should also be found to grant independent researchers access to sufficient data or [algorithmic] sandboxes".
Yves-Alexandre de Montjoye, Head of the Imperial's Computational Privacy Group, was appointed as a special adviser to the EU's Competition Commissioner Margrethe Vestager in April 2018. Dr. de Montjoye's expertise lies in data security, privacy, and algorithmic uses of data.
Alongside two other special advisers – legal expert Professor Heike Schweitzer from the Humboldt University of Berlin, and economist Professor Jacques Crémer from the Toulouse School of Economics – he has been working on the report for the past year.
Dr. de Montjoye said: "I'm grateful to the Commissioner for the opportunity to have contributed my expertise to this important debate. The recommendations we make can really help ensure that consumers do have a choice and are in control when using data-powered services online and promote innovation, including for small innovative start-ups."
Speaking at the European Consumer and Competition Day Conference in Bucharest yesterday, Commissioner Vestager said: "In the digital age, having the right data may be one of the keys to compete," and that the report is "full of important insights into the way markets are changing—and full of valuable ideas on how competition policy can respond".
Digital competition: on the global agenda
The publication of the European Commission report comes after the UK Government's Digital Competition Expert Panel chaired by Harvard Professor Jason Furman published their own report "Unlocking Digital Competition" last month.
Dr. de Montjoye has also played a role in influencing UK legislation. In November 2017, he met with then-Secretary of State for Digital, Culture Media and Sport and Imperial alum Karen Bradley MP to present his research into data privacy and the shortcomings of existing data anonymization techniques. At the time, Bradley was shepherding the Data Protection Bill through Parliament.
Dr. de Montjoye's expertise helped to ensure the legislation was amended to protect researchers focused on protecting consumers by enhancing data anonymization methods from falling foul of the law.