Competition in (data) privacy: ‘zero’-price markets, market power, and the role of competition law

Abstract

Firms compete by offering consumers lower prices but also high-quality products, and a wide range of choices. With the increasing commercialization of personal data, there is a growing consensus that the level of privacy protection and deployment of Privacy Enhancing Technologies (PETs) could be subject to competition, as an element of quality, choice or innovation. A case in point is the recognition by the European Commission that data privacy constitutes a key parameter of non-price (quality) competition in markets for consumer communications and professional social networks. This development signifies that market power may be exerted by reducing the level of data privacy and foreclosing competition on PETs deployment. Despite this, how market power affects competition on privacy and PETs remains unclear. This is partially because microeconomic theory offers little help in predicting how market power or lack thereof affects quality (including choice and innovation). The aim of this article is to examine how market power in the underlying services that generate data impacts competition in data privacy and whether the proxies for assessing market power in these underlying services cater to data privacy interests. To this end, first, the article begins by highlighting some emerging but inconclusive literature shedding some light on the link between market structure and competition in data privacy. Secondly, the article identifies and discusses the structural and behavioural considerations that might hinder effective competition through data privacy and PETs. Finally, it examines the role that competition law can play in promoting and maintaining such competition.