Greed for data and exclusionary conduct in data-driven markets

Abstract

Several two-sided platforms base their business model on collecting user data, which not only is used for advertisements that generate revenue, but also improve the underlying algorithm that forms the core of any virtual platform. In such markets, big data generates network effects that sustain the market position of the dominant player. Further, scope in data adds a crucial competitive advantage to the advertisement-driven business model. The paper argues that by cutting the supply of user data to its competitors, a dominant player can successfully restrict its competitors from gaining critical mass (in terms of both scale and scope) that is crucial to stay viable in a competitive market. The literature on the competition assessment of data-driven markets has predominantly been theoretical hitherto. This paper presents the competition assessment of two recent cases—European Commission's decision against Google in the Android licensing case, and Bundeskartellamt's (German Federal Cartel Office) action against Facebook— in their technological and economic context to ascertain foreclosure. While Google's practices resulted in foreclosure, the technological and economic context in Bundeskartellamt's case against Facebook does not present a convincing theory of foreclosure. The paper also draws common lessons from these cases that can guide the competition assessment in similar circumstances. The paper, therefore, contributes to the scant academic literature on the exclusionary conduct in data-driven markets from a practical standpoint.