The Secure Times

An online forum of the ABA Section of Antitrust Law's Privacy and Information Security Committee

2011 Chair’s Showcase Explores how Antitrust Might Address Privacy in Web 3.0

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Should modern antitrust analysis address data privacy?  This was the intriguing proposition discussed by two different panels at the Chair’s Showcase during the ABA Antitrust Section’s Spring Meeting last week.  Although traditionally viewed as a consumer protection issue, privacy is becoming an important dimension of competition for companies that operate in the information economy.

In fact, the intersection of antitrust and consumer protection, particularly in information markets, is a “platform issue” of Allan Van Fleet, the current Chair of the Antitrust Section (for more, see this recent Secure Times blogger-view with Tara Koslov about the showcase).  Fleet acknowledged that his initial inspiration for the showcase came from a 2008 article (by former FTC Commissioner Pamela Jones-Harbour, and the FTC’s Tara Koslov) that appeared in the Section’s Antitrust Law Journal – Section 2 In A Web 2.0 World: An Expanded Vision Of Relevant Product Markets.  In this article, the authors argue that market definitions should reflect the collection and use of data, independent of product or service markets that are driven by that data.

Tara Koslov and her former FTC colleague Matthew Bye (now at Google) were moderators for the first panel.  Koslov, noted that technology is “changing the value of user data,” a proposition that is constantly being proven by market developments and newer business models. Bye provided a distinct example of how this might play out – data portability.  If consumers aren’t happy with how their data is being treated, they may choose another product or service.

On the first panel, Commissioner Julie Brill reviewed the findings of the FTC’s preliminary staff report on privacy, and its three main recommendations – simplified choice, greater transparency and privacy by design.  She also indicated that a final FTC privacy report would out by the end of the year. Representatives from Google, HP, Microsoft and other technology companies presented on both panels – detailing the various approaches and best practices they have adopted to address privacy concerns by consumers and regulators.

In her remarks as moderator for the second panel, former Commissioner Harbour further outlined the competitive landscape: data now functions like currency, while fueling some of our most important markets; e-commerce, mobile commerce, online advertising, social networking.  Privacy is a non-price factor – but an increasingly important one in data-driven markets. The issue is allowing all of these data flows in a manner that does not undermine both innovation and user privacy.

Clearly, firms often make decisions based on privacy – not just for compliance, but also to satisfy the needs of consumers who are both privacy-aware and tech savvy. But can privacy be a relevant form of non-price competition for products and services?  

Possibly, according to an extremely insightful presentation by Professor Steve Salop, one of four panelists on the the second panel (other co-panelists included former FTC Chairman Tim Muris, and Bruno Lassere of France’s Conseil d’Etat). 

Salop noted that historically, the federal agencies had given “short shrift” to non-price competition (e.g. 1990s radio mergers where the focus was advertising competition, not listener preferences).  That may be changing now that both agencies have acknowledged the importance of non-price competition in their 2010 Horizontal Merger Guidelines.

According to Salop, for privacy to be part of antitrust analysis, three important questions should be answered:

  1. Whether privacy is important to consumers (not consumer advocates), and how attitudes to privacy differ depending on the variables – age, education, income level, etc. 
  2. What are the costs? Does sale of consumer data support an advertiser-sponsored, zero-price Internet with lower priced products?  Salop argued that if increased privacy protections result in increased cost, mandating privacy protection may be a problem better suited for regulation than antitrust.
  3. What are the important competitive issues?  Is there a potential for firms to collude in the interest of promoting uniform data privacy protections?

The last question is a thorny one, and may already be in play. Already, companies are pondering the specifics of the FTC privacy report, which urges companies to adopt both “privacy by design” and choice mechanisms like “do-not-track”.  Would the possibilities for collusive behavior increase with a regulatory mandate that urges companies to integrate a “universal” do-not-track mechanism into their products from inception? 

One thing is for sure – privacy will continue to be a big part of the antitrust dialogue – at this year’s ABA Antitrust Spring Meeting, five different sessions focused on data privacy issues.  My guess is that the intersect of antitrust and consumer protection – especially as it relates to privacy – will continue to be a featured topic at future Spring Meetings and other Section events.  Stay tuned…

Author: ABA Antitrust

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