Digitalisation, Big Data and the Competition

In recent years, the debate around digitalisation and Big Data has become increasingly heated. Digital business models are becoming increasingly important, while the impact of data-based business models remains controversial. In particular, there is a conflict between private and public interests when it comes to the use of data. This paper explores issues of market power, data ownership and data use.

It is important to understand that our article should not be considered a substitute for legal advice, especially when it comes to competition law issues. In such cases, the expertise of an experienced lawyer is invaluable and can provide a much more comprehensive assessment of the situation than we can provide in our article. When dealing with competition law issues, you should always seek qualified legal advice to ensure that you have the most accurate understanding of the laws and regulations involved. Mirko Peters

A growing debate

The debate around digitalisation and Big Data has grown in intensity in recent years. As digital business models become more prevalent, issues such as market power, data ownership and data protection are increasingly coming to the fore. As a result, governments around the world are taking steps to ensure that companies do not monopolise or abuse their access to valuable data resources.

In Germany, for example, the Bundestag recently published its White Paper on Digital Platforms. This document aims to stimulate further discussion on these issues by examining markets centred on platforms, exploring how data can be used in competitive analysis, highlighting potential privacy concerns and looking at ways to limit industry concentration and maintain fair competition in digital markets.

Data ownership and use

At the heart of this debate is the question of who owns the data - individuals or companies? For example, if a company collects data about its customers through its website or app, does the company own all of that data? If not, what rights do individuals have over their own personal data? It is also important to consider how companies use this data - do they use it responsibly? Are they transparent about how they use it? These questions need to be answered if we are to ensure that individuals' rights are protected in an increasingly digital world.

Management Summary

The debate on digitalisation and Big Data shows no signs of abating any time soon. It is clear that there needs to be more clarity about private and public interests when it comes to accessing and using data resources. Governments must take action to ensure that companies do not monopolise or abuse their access to valuable information resources, while protecting individuals' rights to their personal data. The German government's White Paper on Digital Platforms is an important step in this discussion. It encourages further dialogue on these issues so that we can find solutions that balance both private and public interests.

Understanding Big Data and its impact on competition law

As technology advances, the amount of data generated by businesses and consumers is growing exponentially. This information, known as "Big Data", has the potential to provide valuable insights into consumer behaviour and market dynamics. Unfortunately, it also poses a challenge to competition law, as companies could use Big Data to gain market advantages over their competitors. In this short section, we discuss what Big Data is, how it affects economic activity and the implications for competition authorities.

What is Big Data?

Big Data can be defined as any collection of structured or unstructured data collected for analysis and predictive modelling. This includes both machine-generated data (e.g. web logs) and user-generated content (e.g. posts on social media). The sheer volume of Big Data makes it difficult to analyse using conventional methods. Instead, specialised software must be used to extract meaningful insights from the information.

How does Big Data affect economic activity?

Big Data can have a significant impact on market competition, as companies can gain an advantage over their competitors by better understanding customer needs and preferences. Companies can also use Big Data analytics to identify opportunities for new products or services before their competitors do. In addition, companies can use Big Data to identify potentially anti-competitive practices such as price fixing or collusion with other companies to maintain a monopoly in certain markets.

Implications for competition authorities

The advent of Big Data poses a challenge to competition authorities, whose role is to ensure fair competition in the market. Regulators must find ways to protect consumers from anti-competitive practices while allowing businesses to access the valuable insights of Big Data analytics. They must also address concerns about third-party access to consumers' personal data without compromising privacy protections.

Management Summary

In summary, Big Data presents both opportunities and challenges for companies seeking to gain an advantage in the marketplace and for regulators to ensure fair competition between companies. Companies need to be alert to potentially anti-competitive practices when using Big Data analytics, while regulators need to develop policies that balance consumer protection with industry innovation to ensure optimal market efficiency.

How data can influence market power and competition law

In today's digital world, data is becoming increasingly important. It is used to create efficiencies, increase transparency of providers and potentially lead to anti-competitive behaviour. But what exactly is data? According to the Oxford English Dictionary, data is "facts and statistics collected for reference or analysis" In other words, it is information that can be used by businesses to gain insight into their customers, competitors and the market as a whole. This makes data an incredibly powerful tool when it comes to understanding how markets work - but it also means that there are potential risks associated with using data in certain ways. In this paragraph, we explore how data can impact market power and competition law.

Data as a factor contributing to market power

Data can be an important factor in determining market power - the ability of companies or individuals to influence pricing or other aspects of the market. When companies have access to large amounts of data about their customers and competitors, they can use this information to identify trends and make decisions that could give them an unfair advantage over others in the market. For example, if two companies sell products at the same price, but one has access to more detailed customer information than the other, it is likely to be able to offer better prices or services to attract more customers. So data can facilitate collusion between companies if they are able to use it effectively.

How access to data can create market power dynamics 

There is no doubt that data has become one of the most important commodities in the modern economy. Companies have long used data to gain insights about their customers and better target their marketing efforts. In recent years, however, the amount of data available and the ability to process it has exploded. This has led to a new era where companies are able to use data in ways that were previously unimaginable. 

As a result, access to data has become a critical factor for success in many industries. This is especially true for industries where network effects are present. Network effects occur when the value of a product or service increases as more people use it. For example, the value of Facebook increases when more people join it because there are more potential connections that can be made. 

In industries with network effects, the company that can attract the most customers is usually the one that ends up with the highest profits. This is because these companies have a built-in advantage that allows them to scale their business faster and more efficiently than their competitors. 

The implications of this dynamic are far-reaching, especially for smaller companies and new entrants. These companies are at a disadvantage because they do not have the same access to data or the ability to process it in the same way as larger companies. They also often lack direct contact with customers, which limits their ability to collect data from third parties. As a result, it is difficult for these companies to compete with larger companies that can use their data advantages to gain an edge over their competitors. 

One only needs to look at some of the largest companies in the world to see how this dynamic plays out. Amazon, for example, has leveraged its vast repository of customer data to create a powerful e-commerce platform that other companies struggle to compete with. Similarly, Google has used its access to data to create a dominant search engine and advertising business. In both cases, these companies have used their market power to attract even more customers and consolidate their position as industry leaders. 

Access to data is increasingly becoming one of the most important factors for success in today's economy. Companies that have access to large amounts of data and are able to process it effectively have a significant advantage over their competitors. This dynamic is particularly pronounced in industries with network effects, where the company that acquires the most customers usually also earns the highest profits. Smaller companies and new entrants often have a hard time competing with these larger firms because they do not have access to data and cannot use it effectively. As a result, access to data is playing an increasingly important role in shaping market power across a wide range of industries.

Digital innovation and competition law

The rapid pace of digital innovation presents both opportunities and challenges for businesses and competition authorities alike. On the one hand, digital innovations bring potential economic benefits through increased efficiency, improved customer experience and ultimately lower prices for consumers - all of which should be taken into account when assessing the impact of new technologies on competition law considerations. On the other hand, some digital innovations may have anti-competitive effects if not properly considered under competition law principles. This is the case, for example, when companies use algorithms or machine learning tools to manipulate pricing or engage in predatory practices (e.g. by promoting their own products over those of competitors). It is therefore important that companies considering the use of new technologies (especially those related to personalisation) carefully assess any potential competition law implications beforehand.

Increased data availability in the marketplace 

In today's digital world, data availability has become increasingly important. Companies have access to vast amounts of customer information and can quickly understand what customers are looking for in a product or service. This increased data availability offers both benefits and risks in terms of customer satisfaction, competition in the marketplace and the potential for collusion between companies. 

Benefits of increased data availability 

Increased data availability means that companies have access to customer requirements and offerings that enable them to tailor products and services to meet customer needs. This also gives them the opportunity to gain a competitive advantage over other companies by offering more attractive services or better prices than their competitors. In addition, transparency can work both ways, as customers now have access to the prices and offers of different providers without having to contact each provider individually. This allows them to make more informed decisions about which products or services best fit their needs. 

How data availability improves competition in the marketplace 

Data availability also has a positive impact on market competition, allowing smaller businesses to enter the market at a lower cost than ever before. Smaller companies can compete with larger companies on price and quality thanks to better data availability, which makes it easier for them to understand customer needs and offer competitively priced products or services that meet those needs. In addition, better data availability makes it easier for customers to compare prices between different suppliers, which promotes competition between companies.  

Potential risks of high levels of transparency 

In addition to the many benefits of increased data availability, there are also some potential risks. For example, a high level of transparency can lead to collusion between companies, as they can quickly see what their competitors are offering. This could lead them to agree on certain price points or terms without considering consumer welfare. In addition, the increased availability of data could lead companies to focus too much on providing customised solutions instead of developing innovative new products or services that could benefit consumers as a whole.  

All in all, increased data availability has the potential to benefit both customers and businesses by providing more transparency in the marketplace and enabling smaller companies to compete more effectively with larger corporations. However, there is also a risk that this level of transparency could lead to collusion between companies or limit innovation, as companies focus too much on providing bespoke solutions rather than developing new products or services that benefit consumers as a whole. Therefore, it is important that companies consider these potential risks when leveraging increased data availability to ensure that they do not negatively impact consumers while achieving their goal of increasing competitiveness in the marketplace.

Data sharing and competition in the Industrie 4.0 era 

The fourth industrial revolution, or Industry 4.0, is upon us. While this technological revolution has been a boon for many industries, it has also brought new challenges. One of these challenges is data sharing: how can companies collaborate and share data without harming competition? This blog post is about the competitive impact of data sharing and strategies to share data without harming competition. 

What is data sharing? 

Data exchange is the transfer of information between two or more companies. In the context of Industrie 4.0 applications, data exchange is about sharing information between different companies to improve efficiency, reduce costs and increase profits. However, as with any type of collaboration between competitors, there are potential antitrust implications that need to be considered when sharing data. 

The effects of data sharing on competition 

Data sharing can have both positive and negative effects on competition. On the one hand, it can lead to increased cooperation between competitors and better outcomes for consumers. On the other hand, it can also lead to reduced incentives for innovation and ultimately higher prices for consumers, as competition in the market is reduced. It is therefore important to consider how data sharing may affect competition before it takes place.  

Strategies for sharing without affecting competition 

There are several strategies that companies can adopt to share data without harming competition. These include creating a competitive marketplace where rival firms can bid on contracts with their own algorithms, or establishing independent oversight committees to monitor data sharing activities to ensure they are not anti-competitive or otherwise illegal under antitrust laws. In addition, companies should ensure that any data-sharing arrangements are structured in such a way that they do not restrict competition by eliminating or reducing pre-existing competitive constraints in the market.  

Data sharing is an important part of Industrie 4.0 applications and holds enormous potential for the benefit of businesses and consumers alike. However, it is important for companies engaging in such activities to understand how their actions could affect competition before entering into data sharing agreements, so as not to inadvertently harm consumer welfare through anti-competitive practices or breaches of antitrust law. By taking measures such as establishing independent monitoring mechanisms and properly structuring agreements, companies can benefit from data sharing without negatively affecting competition in their markets. Ultimately, understanding the competitive impact of data sharing is critical if we are to maximise its potential benefits while minimising its potential harms.

The impact of mergers and data access on competition 

Mergers between companies can raise competition concerns, such as higher prices and lower quality. In recent years, data access concerns have become increasingly important in merger reviews. Data access - the ability for one company to access its competitors' data - can be anti-competitive if denied to other companies. This blog post provides an overview of the potential competition law concerns related to mergers and data access, including how price discrimination and increased information asymmetry can arise from data access. 

What is a merger? 

A merger is defined as "a combination of two or more companies into a single company in which the shareholders of each company retain some ownership interest" Mergers can lead to competition concerns if they result in higher prices, lower quality or less innovation. Mergers also give companies the opportunity to engage in anti-competitive practices by denying competitors access to important data. 

Denying competitors access to data 

When companies deny their competitors access to data, it is an anti-competitive practice called "data exclusion" This occurs when one company denies another company access to necessary data that would be available under normal market conditions. Examples of this type of behaviour include refusing to share customer data with competitors or blocking competitors' ads on a website. There are numerous reasons why a company may deny its competitors access to data, e.g. to maintain its market power or to prevent competitors from competing in certain markets. 

Rules for data exclusion 

The rules for denying access to data vary by jurisdiction. In the United States, the FTC has taken action against companies that have engaged in anti-competitive practices related to data exclusion. For example, Google was fined $2 billion by the EU for blocking competitors' search ads on its platform and preventing them from appearing alongside Google's own ads. Facebook was also fined $5 billion by the FTC for using user data without their consent and sharing it with third-party developers without their knowledge or permission.  

Price discrimination and information asymmetry due to data access

Price discrimination occurs when two customers have to pay different prices for identical products because they are unable or unwilling to pay for them. This practice can occur when companies use customer information obtained through data access to charge different prices to different customers based on their individual characteristics. In addition, price discrimination can lead to increased information asymmetry between buyers and sellers - a situation where one party (usually the seller) has more information than the other (usually the buyer). This can lead to higher prices and lower overall welfare, as buyers may not know what other buyers are paying for similar products or services. 

Mergers between firms can lead to competition concerns both directly and indirectly, e.g. by raising prices and reducing quality due to monopoly power created by the merging firms having control over important assets/resources/data, etc. Denying competitors access to important resources such as consumers' personal information can also lead to cost increases due to price discrimination resulting from information asymmetries between buyers and sellers, which in turn reduces consumer welfare and leads to anti-competitive practices and outcomes. Understanding these dynamics is important for regulators, policymakers and antitrust practitioners alike. Understanding how mergers can impact competition by denying competitors access to important resources such as consumers' sensitive personal information, regulators, policy makers and antitrust practitioners alike should take appropriate measures/actions/policies etc. to protect consumers from anti-competitive outcomes arising from possible monopolistic practices that may result from mergers and acquisitions. This is ultimately how consumer welfare is protected and competitive markets are created. Therefore, it is important to understand how mergers and acquisitions affect competition by looking at both the direct consequences such as monopoly power and the indirect consequences such as denying competitors access to important resources such as consumers' personal data, which could lead to cost increases due to information asymmetries between buyers and sellers, which in turn leads to price discrimination and thus anti-competitive outcomes.

Management Summary

In summary, data is becoming increasingly important in today's digital world as it can provide valuable insights into customers, competitors and markets in general. However, it is not only important for companies to understand how to use data effectively, but also how to consider potential competition law implications prior to implementation - especially if they want to avoid allegations of anti-competitive behaviour or manipulation of pricing structures in their respective markets. Understanding how data can impact market power dynamics and the applicable rules governing competition law principles will better equip you when making decisions about your business in the future.

How data protection and competition law are related 

Data protection and competition law are two areas of law that are closely linked. As market power increases, so does the potential for misuse of user data. It is important to understand the different aspects of competition and data protection and how these two areas of law interact to protect consumers from unfair practices. In this penultimate section, we will examine how data processing, competition parameters and the Bundeskartellamt's case against Facebook are related to competition law and data protection. 

Data processing as a competition parameter 

The European Union has taken measures to ensure that data processing remains an important factor in determining the conditions of competition in markets. In particular, certain data protection measures are given preference over others when it comes to protecting the rights and freedoms of users. This means that companies must take into account certain data protection requirements when setting up their services or using personal data. In addition, excessive collection of user data by dominant companies may constitute an abuse of their dominant position and be subject to antitrust investigation by European competition authorities. Unlawful terms and conditions also warrant antitrust scrutiny if they prevent users from exercising their rights under applicable EU law, such as data protection provisions or consumer protection laws. 

Proceedings of the German Federal Cartel Office against Facebook 

The German Federal Cartel Office conducted an investigation into the possible misuse of user data by companies owned by Facebook Inc (Facebook Ireland Ltd, WhatsApp Inc, Instagram LLC). The investigation focused on the question of whether Facebook exploits its market power to gain insights into the business models and strategies of its competitors and thus limit their competitiveness in the online advertising markets. The Bundeskartellamt also investigated whether Facebook imposed illegal conditions on its users by forcing them to accept its terms in order to use its services or apps. The Bundeskartellamt concluded that Facebook had abused its dominant position in the social networking market by requiring its users to accept its terms without giving them a choice or the opportunity to negotiate or appeal. The other European competition authorities and data protection commissioners have joined forces with the German Federal Cartel Office in this case against Facebook, which is a clear sign that both competition law and data protection are taken seriously by regulators across Europe.  

Management Summary

Data protection and competition law are closely related areas of law that need to be considered when assessing market power dynamics in digital markets such as online advertising markets, where companies have access to vast amounts of user data that can give them an unfair advantage over their competitors if not handled responsibly. The recent proceedings initiated by the Bundeskartellamt against Facebook show how serious regulators are about ensuring that companies do not abuse their dominant position by improperly using user data collected through online services or apps. It is vital that companies comply with applicable EU laws to avoid any potential liability arising from the misuse or mishandling of user data they collect from customers or other third parties. This blog post has shown why it is important for companies operating in digital markets to keep up with both developments in competition law and changes in the applicable EU data protection rules in order to protect themselves from potential penalties for non-compliance with both sets of rules.

Digitisation and data collection: how they can influence market power and competition

In the digital age, data has become a valuable commodity. Companies are using data to improve the customer experience, develop new products and build better algorithms for predictive analytics. However, this has also led to imbalances in market power and competitive issues that require further analysis. In this blog post, we explore why data is so valuable and how its collection can lead to complex competitive challenges.

Why is data so valuable?

Data is extremely valuable because it provides companies with insights into the behaviour, preferences and buying patterns of their customers. This allows companies to make informed decisions about product design and marketing campaigns that best meet customers' needs. Companies use this data to better tailor their services to their customers' needs, resulting in higher customer satisfaction and loyalty. In addition, data can be used for predictive analytics that allow companies to anticipate market trends before they occur, giving them a competitive advantage over their rivals.

However, one of the biggest problems associated with data collection is consumers' lack of knowledge about it. Consumers are largely unaware of how much and what data is collected about them by various companies and how this information is used. This can lead to misuse of personal data or unfair practices such as targeted marketing campaigns or decision-making processes that favour certain customers over others. This lack of transparency has raised serious concerns among privacy advocates. They call for consumers to have more control over their personal data and how it is used by companies.

The complexity of competition law poses another challenge when it comes to digitalisation and data collection. The advent of Big Data brings with it a number of complex competition law issues that need to be addressed jointly by competition authorities, legislators and privacy advocates if fair competition is to be maintained in the market while protecting consumers' privacy rights at all times. This includes questions such as: What is anti-competitive behaviour in an increasingly digitalised world? How should mergers between tech giants be assessed? What measures should be taken to ensure fair access to the relevant digital markets? And how should existing antitrust regulations be adapted to the digital age? These are all questions that need to be further explored if we are to ensure fair competition in the market for both businesses and consumers, while protecting consumers' data protection rights at all times.

Management Summary

In summary, technological advances have transformed data into a valuable asset with great potential for businesses, but also have serious implications for consumers' data protection rights that should not be overlooked. The potential imbalances in market power caused by these advances need to be further explored if we are to ensure fair competition in the market while preserving consumers' right to privacy at all times. By working together - competition authorities, legislators, experts - we can take effective action that protects both the interests of businesses and consumers worldwide, while preserving our right to privacy online at all times.