Smart data and anti-trust trends

Margrethe Vestager is the European Union's chief competition regulator. And the gloves are off. Vestager is currently investigating Amazon over allegations that it may be using data gathered via its market places to gain competitive advantage over other retailers.

There is no doubt there are also increasing concerns over Google and Facebook's dominance in first party data and user profiles. In the US, New York's Attorney General, Letitia James, (AG) this month announced comparable anti-trust investigations into both technology giants' data dominance and alleged sharp commercial practices. According to the NY AG James in relation to the Facebook anti-trust enquiry: “We will use every investigative tool at our disposal to determine whether Facebook’s actions may have endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising.”

Separately, and simultaneously, fifty (yes, five zero) US state Attorney Generals announced that they will be investigating Google's online advertising business over potentially anti-competitive conduct.

The New York Times has established a useful online tracker to keep abreast of these gargantuan probes - see The New York Times Tracker here. Having details of all these investigations in one place has quite an impact. Please bear in mind that Facebook settled with the Federal Trade Commission (FTC) early this year for a record US$5 billion for breaches of previous undertakings, inadequate security processes and breaches of privacy rules.

So are we nearing a watershed moment. It's far from Google's death knell yet. Nevertheless, it certainly raises the stakes and alters the risk profile for those operating in data driven businesses.

Vestager has new powers to make "Europe fit for the Digital Age," and clearly wishes to extend the reach of the EU's General Data Privacy Regulation (GDPR). As you may know, GDPR introduced sanctions for serious breaches of data protection law of up to 4% of a relevant undertaking's annual worldwide turnover or EUR 20 million (whichever is the greater). The European Commissioner for Competition is concerned how the larger platforms: "manipulate the way we see the world, in ways that we often don't even notice" and highlighted that, "...when a few companies control a lot of data about us, that can also help them influence the choices we make."

So, it seems inevitable that even greater scrutiny will be given to how transparent organisations are where consumer data is concerned.

As a starter for ten, an individual has a right of data portability under GDPR to seek to enable consumers to migrate their personal data to a new provider (this is in part designed to increase competition whilst strengthen an individual's right to privacy.

This general concept of open data has equally been extended to open finance - the regulation which applies to open banking is embodied in the form of the Payment Services Directive (PSD2). This obliges the major banks to open up account data to smaller fintech companies so that they may offer innovative, ancillary financial services and related products. It is hoped this will create a more level playing field by reducing the dominance of the Competition and Markets Authority (or CMA 9) nine banks (i.e. those banks deemed by the CMA to be the nine largest banks with dominance in financial services).

By mid-September this year, the major banks were obliged to migrate consumer account data to fully fledged application programme interfaces (APIs) - however, due to ambiguities around the Regulatory Technical Standards (RTS), there has been a lack of consistency in interfaces and data formats. This, in turn, has resulted in significant delays to this migration. Resulting in frustration for existing customers of third party providers (or TPPs) who are reliant on real-time access to accurate account and payment data. All of this demonstrates that achieving real-time, dynamic and seamless access to customers' account data is far from easy. That said, these remain fantastic initiatives which should bring greater choice and competition to consumers in the longer term.

The UK government has also just closed its consultation on Smart Data which builds on this theme of open data. The consultation emanates from its 2018 Consumer Green Paper: ‘modernising consumer markets’ and is part of its wider, 'Industrial Strategy'. In summary, the consultation succinctly encapsulates the concept of smart data:

"Data needs to be smart: easily and instantly accessible to consumers and be able to be safely and securely transferred to third party services who can use this data to provide innovative services for consumers. This is what we mean by Smart Data. Smart Data initiatives seek to improve data portability between consumers, incumbents and third party providers in a way that is responsible and secure."

In its consultation, the key features of Smart Data comprise (amongst other things):

• the immediate provision of data by the data holder to TPPs following a request from a consumer (rather than 30 days permitted in the right to data portability)
• the use of APIs to share data securely, but only once the consumer has verified their identity and the TPP has received their express consent to do so
• where appropriate, an ongoing transfer of data between businesses and TPPs, rather than a one-off transfer
• adherence to common technical standards, data formats and definitions to ensure inter-operability and to minimise barriers for TPPs
• provision of certain product and performance data, such as tariffs or geographical availability of services, in addition to consumer data, if necessary, to enable innovation

This sits alongside the government's paper The Fourth Industrial Revolution - this is designed to transform the UK’s regulatory system to support innovation while protecting citizens and the environment.

As part of this initiative the government proposes to introduce a new body, provisionally entitled, the 'Smart Data Function'. It is, as yet, unclear where this body will sit other than beneath a new 'Digital Markets Unit' - in any event, it will need to work hand-in-hand with the Information Commissioner (ICO) and the Financial Conduct Authority (FCA).

The key challenges in facilitating smart data are not dissimilar to those implementation hurdles faced by PDS2: consistency of standards and data formats, legacy systems, scarcity of appropriate coding talent, the extent to which regulators can measure performance and compliance, maintaining trust in data sharing, data security and accrediting TPPs.

Yet the opportunities are vast. If these practical and operational hurdles can be overcome, we are entering an exciting new phase of the digital economy and innovative commercial data modelling. Enter the new kid on the block, Smart Data.

17 September 2019.

Philip James is a Partner at Sheridans and advises clients on data strategy and licensing frameworks. Philip has a particular interest in open finance, geospatial data, fraud, risk governance and cyber security.