Should antitrust regulations govern how large technology companies collect large amounts of consumer data? It is a recent issue that has received increased attention, with increased pressure from state regulators and legislators for antitrust measures against big tech companies. Although the United States still has a long debate ahead of this, European regulators have already investigated and in some cases fined major technology companies for their data practices. Part of the debate in the United States is whether the control of large data is an antitrust issue, a consumer protection problem or both. But there are indications that the FTC, the US Department of Justice's antitrust department and state regulators will not be idiotic while the debate continues.
Last month's announcement that the US Federal Trade Commission has created a new technical workgroup overseeing a technical company signals that enforcement of US antitrust regulators may be on the way.
The FTC's newTechnology Task Force will focus on "examining industry practices and conducting law enforcement investigations on technology-related issues, including prospective technology sector merger assessments and consumer merger review." to co-ordinate with the Agency's Consumer Protection Agency and the authorities' techniques. This new federal enforcement tool is the FTC's recent effort to monitor the impact of technology markets on competition and is also the most significant of several steps US federal and state regulators have taken so far on this front.
A particular issue of regulators is that the anti-competitive behavior can adversely affect consumer integrity. In September, DOJ, including Assistant Attorney General for Antirust Makan Delrahim, held a meeting with attorneys general from eight states and the District of Columbia and law enforcement representatives from five other states. DOJ stated and several government agencies confirmed that the purpose of the meeting was to discuss whether technology companies could "damage competition and deliberately establish the free exchange of ideas on their platforms" and to ensure that consumer personal data is protected as much as possible.
Unlike regulators in Europe, neither DOJ nor the FTC have had any concrete cases than dealing with these problems. US regulators have also commented on the potential overlap between consumer integrity and antitrust problems, neither the DOJ nor the FTC has had a concrete case to determine linked to anti-competitive issues related to consumer data.
A challenge facing US regulators is that it can be difficult to articulate the theory of harm. Generally, harm to a group of consumers as a whole would be best handled by antitrust laws, while damage to individual consumers is best solved by consumer protection laws. Some have theorized that large data can allow a large-tech company to raise prices and exploit consumers or that accumulation and control of data affect privacy and data security, reducing the quality of a product or service offered to consumers. But antitrust laws do not make it illegal to charge high prices. And the competition theories should not be based on injustice, which is not a competitive damage. In addition, if a technology company's platform serves two markets, e.g. consumers and traders, and if transactions on each side are tied to each other (the so-called "two-sided market"), a viable antitrust requirement would have to involve damage on both sides of the platform.
In the case of mergers, there is an argument that combining large datasets could constitute potential barriers to access. But any company can start collecting consumer data, and that data is not unique in any way to constitute a single product market. This means that the focus of any analysis of mergers is likely to be on whether the combination will reduce incentives for merging entities to protect data. So far, the FTC has not challenged a merger on the basis of a reduction in price competition for privacy protection, but it was noted as far back as June 201
At the FTC hearings on competition and consumer protection in the 21st century held in the autumn of 2018, the panelists explained that it would be difficult to prove that a company's data collection methods are contrary to antitrust rules. What is clear from the hearings is that no one can yet point to behavior and results that would make a case of monopolization or exclusively behavior due to data aggregation. In fact, there seems to be agreement between economists and antitrust practitioners to acquire or hold large data; in itself, it is not enough for the regulators to show any violations.
However, the state regulators and legislators are pressing against the FTC to pursue such cases. In a letter dated October 2018 to the FTC, Advocates of 11 states and the District of Columbia FTC asked aggressively to enforce the antitrust law at the "intersection of integrity, large data and competition". The State's AGs argued that there could be "Possible long-term competition damage arising from aggregation of large data with a small number of dominant platforms", including the possibility that data aggregation may become an obstacle to access. Statens AG has argued that dominant companies could stifle competition in "new industries, and perhaps especially in connection with new services" and demanded "[c] reative and powerful compliance measures." In particular, the State AG criticized the "misapplication of the consumer protection standard" by AG and indicated that it believed it could be "too narrowly" applied under certain circumstances.
In particular, federal and state regulators do not list the specific statutes or regulations they are to enforce or how the accumulation of large data from technical companies may violate these statutes and regulations. Unlike EU competition laws, US antitrust laws do not penalize dominant market power unless there is any anti-competitive behavior that has allowed the goal to maintain or prolong its monopoly. In the United States, the acquisition and collection of consumer data, with some valuable and competitive meanings, does not exclude concerns. And the growth of technology companies that focus on collecting information about Internet users and consumers does not necessarily indicate that it has been violated by antitrust laws. In fact, if a company acquires market power through legal means, there is no violation of US antitrust laws. For that purpose, no literature on the antitrust problems over large data contains a roadmap for how an enforcement measure would be handled in the United States
Despite the ongoing debate, the investigation of technology companies – and, above all, the big technology – continues to grow. The European Commission and other European competition authorities have laid the foundations for future antitrust investigations and have tried to test antitrust theories by implementing enforcement measures against technical companies in Europe. The creation of the FTC Tech Task Force signals that US regulators intend to take a similar approach – particularly in the case of data grouping. What this also means is that the FTC now has dedicated staff and resources to investigate potential malfunctions and try antitrust theories. To the extent that a technical company accumulates and maintains large volumes of consumer data but has not yet evaluated how the regulators can perceive their business model and data-related methods, it is time. While the debate continues and there are significant doubts as to whether regulators, both federal and state, could frame data practices as an antitrust issue, the risk of getting involved in a long and cost-effective survey must be carefully deserved.
Zarema A. Jaramillo and Kathleen McGee are lawyers at Lowenstein Sandler. Zarema is a partner in Antitrust and Global Trade Group. Kathleen is an advisor to the Tech Group and was recently president of the Internet and technology of the New York Attorney General Office.