No evidence to suggest dominant companies using data in breach of competition rules, says CMA

Out-Law News | 18 Jun 2015 | 5:30 pm | 3 min. read

An information-gathering exercise by the UK's main competition authority has uncovered no evidence that companies dominant in their markets are breaching competition rules by using consumer data in a way which abuses the dominance they enjoy.

In a report into the commercial use of consumer data (175-page / 2.85MB PDF), the Competition and Markets Authority (CMA) said no evidence had been presented to it during a 'call for information' (CFI) it held on the commercial use of consumer data earlier this year.

"Respondents raised concerns about the potential for consumer data to be used to generate or exacerbate market power in a single market, or being used as a source of power that could be leveraged into a related market," the CMA said. "We have not received evidence in the CFI that indicates an abuse of dominance in breach of [the UK's Competition Act or the Treaty on the Functioning of the EU] has been, or is being committed."

The CMA also said that it had not seen any evidence of consumer detriment stemming from companies using consumer data to offer "targeted price discounts".

The authority said, though, that competition concerns may arise in markets where online platforms play a role in serving consumers.

"We consider that restrictions in the access to consumer data, particularly where data is an important input in the production of a good or service, have the scope to generate barriers to entry and can in some cases lead to the creation of a position of market power, or can exacerbate an already existing position of market power," the CMA said. "In addition, the two-sided nature of some data markets can increase concentration. This arises as consumers and firms see greater value and are attracted to platforms with the greatest number of users on both sides of the platform."

The CMA highlighted "market indicators" that it said would "suggest a greater likelihood of competition concerns". This includes where companies with "existing market power" have control over the collection of consumer data in a market, it said.

"Where a firm or firms in a market already have a position of market power, their ability and incentives to exploit further power over the collection of consumer data may be stronger," the CMA said.

Competition expert Sammy Kalmanowicz of Pinsent Masons, the law firm behind Out-Law.com, said: "The CMA's findings largely correspond with our previous analysis regarding the commercial value of big data for companies and in particular the possibility that the large scale use of consumer data could, under certain circumstances, entrench the market power of incumbent market players. Whilst the CMA finds that this phenomenon does not yet give rise to imminent concerns regarding dominance, we recommend companies to be vigilant. This seems particularly relevant for multi-sided digital platforms and companies active in the sharing economy."

"In the more immediate future we believe that the CMA and other competition authorities will pay greater attention to data collection and data use in the context of merger control. This may not only affect horizontal mergers, but also lead to a closer scrutiny of conglomerate mergers and vertical integrations," said Kalmanowicz.

The CMA said that a further indicator of competition issues in markets in which consumer data is collected and used would be if businesses in those markets are not competing openly with one another on "data privacy and transparency of their uses of consumer data".

"An absence of competition over privacy may indicate data markets failing to deliver what consumers want," the CMA said. "This may occur where the implicit price of data used by firms is unclear, and where consumers are unable or unwilling to drive competition and incentivise firms to consider and improve the degree to which consumers’ privacy is protected."

The authority also suggested it might scrutinise markets where "data is a significant input into products and services produced" and in cases where consumer data collected by companies cannot be easily substituted.

The CMA said any competition assessments into "data markets" would involve an examination of "both the level of competition prevailing at the time of assessment and the likely ways in which the market may evolve". However, it said it believes its "existing competition and markets tools" would be sufficiently effective to combat "conduct that gave rise to competition concerns in these markets".

In its report, the CMA also said that businesses could do more to explain what data they collect from consumers, how they use and provide those people with "more control over the data provided".

"Consumers should know when and how their data is being collected and used and be able to decide whether and how to participate; and they should have access to information from firms about how they are collecting, storing and using data, so that they can select the firm which best meets their preferences," the CMA said. "Firms should compete on all issues that matter to consumers, including the provision of clear and useable controls that enable consumers to manage data-sharing."

The benefits derived from the commercial use of consumer data should be shared between businesses using the data and the consumers concerned, it said. The authority also said that the regulation of data collection and use must protect privacy rights.

Alongside its own report, the CMA also published a report from DotEcon and Analysys Mason. They conducted specific research into the commercial use of consumer data in the motor insurance, clothing retail and games applications industries (163-page / 3.92MB PDF) on the CMA's behalf.