Out-Law / Your Daily Need-To-Know

Value of data relevant to whether companies' data use breaches competition rules, says CMA chief executive

Out-Law News | 24 Jun 2015 | 11:06 am | 2 min. read

Whether or not a company's use of consumer data breaches competition law will be influenced by the value of the information they have access to, the head of the UK's main competition authority has said.

In a speech, Competition and Markets Authority (CMA) chief executive Alex Chisholm said the value of data can change over time and that it would be "important to think about" this when assessing whether businesses' use of consumer data raises competition concerns in a market.

"Some data loses value over time, so it is hard to see how persistent, unmatchable competitive advantage could be maintained," Chisholm said. "However some data has persistent value – for example in relation to customer transaction history on auction sites – and it is easier to see how the control of this data could become a barrier to entry."

In a report published last week, the CMA outlined a number of "market indicators" that it said would "suggest a greater likelihood of competition concerns" over the commercial use of consumer data.

The indicators include where companies with "existing market power" have control over the collection of consumer data in a market, where consumer data collected by companies cannot be easily substituted and if where "data is a significant input into products and services produced" in markets. If businesses are failing to compete openly on privacy then this would be a further indicator of competition issues, the report said.

Chisholm outlined how the CMA would consider each of these issues.

"For each of these characteristics, a competition assessment would need to differentiate between the use of consumer data to generate efficiencies for firms and consumers, and the collection and use which might lead to exclusionary or exploitative conduct," he said.

The CMA's report highlighted the results of a 'call for information' the authority held on the commercial use of consumer data earlier this year.

Chisholm said: "We carried out this work because we recognised that data will become a bigger issue for us across the full range of work we do. We also recognise that there are a broader range of concerns relating to digital markets that are not the responsibility of a competition authority, in particular privacy, security and data protection."

"One role for us in digital markets is to think about how best to incentivise competition to promote these non-economic aims. Where a market is working well, and there is healthy competition to win the custom of consumers, and where the consumer understands and values non-price aspects of a product like privacy, you would expect to see firms competing to provide a product that reflects that demand. We want to work with other regulators, in particular the Information Commissioner’s Office in the UK, and the EU institutions, to try and achieve that while minimising the need for regulation," he said.

In its report, the CMA said it had 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.

However, competition expert Sammy Kalmanowicz of Pinsent Masons, the law firm behind Out-Law.com, said that there remain competition law compliance issues that businesses using consumer data need to remain aware of.

"Whilst the CMA finds that this phenomenon does not yet give rise to imminent concerns regarding dominance, we recommend companies to be vigilant," Kalmanowicz said. "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.