What’s the Future of Competition in the Intangible Economy?

We live in a period which is marked by a transformation from an economy based on physical scarcity to one that is grounded in intangible rarity, that is, an economy in which tangible property is increasingly marginal in economic exchange relationships and is gradually replaced by direct relationships between firms and consumers. This transformation brings about a sharp reduction in the cost of production and distribution of all sorts of things and the disentanglement of informational content from physical goods. Take the availability of 3D printers, synthetic biology, and robotics as examples. Here, more than one person can simultaneously possess the same informational content about a physical good, and use that good at different times in different places. Only the legal ability to exclude others from copying that work or to require permission from the original owner to incorporate it into another can assure its sustained shortage and guarantee that the initial labour will be rewarded in correspondence with its worth. In a forthcoming article, I identify three basic repercussions that this transformation has on how the law interacts with new technologies:

First, in an economy where information production is key, product manufacturers are increasingly concerned with the protection of the exclusivity, uniqueness and scarcity of their physical goods and services to preserve the manner in which traditional markets function. In fact, competition and intellectual property laws are working to conserve conventional notions of scarcity and product exclusivity already. In competition law, one recent strand of case law is concerned with limiting competitors’ access to a product manufacturer’s distribution channels online. This enables manufacturers of everyday consumer goods to invest in, and preserve, product exclusivity. The doctrine originates from trademark scholarship. Today, trademarks no longer necessarily need to designate any specific commodity so as to grant protection. Rather, trademark law sometimes protects the trade symbol itself as opposed to all other trade symbols in the marketplace against uses that may undermine the symbol’s own distinctiveness. The idea is to put product manufacturers in a position to protect experiences that differentiate their goods in consumers’ minds rather than the goods themselves. The doctrine has also been employed to expand trademark law’s scope to enable product manufacturers to speak to a wide variety of sensory stimuli—tactile, olfactory, visual, etc. In all these cases, the law works against the gradual removal of the natural scarcity of goods by helping product manufacturers to gain control over the sale and commodification of non-material relationships and experiences.

Second, with the emergence of the Internet, online platforms such as Netflix, Amazon, or Spotify increasingly collect, analyse and sell consumers’ data to third parties. On the basis of this data, platforms categorize and make suggestions about their content to provide users with the best of all possible consumption experiences. Online platforms also employ consumers’ data to invest in creative content. An example is Netflix’ House of Cards production. Supported by a careful analysis of viewing patterns, Netflix produced and successfully streamed the series without relying on conventional box office forecasts and reviewer insights gained by producing a pilot movie first. Digital platforms are also beginning to make creative publishing decisions on the basis of consumers’ data. Amazon, for instance, commissions works form authors based on users’ data, disseminating bespoke content to readers in turn. Big data therefore entails an economy in which the production of goods and services is almost entirely based on users’ past consumption preferences; the market’s supply, as a result, is no longer merely triggered by the market’s demand but instead is produced, in part, by consumers themselves.

Third, legal commentary and practice have mainly justified increased promotion of the production of exclusivity and scarcity based on the consumer’s willingness to pay for the distinctiveness, uniqueness, and authenticity of a product manufacturer’s goods. In the same vein, widespread collection of users’ data for the production of new content in the digital economy is increasingly endorsed based on consumers’ revealed preferences as well. In that sense, the digital economy is progressively aiming to replace consumers’ choices with an estimated prediction about what they will most probably pick. But predictions based on consumers’ revealed preferences are restrained by history, and threaten to leave little room for other forms of new content to be brought to the fore. To enable consumers to steer commerce into a broader range of choices and back to the production of more diverse product offerings, we may thus render product manufacturers’ offers, including their algorithms, more transparent. However, to afford consumers real agency, consumers must likely be given additional avenues of influence. This includes an opportunity for customers to directly modify terms and conditions of agreement, to take a decision on the configuration of the product’s design they actually desire – to help consumers to adjust markets themselves, by making an impact on their preferred product offerings.

Adrian Künzler is an Associate Professor of Law at the University of Zurich.