Competition, Market Power and Third-Party Tracking

The online digital economy has benefitted us with waves of innovation, transforming the way we search, shop, communicate and consume information. Be it on our computer, tablet or mobile device, the world is our oyster. A key characteristic of our online world is the ability to offer us what we most desire: targeted ads, targeted news, targeted goods and services—more of what we want, when we want it. To enable this personalised and responsive environment, service providers constantly engage in data harvesting, either directly or through third-party tracking. Gathered data enables, among others, to identify shopping and behavioural patterns and to monitor consumption of media and news. It provides a picture of our wants at a level of transparency and accuracy which is unmatched by the old brick and mortar world.

These distinct benefits have come at a cost, as the quest to better map our behaviour, social relations and desires can adversely affect our autonomy and privacy. The use of tracking, in particular in stealth mode, has led to asymmetry in the relationship dynamics between users and providers. It has enabled trackers and service providers to engage in price and behavioural discrimination—the ability to exploit and extract value from unsuspecting consumers by estimating their willingness to pay in real time. It has also enabled the control of our personal online environment, leading to manipulation of news feeds, search results, the rise of echo chambers, and, more broadly, the distortion of the market for ideas.

From a competition law viewpoint, advanced data harvesting capabilities may give rise to concerns. In our paper, ‘Competition, Market Power and Third-Party Tracking’, we consider the role played by third-party trackers and their welfare implications. These trackers are present on most websites and applications and feed data from a wide range of sources. While seemingly operated by a large number of firms, most data is channelled to a handful of companies which dominate the scene. This amalgamation of rich multi-sourced data can translate into market power, reinforcing the data advantage that certain tech companies are already benefitting from.

While the competition laws usually do not condemn the attainment of market power as such, the attainment of market power may enable companies to abuse their position. Companies may use rich data to exploit users or exclude competitors. Furthermore, they may be incentivised to use their market power in order to compel users to disclose information or waive their privacy rights. To feed the data machine, those benefiting from market power could use a range of means to undermine user privacy. As noted by Tim Cook, Apple’s chief executive, ‘the desire to put profits over privacy is nothing new’.

For competition enforcers, a key challenge concerns the interface between competition and privacy. The extent to which privacy degradation by powerful companies should be treated as a competition problem remains an unresolved question. Could the competition agency condemn a company for abusing its power by harvesting excessive volumes of data from a user? Or, alternatively, could competition agencies treat the data harvesting as an abusive degradation of privacy? Are these competition problems or should they be treated using other regulatory means?

After all, competition law is only one out of several instruments. In Europe, for example, of relevance are the GDPR and the envisaged ePrivacy Regulation, both of which offer privacy protection. Could they provide an effective constraint which will safeguard consumers’ welfare? One on hand, there may be reason to be optimistic. Initial observations indicate that third-party cookies on news sites in Europe have declined by 22% since the GDPR entered into force in May 2018. On the other hand, other observations show that a number of big trackers—amongst them Google—now scoop up more user data than before the entry into force of the GDPR. The trend toward increased data concentration persists.

As consumers, we may be ill-equipped to protect our own interests when it comes to safeguarding our personal data, as we grapple with the privacy paradox. Few users invest time and effort in reading data policies and considering the implication of their consent to them. The majority offers consent with little hesitation, as it enables users to gain immediate access to desired websites and applications. Furthermore, new strategies and rapid development of new technology may enable the industry to bypass specific regulatory instruments and come up with new mechanisms and technologies to achieve similar goals.

With the regulatory and consent limitations in mind, competition law could add an important layer of protection against exploitative third-party tracking. Competition enforcers display an increased awareness and concern over tracking and data collection. Notable are the fines that the European Commission recently imposed on suppliers that tracked the retail prices of their retailers in order to enforce resale price maintenance, as well as the ongoing antitrust probes into Amazon’s use of data on its merchants. This awareness is not limited to Europe: in Australia, there are ongoing data-related investigations into DoubleClick. And in the US, the data breach related to Google+ that has only recently become public knowledge was met by calls for involvement of the Federal Trade Commission and of European authorities. More specifically on point is the ongoing Facebook investigation in Germany which suggests that tracking which complies with data protection rules may be caught out under competition law.

Third-party tracking raises many complex and intriguing questions, yet one should refrain from unwarranted intervention. Indeed, the extent to which third-party tracking would affect antitrust scrutiny remains to be seen. What, however, is already evident is the power change that third-party tracking capability fosters in digital markets—and its ability to remain often below the antitrust radar screen. As third-party tracking takes place across markets, across platforms and across devices, we might be witnessing a rise in power over consumers even when, seemingly, companies do not enjoy visible power on a given tangible market.

Ariel Ezrachi is the Slaughter and May Professor of Competition Law at the University of Oxford.

Viktoria Robertson is an Assistant Professor of Law at the University of Graz.