Consumers’ decision-making sovereignty

This was a truly exceptional online panel discussion, with over 700 participants from around the world. We must keep this tiny but welcome democratic silver lining of lockdown post-Covid-19 đź‘€

Andreas Mundt @Kartellamt: 1/ The German Federal Court of Justice (Bundesgerichtshof) recent Facebook interim decision expresses no doubt on the market definition of “social networks offering a rich social experience” or Facebook’s dominant position on it; or 2/ Facebook’s abuse of dominance, by collecting data from off-platform due to absence of user control.

Users should be able to use platform without agreeing to such an extensive use of their data. Their Terms of Service are abusive, because they deprive private Facebook users of any choice as to whether they wish to use the network in a more personalised way, or instead only using explicitly shared data.

The court stated this lack of options to use affects the personal autonomy of FB users and the exercise of their right to informational self-determination — protected by the GDPR (and German constitution.)

3/ Court stresses FB’s activity on two markets (+advertising). Access to data is an essential parameter in both markets. As dominant operator, FB has a special responsibility to maintain competition, but the larger databases maintain a lock-in effect, financed by the larger advertising market. Cannot rule out affect on that market. @Kartellamt insists on the return of sovereignty to the user, over which and how much data s/he hands over.

4/ Court states high public interest in enforcing the Office’s decision in a preliminary hearing. Could be an important point for the future on interim measures.

5/ No doubts from court on the Office’s imposed remedies (FB must keep off-platform data separate.) The Federal Cartel Office awaits the written verdict of the BGH, and retains its ambitious agenda. The amendment of German law relating to data is before the Cabinet.

@Kartellamt has shared an English translation of the Court’s #Facebook press release (judgment is awaited): bundeskartellamt.de/SharedDocs/Pub…

Now @cmagovuk talking about its online platforms and digital advertising study. Such a pleasure to listen to economists that *do* understand privacy issues. CMA’s consumer protection responsibilitilies definitely help here. They found very few users understand the value of their data.

Japan shares its interim report on online advertising from 17 June: search.e-gov.go.jp/servlet/PcmFil…

.@adlc_ president: We are only now seeing the first finalised GDPR fines (e.g. the French conseil d’etat’s confirmation of CNIL’s judgment against Google). Competition agencies must still look at data collection and exploitation because it’s at the heart of the new digital economy.

We must also look at improving merger control, for example taking better account (eg social networking+messaging WhatsApp decision) the risk data can be collected and used in a much more global way. Need new tools beyond market definition — how will data be used?

The EU’s TFEU Art.102 talks about “abuse of dominant position” — this could come from the way data is collected and used. Mentions “prejudice to consumers” but also abuse can consist in imposing unfair purchase, selling prices, or other unfair trading conditions.

Here is the Conseil d’État decision: conseil-etat.fr/ressources/dec…

@adlc_ found Google Ads abuse of dominant position — this was more of a business-to-business case, but the reasoning could also be applied to consumers. @CNIL similarly found Google was not providing clear information to consumers about how their data is used.

Consumers do not have effective choice of social networks where all their friends are (hence need for interoperability!)

@chopraftc: #covid19 has accelerated the role of platforms in our everyday lives, contact tracing, the growing dependence businesses and families have on e-commerce, the network effects in videoconferencing systems like Zoom (nb @benedictevans says they don’t exist!)

We should close the book on the concept these services are free. Any legitimate economist will say it is a trade, a barter, a constant exchange of valuable assets (personal data). Facebook and Google are not charities — they operate massively profitable behavioural ad systems

Privacy is often discussed as as a non-price factor (eg quality.) But @chopraftc thinks it absolutely is a price factor, and (just as a thought experiment) we should think about consumers being *paid* for their data. We have to move past the view competition is a click away

US ban on “unfair, deceptive acts and practices” are absolutely a core part of competition enforcement, not a separate (consumer protection) issue (both s5 in the FTC Act). See also FTC deceptive practices statements from the 1980s.

@chopraftc: We need to attack the business incentives that drive abuse of personal data. It’s hard to observe data use, and data protection rules enough may not be enough — competition enforcement is also needed.

@chopraftc: The way democracies can out-compete the authoritarian model from China in the 21st century is by vigorous enforcement of competition law, ensuring continued innovation and dynamism.

@Caffar3Cristina: how do get better *outcomes* for competition? Eg Google still has 97% of many European country search markets. How do we move away from the traditional perspective that competition enforcement should not affect business models?

Andreas Mundt @Kartellamt agrees with that biz model perspective. But biz models that include anticompetitive elements, or even worse anticompetitive behaviour is a precondition, then that is not a business model, b/c not in line with competition law.

Most Favoured National clause is a good example — firmly believes that can be anti-competitive. When it comes to data, there are three options/remedies, since data drives network effects and data: 1/ Grant access 2/ Interoperability/portability of data. 3/ Limit gathering/processing

1/ Is controversial but Germany is widening its essential facilities doctrine in that direction. It’s hard to implement, as you need to know which data? Which extent? Which format? Who should know that? Not an easy task with big firms. Maybe certain results? Also DP issues.

2/ Interoperability/portability has a very competitive effect, but hasn’t played a big role yet before @kartellamt. 3/ is remedy in Facebook case. Not changing business model, but giving choice to consumer in how her data is gathered and processed.

@kartellamt to @facebook: You must eliminate the elements we find anticompetitive in your data gathering and processing. But we await the written ruling of the Bundesgerichtshof.

@adlc_ imposed a data access remedy in 1 case; they asked the @cnil to approve the details to protect privacy. Fines are incredibly important in terms of deterrence, and a reference to damage action (now much more easy for companies harms by such conduct to receive compensation).

@adlc_ thinks timeframes v important in enforcement, and perhaps more use of interim measures. We also have to take into account the interaction between enforcers and legislators.

The CNIL-involved case: actu-environnement.com/media/pdf/news… twobirds.com/en/news/articl…

@chopraftc: big fines can simply allow companies to continue down the same path. We should think about individual liability and injunctions, where they ordered the conduct/abuse. We’ve seen this in financial services — Wells Fargo fake account fraud may face criminal penalties. Let’s think about illegally consummated mergers! Need to think about structural solutions, such as mandatory licensing of IP, and even cloning for spinning off.

The rise of the behavioural advertising model has driven some of these abuses – for recidivists or very egregious violations of law, there should be specific bans on types of data that should be collected. If a function of conflict of interest of biz units, structural separation.

More on the @adlc_ Energie decision, from Alexandre de Streel: papers.ssrn.com/sol3/papers.cf…

@chopraftc: be careful with remedies that require high tech savvy to monitor, which may be lacking. Competition, consumer and DP authorities need to work together to fashion remedies using all those authorities, to set the industry in a flourishing way with lots of market entry.

Andreas Mundt @Kartellamt civil damages claims are also important. On law: its Facebook action takes advantage of German rights on terms and conditions by dominant actors, not EU law. It was a nationally defined market. @adlc_ adds national actions have ripple effects cross borders

@chopraftc: how can structural limits on data combination and use be effectively monitored by courts/regulators, given the constant analysis (with no audit trail) by firms, including machine learning? Another reason why we can’t be scared of structural separation, avoid co-mingling.

@adlc_ Facebook lied about WhatsApp data separation: in French law we can forcibly reverse a merger in such circumstances. And we should consider prohibiting such mergers in future.

More useful resources shared by webinar participants: oecd.org/daf/competitio… papers.ssrn.com/sol3/papers.cf… papers.ssrn.com/sol3/papers.cf…

@cmagovuk: competition and #GDPR work well together in many circumstances. A data silo remedy could be used where vertically integrated companies are construing GDPR in anti-competitive ways. It is taking this forward with its Digital Markets Task Force.