In Case You Missed It: Key Takeaways From This Week’s FTC Hearings
This week, the FTC held its sixth in a series of hearings about competition policy in the 21st century. Below are a few highlights from some leading experts in the field.
Data is a widely available resource, not a commodity
Daniel Sokol, University of Florida Levin College of Law: “Big data: There’s no one company that can collect all of it, in a sense — not the way we conceptualize oil like there’s a finite amount. No, the amount of big data that we’re going to have in five years’ time, or maybe even three years’ time, is literally going to dwarf all the data we’ve ever had in human history up until this moment.”
Alex Okuliar, Orrick: “Is the data actually something that could be collected reasonably by another competitor? Is it, as they say, non-rivalrous? Is it non-exclusive? And very often, data is.”
Marianela López-Galdos, Computer and Communications Industry Association: “What I mean is that, similar to the brick and mortar world, in the digital economy, companies exist, flourish, and compete because they have a good idea. And that idea allows them to bring to the market a product and a service that consumers like. Therefore, it’s not access to data, what allows these companies to compete, to exist, but rather the initial idea. So, we need to clearly understand that an idea comes first.”
—“For example, you can see how Snapchat or Slack obviously became very successful companies without having access to data in the beginning. We also see how Handshake has become a very strong competitor to LinkedIn, with more that 14 million users right now among recent graduate students.”
Daniel Sokol, University of Florida Levin College of Law: “It’s not how much data you have, it’s what you do with the data where there seem to be diminishing returns on data size, and we’ve seen that, in terms of companies that have lots of data don’t use most of it.”
Consumers only provide companies access to their data in exchange for products and services they value
Michael Baye, Indiana University Kelley School of Business: “The only way you create big data is somehow attract consumers or induce consumers to turn that stuff over. I’m assuming here we’re not engaging in fraud or deception, something like that, so just bear with me for a moment. So, in an environment like that, if a competitive platform is at a disadvantage with respect to the data that it has, one hypothesis is it’s at a disadvantage because it’s not creating the value that consumers need to turn that data over in the first place, right? So it’s easy to cry foul, but it’s not at all transparent that that foul is due to anti-competitive behavior. In fact, it could just simply be that the platform is offering lots of value.”
Renata Hesse, Sullivan & Cromwell LLP: “The reason why people use Google Search, generally, is because they like it better. One could argue potentially that — and Google is not a client, it’s a former client but it’s not a current client, and I’m not saying this because of that — you know, the fact that they have all this data makes it easier for them to be better. But this goes right to the question that I think Gail was asking, in part, which is, does it matter whether the firm spent spent substantial resources developing and building them? So this is when I start to worry about, are we gonna punish someone because they did a great job? They got a lot of data, so they have a great product that people like. And if people didn’t like it, it is really easy to switch, right? It’s not hard. So I take your point that the barriers to entry look low but for whatever reason you’re not seeing people switch. And the question is, does that have something to do with what — again we’re picking on Google here but you could apply this in any other market — is that because Google’s doing something that they shouldn’t be doing, or is it because for whatever reason the other product just isn’t as good?”
Using antitrust to address non-competition issues could lead to consumer harms
Michael Baye, Indiana University Kelley School of Business: “It’s important that we not confuse competition issues with other issues like unfairness — ‘Gee, it’s unfair that a firm with big data might be able to do a better job of extracting rents from its consumers,’ okay. That, in and of itself, as I see it, is not harm to competition.”
Alex Okuliar, Orrick: “And by applying traditional antitrust analytical tools and principles, including the consumer welfare standard, to reduce the likelihood of over-enforcement, particularly in situations of speculative or difficult to ascertain harms.”
Online advertising allows businesses to provide consumers with better products at lower costs
Leigh Freund, Network Advertising Initiative: “Today, a broad array of rich content is available on the internet. News content, information, video and music streaming services, interactive software services, email, social networks — they’ve all experienced robust growth over the last several years and they provide those services and information to consumers for free or little cost because they are supported by digital advertising.”
Howard Beales, George Washington University School of Business: “It’s important to remember advertising is actually a good thing. The FTC actually, for a long time, has been a leader in recognizing the benefits of advertising for competitive markets. Advertising tends to lead to lower prices. It leads to product improvements. It narrows the differences between demographic groups. And, it’s FTC studies that have established a lot of those propositions. There’s no reason to think online advertising is any different. It’s a cheaper way to do what is a good thing for consumers, and likely to enhance market performance across the board.”
Excessive regulation could hurt smaller companies at the expense of larger ones
Marianela López-Galdos, Computer and Communications Industry Association: “Because obviously if we adopt regulations, companies are going to comply with them. Those are the resources that the smaller companies are gonna stop investing in innovation, so we also have to look into the actual effects of the need to comply with the law. And it’s certainly the case that big companies can comply with those new laws much easier than smaller ones.”