Tomorrow, the House Judiciary Committee will hold another hearing on tech, with an eye towards data, privacy and competition. As rhetoric surrounding leading tech services heats up, and opinions increasingly get in the way of facts, here are three important points to keep in mind:

— Privacy is not a competition issue, and antitrust tools are not an appropriate way to enforce privacy regulation

— Data does not create a barrier to entry for new market entrants

— Data is increasingly portable, and leading tech services are heading the drive to make data easier to transfer between platforms

Privacy is not a competition issue, and antitrust tools are not an appropriate way to enforce privacy regulation

FTC Commissioner Christine Wilson notes that there are tools available to enforce privacy that are distinct from competition law.  “[B]ecause we have many tools available to address privacy qua privacy, there is no need to shoehorn it into competition analysis. So I disagree with those seeking to install privacy as an independent aspect of antitrust analysis.”

FTC Commissioner Noah Phillips: Experience shows that privacy and competition law are distinct, and trying to link them leads to poor outcomes. “They have different aims, and use different tools to achieve those aims. My concern with adopting a broad ‘convergence’ of privacy and competition law is that addressing both together will lead to incoherence and erosion of the rule of law.”

Former FTC Commissioner Terrell McSweeny: It is important that the FTC’s privacy and competition enforcement mandates remain separate. “Even if data privacy does play a meaningful role in our antitrust analysis, the focus of a merger investigation is always on the effect of the transaction on competition – and thus privacy protection as a quality dimension of non-price competition. I believe it will continue to be important that competition enforcers not use their power over a transaction to exact privacy or data protection concessions unrelated to the underlying competition analysis.”

Data does not create a barrier to entry for new market entrants

ITIF’s Joe Kennedy notes that possession of data does not establish lasting market power. “First, the mere possession of data is seldom the main source of competitive advantage. What distinguishes companies is often the development of algorithms that add market value to the products they sell. Google’s search, for example, benefits from lots of data. But its biggest asset is the software that uses this data to deliver the most relevant search results. While more data can lead to better results, after a certain point, there are diminishing returns. Doubling the amount of data may lead to only marginal improvements in the quality of an algorithm’s output.”  

Marketing scholars Anja Lambrecht and Catherine Tucker find that simply amassing data does not produce a competitive advantage. “The unstable history of digital business offers little evidence that the mere possession of big data is a sufficient protection for an incumbent against a superior product offering. To build a sustainable competitive advantage, the focus of a digital strategy should therefore be on how to use digital technologies to provide value to customers in ways that were previously impossible.” 

Economist David Evans: Spotify’s success proves that lack of data is not a barrier to entry for startups. “A similar story was true for Spotify. When it entered the U.S. 2011, Apple had more than 50 million iTunes users and was selling downloaded music at a rate of one billion songs every four months. It had data on those people and what they downloaded. Spotify had no users, and no data, when it started. Yet it has been able to grow to become the leading source of digital music in the world. In all these cases the entrants provided a compelling product, got users, obtained data on those users, and grew.”

Data is increasingly portable, and leading tech services are heading the drive to make data easier to transfer between platforms

In mid-2018, companies including Google, Facebook, Microsoft, and Twitter announced the creation of the Data Transfer Project. The initiative, which has since added Apple as well as smaller tech companies including Mastadon and Solid to its list of backers, aims to radically reduce the barriers preventing consumers from being able to transfer their data across platforms. The project aims to give consumers greater control of their data  and “can make it easier for them to choose among online service providers.”

Public Knowledge’s Gus Rossi and Charlotte Slaiman note that the Data Transfer Project significantly increases consumers’ control over their data. “The goal of the Data Transfer Project is to ‘create an open-source, service-to-service data portability platform so that all individuals across the web could easily move their data between online service providers whenever they want’. As a result, it’s now relatively easy to get some of the data that these companies have collected from you, which might help you move to a different service, and also give you a better understanding of what information they have from you.”