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Competition Policy and Data Sharing on Data-driven Markets: Moving towards Policy Making

The datafication of our lives, driven both by the availability of so much data and technological progress in artificial intelligence, is ongoing. One key element of this unstoppable process, which brings us many fabulous technologies but also exposes us to new threats, is the development of so-called data-driven markets, which has growing implications for all parts of the economy. In earlier work (especially here), we analyzed competition on data-driven markets and showed a very strong tendency towards monopolization/market tipping. Market tipping leads to lower innovation incentives of both the challengers and the dominant firm on these markets. Based on the analysis, we made a policy proposal, a specific kind of mandatory data sharing between competitors, and showed that this can avoid market tipping—at least in theory. More details are here.

Since 2016, policy makers have expressed grown interest in this research and in the policy proposal. Now, several European governments and the EU Commission have moved forward. For instance, the Dutch Economics Ministry recently wrote an open letter (in Dutch, English, French, and German!) to the Dutch parliament (guess why the many languages!), suggesting to significantly reform EU competition law such that competition authorities can already intervene in certain (data-driven, tipping) markets before it is too late, even if the dominant form has not abused its market power or cartelized the market, which current EU competition law requires. While this is already in line with our proposals, which have been expressed several times at that ministry, the letter picks up our data sharing proposal explicitly (on p.5 of the English version):

"Gatekeeper platforms may for example have access to certain data, such as specific consumer preferences, which other businesses need in order to compete, thereby making use of the platform unavoidable. In such cases the authority could force the platform to share the data in question with the businesses that require it under reasonable conditions."

Moreover, Sébastien Soriano, the head of France’s Electronic Communications and Postal Regulatory Authority (ARCEP), has put up five interesting proposals how (and why) to regulate big tech firms. His main reason (just as here) is to defend incentives of innovators, who cannot make business at all or face a very uneven playing-field, against big tech firms. Notably, one of his examples picks up our mandatory data-sharing proposal (the link to this website is in Soriano’s original):

"Data sharing mechanisms could also be used for competitive purpose. Economists have shown that, in data-driven markets, data sharing would allow us to regain our capacity to innovate: “Data sharing (voluntary, or not) eliminates the mechanism causing data-driven markets to tip.” This is no small issue: it would amount to protecting the innovation economy and ensuring that innovation is not the sole dominion of a small handful of people. This is why the idea is catching on more and more. One of Germany’s main political party’s actually made it part of their platform for the EU elections."

We are actually in contact with that political party. It will be interesting to see whether and how research can have real impact, which may impact the lives of virtually all Internet users (and beyond).