Online search engines are a key “platform market” and are used by billions of users every day. They offer the basic infrastructure for many other industries and are, therefore, of very high economic, political, and social importance. Over the past few years, an intense policy debate has formed around the question: do some search engines produce better search results because their algorithm is better, or because they have access to more data from past searches? In the former case, it may be best to refrain from interventions in the market in order not to stifle the innovation incentives of successful entrepreneurs (and their potential contestants). In the latter case, mandatory data sharing of user-generated data, a policy that is currently discussed and already contained in the EU’s Digital Markets Act, could trigger innovation and would benefit all users of search engines.
Together with Tobias Klein, Madina Kurmangaliyeva, and Patricia Prufer, I have had the opportunity to study this question empirically (theory is here). In 2020, we conducted an experiment with a small search engine, Cliqz, on behalf of the German Finance Ministry, who wanted to know when a market is “data driven” (results are here).
Now, the core academic paper is available, which reports background, methodology, and results in detail. The results show that the mandatory sharing of user data — a provision in the EU’s Digital Markets Act that is planned to be enforced in 2023 — may be an appropriate remedy on the search engine market: it would likely allow entrants, such as Cliqz, to successfully compete with the incumbent (Google) by enabling Cliqz to provide search results that are also of high quality for rare queries.
Unlike in other contexts, this remedy does not directly harm the incumbent, as it makes use of the non-rivalry of information: the incumbent will still be able to use the same data. Only the exclusivity of data access would be reduced. Consequently, users would benefit.
A CCP Policy Brief, explaining the study in a nutshell, is here.
If you are interested In how to implement mandatory data sharing on data-driven markets in an economically efficient way that is in line with European competition law, consumer protection law, IP law, and privacy law, read the article linked here.