This is a report published by Italian competition authority, together with the telecommunications regulator and the data protection authority, on how to address big data. It is available here.
In my analysis below, I will focus on the elements of the report that touch or focus on competition law. I would also emphasise that this is not the first competition authority in Europe to look at data – the joint Franco-German report in 2016 also looked at the intersection between competition and data.
The decision to pursue an interdisciplinary study arose from a recognition that the characteristics of the digital economy are very often such that it touches on the competences of the three authorities. The relationship between competition, privacy and pluralism requires a particularly close coordination between different regulators, not only to ensure effective regulatory action but also to identify and reconcile possible trade-offs between the values protected by different regulatory schemes. Furthermore, joint action will allow a better understanding of digital phenomena, improved choices of remedies for problems that arise at the intersection of the competences of various regulators, and improved determination of which regulator is best placed to intervene.
The study begins by noting that big data is an important phenomenon that affects the whole economy. The emergence of huge digital operators, active on a global scale, dealing with immense volumes and variety of data gives rise to unprecedented forms of economic exploitation of data and new concentrations of power, understood not only as ‘market power’ but as economic power more generally.
Big data therefore is a phenomenon that deserves attention from all the institutions that contribute to market governance. The available institutional set-up in Italy is broadly adequate to protect fundamental rights, and in particular the right to protection of personal data, and competition. Nonetheless, the growing interdependence of markets and economic systems means that the questions raised by the data economy are often supra-national. Therefore, coordination between European authorities is not only desirable, but indeed necessary. In practice, such coordination already occurs across a number of dimensions. As concerns the Italian competition authority, international cooperation takes place within the scope of the European Competition Network (ECN), the Digital Clearing House set up by the European Data Protection Supervisor, and international fora such as the OECD.
As regards antitrust, the study explains that the repression of abusive behaviour by big digital players and of restrictive agreements on competition facilitated by the development of new software and sophisticated algorithms is one of the Italian competition authority’s priorities. The development of profiling capabilities combined with network effects can facilitate abusive behaviour able to reduce the contestability of the ecosystems where the main platforms operate, making their market power persistent. The diffusion of pro-collusive price algorithms may facilitate the stability of cartels and the creation of market contexts favourable to collusive outcomes. Furthermore, given the characteristics of digital ecosystems, it is appropriate not to confine the analysis to the traditional competitive parameters linked to prices and quantities, but, with the help of the instruments of antitrust law, to extend the analysis also to quality, innovation and equity. Ultimately, the characteristics of the digital economy require the striking of a new balance between the risk of discouraging innovative processes and the risk of under-enforcement.
A related area of concern is merger control. In order to increase its effectiveness, it is important to allow competition authorities to assess concentrations falling below current notification thresholds when they may be able to restrict important forms of potential competition (e.g. when large digital operators acquire particularly innovative start-ups, in so-called ‘killing acquisitions’). Further, the law may need to be amended to introduce an evaluation standard more suited to the challenges of the digital economy than the current SIEC – “Substantial impediment to effective competition” standard.
Moving beyond competition law, the study addresses how to facilitate the portability and mobility of data between different platforms through the adoption of open and interoperable standards, even beyond what is already provided for by the right to portability set forth in Art. 20 of the European Data Protection Regulation. In specific cases, the protection of competition could require the mobility and portability of personal data. Data portability can, furthermore, have a strong pro-competitive value by allowing market contestability. Legislative or regulatory initiatives to this effect should therefore consider regulating the interoperability of technological platforms, so as to effectively allow the full portability of data by digital platform users.
A particular challenge to which various economic regulators can contribute is the reduction of information asymmetries between users and digital operators at the data collection stage. Both data protection and consumer protection rules can offer an important contribution to the reduction of this information asymmetry, and to guarantee that users receive adequate, timely and immediate information about the purposes of the collection and use of their data. It is also important to proceed towards a progressive reduction of information asymmetries between large digital platforms and other operators that make use of these platforms by increasing the transparency of the criteria under which the data are analysed and processed, and by promoting the entry of new data intermediaries with increased negotiating power vis-à-vis the digital platforms.
Another challenge is that the available regulatory framework may be unsuited to protect information pluralism. While competition is undoubtedly a useful tool to this end, it is insufficient to guarantee that pluralism is preserved. In recent years, both the European Commission and the Italian competition authority have engaged in self-regulation and co-regulation efforts extending across society. These efforts tended to make technology platforms more responsible, by making them adopt appropriate codes of conduct to guarantee the correctness, completeness, verifiability and non-discriminatory nature of information accessible online. However, the Italian competition authority’s experience evidences some limits to self-regulation when not accompanied by external powers of audit and inspection. The independent verification of the results and impact of self-regulation initiatives is desirable, and legislative initiatives aimed at ensuring that the independent authorities responsible for protecting pluralism have audit and inspection powers regarding algorithmic profiling for the purpose of information selection and content may be appropriate.
The study concludes by addressing a number of institutional challenges. First, it argues that the need effectively to enforce consumer protection rules requires a reinforcement of the information gathering powers of the relevant authority. Secondly, the challenges posed by the development of the digital economy and Big Data require the full exploitation of the existing synergies between ex ante and ex post regulation to protect privacy, competition, consumers and pluralism. As such, the Italian competition, telecommunication and data protection bodies will be able more effectively to fulfil their roles if they are able to engage in fruitful cooperation. To this end, the three Authorities, in the exercise of the complementary competences assigned to them and in order to contribute to their ability to address the critical issues created by the digital economy, commit themselves to close forms of collaboration in interventions that affect the digital markets.