This is a (short) paper on the proper role of privacy in merger review, which can be found here. While focusing mainly on the US (where there have “been increasing calls for the Federal Trade Commission (“FTC”) and U.S. Department of Justice (“DOJ”) to consider the potential loss of consumer privacy as a factor in their merger reviews and to challenge mergers of firms with large stores of personal data that otherwise pose no apparent competitive issues”), it could be read more generally.
The argument in this paper is quite straightforward: the law is clear that non-competition factors – such as standalone consumer concerns – cannot be considered in antitrust analysis. Further, the law seems to be on sound policy grounds.
- The paper begins by arguing that there are good reasons why privacy should not be applied as a competitive parameter. First, there are a variety of concepts of privacy, and it is unclear which one should be applied. Secondly, consumers have mixed views about the optimum level of privacy – unlike lower prices, which can be observed and which consumers universally value, the concept of “more” or “better” privacy is not always clear, and consumers value privacy in different ways. Thus, without a clear standard for how to weigh competition versus privacy considerations, the outcome of a case is likely to reflect the personal views of the particular enforcer reviewing the transaction, ultimately leading to less predictability and consistency in outcomes. An additional concern is that competition remedies are not well suited to address privacy concerns.
It may be argued, however, that privacy is a form of non-price competition. In theory, a merger between firms that are close competitors on the basis of their privacy protection policies could lead to anticompetitive effects, in much the same way that a merger between two firms that are close competitors on the basis of their product features could lead to anticompetitive effects. However, despite what appears to be a widespread recognition that privacy can be a form of non-price competition cognizable under the US Merger Guidelines, there does not appear to be any generally accepted means of assessing which transactions will lead to anticompetitive effects due to a loss of privacy competition.
- The author then moves on to delineate a specific, very limited scenario where private considerations can be clearly used to conduct a competition assessment. This will occur when: (i) the merging firms are significant rivals due to their competition on privacy; (ii) a large share of customers regard the merging parties as offering the best products as a result of their approaches to privacy; and (iii) rivals must be unlikely to revise their approach to privacy to better compete with the merged firm (i.e. no repositioning). This approach takes into account privacy consideration without requiring one to quantify the strength of a company’s privacy offerings, or to determine the “optimum” level of privacy for consumers in the industry or for particular segment of consumers.
This paper is a fairly narrow review of the topic, but contains a workable test for including privacy into competition assessments on competition’s own terms. The issue with this limited approach is, well, that it is limited: it only applies to mergers where privacy is an important element of competition and where the merger is between two firms that offer stronger privacy protections than most other rivals. As the author himself points out, this will only occur in very few cases. What to do in other cases is a topic to which more attention is likely to be devoted.