Challenging the traditional tools for economic analysis in competition cases – 10th Annual IGLR Conference, King’s College London

The following is a report from a presentation by Magali Eben at the International Graduate Legal Research (ILGR) Conference on 4 April 2016.

Presenting her idea, Megali Eben suggests that the traditional tools used for defining the relevant market in competition cases can be updated by including personal data among the relevant elements that are considered in this context.

 

“Free very often does not mean free”, according to Magali Eben, a research student at the University of Leeds.

Speaking at the 10th Annual IGLR Conference, Eben said that we increasingly pay for goods and services with our personal data, often without realising this. “You should question if it is really free”.

On the other hand, companies that process these transactions are for profit and use our data in a variety of ways to monetise it.

Eben pointed at Amazon, which offers its tablet with adverting for £10 less than a version of the same model without advertising, and Google, which will collect the data from our search to sell targeted advertising and thus generating revenues from it.

In turn, this creates situations on the market where goods or services are exchanged but no money.

Eben continued by saying that “A lot of competition law analysis is based on price analysis. What do you do when there is no price? If consumers are not paying the money, then how do you use those tools?”.

Defining the relevant market is one of the basic steps in many antitrust cases and merger reviews. It is a crucial step to assess the market power. To determine the relevant market, a product market must be defined.  “This is done by testing the product’s substitutability from a consumer point of view.  SSNIP test is often used as a tool to test this.”

Indeed, SSNIP (small but significant and non-transitory increase in price) is a widely used tool by competition authorities though there are notable exceptions, even in Europe. Initially adopted by the US in 1982, it was first used in Europe 1992[1], before the European Commission officially recognised it in 1997[2].

The essence of the test, in short, is to show if customers would be inclined to switch to another brand of the product if there is a small price increase, or would they buy an alternative product. If the answer is affrimative, the market should be defined as wide as the products. If the answer is negative, the market should be defined more narrowly.

In this context, Magali Eben suggested that we can use units of personal data to feed those models. A ‘data record’ would become a mean of exchange (MoE) allowing us to measure if increase in demand for data record would make consumers change their behaviour.

Several conditions would have to be met for this to work. “Evolution in consumer awareness must happen for this concept to work. It also requires transparency – consumers would have to be aware of the transactions’ cost of the data collection and accept it in exchange for goods or services. “

“Are consumers sensitive for an increased demand in personal data and if so, would they ever switch if they were asked to do so for additional data record? Will consumers respond in the same way as they respond to a money price increase?”

Eben finished her presentation stressing there are other ways “There are alternatives to SSNIP test to apply in analysis where there is no monetary price.  We have to keep an open mind.”

By Sylwester Gumienny.

[1] Nestel/Perrier

[2] Commission’s Notice for the Definition of the Relevant Market


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