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Can data exploitation be properly addressed by competition law? A note of caution

In this brief piece of caution, we argue that competition law is not well-suited for dealing with exploitative data practices. As consumers usually act as if they did not value their privacy, legal remedies that neglect what social scientists call “the privacy paradox” are unlikely to improve the current status quo. We claim that privacy exploitation is better explained by informational and behavioral failures. Our analysis has important policy and legal implications as is shown in our assessment of the German Facebook Case. Under plausible assumptions, if consumer demand does not police the privacy attribute, any competitor will exploit it and thus competition will fail to yield higher privacy protection standards. Accordingly, it is impossible to find a competitive benchmark in the real world. From a legal perspective, this means there is no causality between a firm’s market dominance and the imposition of privacy intrusive terms and conditions. From a policy perspective, we argue that privacy intrusion would be better addressed by direct market regulation, since the complexity of the digital markets requires an assessment of the real equilibrium effect on privacy related concerns. This has to be handled with expert knowledge. Competition law is not a silver bullet, and many social and economic failures are beyond its institutional boundaries. Yet, any data related competition concerns should also reflect on the role of data under exclusionary abuse considerations, something that the Supreme Court of Germany surprisingly did. 

Introduction 1. Competition law is experiencing a remarkable revival. The U.S. antitrust authorities have recently sued both Google and Facebook, and antitrust policy was a matter of debate in the last presidential elections. [1] The European Commission just presented charges against Amazon [2] and fined Google for alleged abuses in the markets of mobile operating systems, and mobile communication applications and services. [3] The increased awareness about the role of antitrust in a well-functioning economy encompasses not only its political salience and its enforcement but also academic proposals that suggest expanding antitrust’s domain to incorporate broader goals, such as political power and industrial concentration. [4] While those ends may influence the principles of competition

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