By
David Balto
January 23, 2020 at 5:00 am ET
Antitrust is becoming front and center in the country’s economic discussion. Hardly a week goes by without a politician or an apparently well-meaning public advocate calling for some new investigation, break up, or industry restructuring. This country’s antitrust laws, which Justice Marshall called the Magna Carta of economic freedom, are a bulwark to prevent concrete competitive harm, but they do not permit broad industry restructuring without hard evidence that consumers ultimately are harmed – through higher prices or reduced quality.
Unfortunately at times, rhetoric can replace hard analysis, and broad amorphous claims can be fashioned into a potential competitive concern. But without those clear hard facts of consumer harm, any enforcement would simply be “tilting at windmills.”
Nowhere is this concern over misleading tasks as prevalent as the so-called concerns over firms having a lot of data. Some people look at the aggregation of data and suggest it gives a few companies the ability to control competition and exploit consumers. But careful analysis shows the flaws of such speculative claims.
If a car manufacturer owns all of the iron ore to make steel and all of the raw rubber to produce tires, then there might be a legal argument that the manufacturer is preventing competitors’ access. However, data is completely different from traditional raw materials, because it is not a finite, tangible resource.
Data is actually quite inexpensive and easy to obtain. Any technology company, brick-and-mortar store or mobile phone app starts to collect data the moment it begins operating. Not surprisingly, the only data-oriented cases brought by the Federal Trade Commission or Justice Department were cases where there were regulatory limits on access for data.
It’s arguably more important for a business to make good use of data than for it to collect a large quantity of data. Simply put, the recipe matters more than the ingredients that go into it. People can largely guess the ingredients of Coca-Cola, but the formula is one of the most protected trade secrets in the entire world.
The same is true for technology companies. Over time, we’ve seen new up-and-comers surpass successful incumbents by developing better business models and more attractive features for consumers. Tinder became a popular dating app because consumers liked its simplicity. Even though the company had very little user data when it launched, it quickly took on existing dating sites like Match.com and eHarmony that had mounds of user data. The same is true for Spotify. Despite entering a crowded market with music streaming giants like Pandora and Apple Music, Spotify was able to grow because it offered a better experience for users.
In the digital age, there are so many apps and networks to choose from that consumers truly are the ultimate arbiters of what succeeds and what fails. MySpace had lots of networking and social data, making it the largest social media company from 2005-2008. None of MySpace’s data stopped Facebook from starting up, and none of Facebook’s data prohibited the rise and growth of sites like Snapchat, Pinterest, LinkedIn or other social media platforms.
There’s a rich ecosystem of different online companies and platforms not only because consumers have so much to choose from but also because consumers don’t have to choose just one company. The average consumer has 35 different apps installed on their smartphone. A consumer can give their data to Google and Facebook, as well as Apple, Spotify, Venmo, Twitter, Amazon, VSCO, Airbnb and more. A consumer can also give their data to any other new entrants and startups — and they do, if they think the platform is worth using.
With iron or copper or silver or oil, those are physical resources that can only be used for one purpose at a time. With data, consumers are using multiple platforms at the same time, enabling the data to be used simultaneously and repeatedly.
It’s not anticompetitive to have data and — based on the online economy’s thriving exchange of data and the many choices that consumers have — it’s possible for any company to enter into the market and obtain data to build their own product.
When it comes to antitrust investigations, the most important question for regulators should be: Are consumers significantly harmed by a practice that clearly restricts competition? Data is ubiquitous and can be readily shared. Silicon Valley is driving innovation and choice in order to benefit consumers every day, and in today’s highly active tech industry, there is fierce competition to win and keep consumers. Companies only win through innovating and improving in the name of providing better services and products for their customers.
David Balto has practiced antitrust law for over 30 years in the antitrust division of the Department of Justice, the Federal Trade Commission and in private practice where he advises technology and other clients including Google, Broadcom and Asus.
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