Is “Big Data” a threat or benefit to competition?

Written on 26 Jan 2016

Competition Authorities are preparing to deal with big data companies

Large amounts of customer data (“big data”) have significant value for businesses operating in the digital world. Companies use the knowledge gleaned from this data to serve their customers better. The potential privacy issues connected with “big data” analysis are well known, however, it has also been argued that this proprietary data can be used to drive competitors out of the market, so reducing competitive pressure and giving the data owner “market power”. The question of whether – and if so, when – the use of big data distorts competition in this way has, yet to be answered.

German / French Study on big data

To this end, competition authorities in France and Germany have announced that they will conduct a joint study on the role of big data and competition law. The study will look at ways to assess market power and potential anti-competitive effects in the context of big data; it is expected that the study will be published later in 2016.

How can big data affect competition?

The Franco-German study is aiming to offer new ideas as to how the market power of big data companies can be analysed. While market shares are currently used as the main indicator for dominance, the value of personal information may need to be assessed on a different basis. In particular, where data is given as payment for goods or services, the willingness of users to give up their data may itself be a better indicator of market power than market share.

In addition, large amounts of customer data may be used as barriers to entry into a market. It is often the case that the service a business can provide improves in proportion to the amount of data it holds on its customers. It follows that, in order to compete effectively, new entrants will also require a certain amount of data. In this case, market power could be assessed based on how quickly new entrants are able to replicate such data. In the case of social platforms, for example, users have already given up a significant amount of data in exchange for the ability to join and interact with others. They might be reluctant to share such data again with a new entrant in the social networking market.

The effect on dominant companies

Once a dominant position is established, EU competition law requires that companies do not abuse this position. In respect of big data, this could include the obligation to provide a third party with access to data, where the absence of such data works as a barrier to other markets.

This concept can be compared to Microsoft’s ‘interoperability information’, which the European Commission held was necessary for Microsoft to share in order to allow others to compete on the neighbouring market for server operating systems. The underlying concept of data sharing to prevent market entry barriers was originally applied to physical networks like electricity grids and rail systems and later extended also to intellectual property rights and confidential information. It will be interesting to see whether the competition authorities deem it necessary to extend this further in the field of big data.

European experience

The Franco-German study follows competition law developments which did not offer ample guidance on how to deal with big data. Last year, the European Commission cleared Facebook’s acquisition of WhatsApp, arguing that consumers would continue to have a wide choice of alternative consumer communications apps after the transaction. In addition, large amounts of internet user data were not within Facebook’s exclusive control. Similarly, Google’s acquisition of DoubleClick did not cause any serious competition concerns – despite the significant amount of data held.

In line with these mergers, EU’s antitrust chief Margrethe Vestager pointed out recently that big data companies have not raised any competition concerns to date, but that she will continue to monitor future developments closely. For Ms Vestager, large amounts of data do not automatically confer great power; she believes that data that goes out of date quickly or that is easily replicable by competitors will not have a significant impact on a company’s ability to build a strong market position.

Germany: a more critical approach

The German competition authority (Bundeskartellamt, or BKartA) seems to take a more critical approach. In a background paper published by the BKartA last year, it explains that access to customer data might allow companies to foreclose markets and abuse market power. Typically, the BKartA envisaged such conduct occurring in two-sided markets where two or more user groups benefit from the use of a digital platform.

One example which the BKartA has in mind is a search engine which collects data from its customer group by offering free services in return. Such platforms generate profit by offering advertisers access to viewers. Based on the amount and quality of customer data, the platform is able to offer highly valuable information based on which advertisements can be targeted precisely to the customers’ needs. This ability to offer highly targeted advertising gives platforms a competitive advantage in selling advertising.


In the absence of guiding principles from decided case law or official publications, businesses will have to rely on a well-balanced assessment of potential risks. Although the European Commission and national competition authorities do not see specific antitrust issues for now, this could change in the course of on-going discussions – and as ownership of big data grows. Companies should therefore closely follow new developments and be prepared to adapt their business model accordingly. In addition, it is worth being open to the opportunities to actively shape the evolving guidance of competition authorities. We will keep you updated on ways to engage with them.