The role of personal data and privacy in merger analysis by Elias Deutscher

1. The role of personal data and
privacy in merger analysis
FSR COMMUNICATIONS & MEDIA, CMPF AND ENTRANCE ANNUAL
SCIENTIFIC SEMINAR ON THE ECONOMICS, LAW AND POLICY OF
COMMUNICATIONS AND MEDIA 2017
March 24 and 25, 2017 EUI Florence
Elias Deutscher – EUI Florence
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2. I. Data and privacy as antitrust concerns?
II. Privacy as price in zero-price markets
III. Methodologies to measure privacy-related
price increases?
IV.Facebook/WhatsApp revisited
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Roadmap

3. I. Data and privacy as
antitrust concerns?
Non-concern camp
• Data as ubiquitous and non-
rivalrous good
• Dynamic competition
• Sector-specific regulation
• Incommensurability of
privacy and efficiency
Concern-camp
• Data-related entry barriers
– Supply-side data-related
economies of scale and scope
– Demand-side data-related
economies of scale (direct and
indirect network effects)
• Consumer lock-in
• Tipping
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4. Privacy = P
Market
Definition
Privacy as
parameter of
competition
SSNDQ /
SSNDP
Privacy-
related theory
of harm
↓privacy =
↑ price
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II. Privacy as price in zero-
price markets

5. Δ privacy
= Δ price
Data protection
regulation as benchmark
Privacy policy t1 ≤/≥
Privacy policy t2
Conjoint analysis
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III. Methodologies to measure
privacy-related price increases (1)

6. Different product
attributes and
attributive levels
Different product
profiles (stimuli)
Choice tasks to allocate
preference
Participants
n = 1000
Stimuli n =20
Price
Network popularity
Communication parties
Functionalities
Level of privacy
Compatibility
Availability
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III. Methodologies (2) – Choice-based conjoint
analysis

7. 7
IV: Facebook/WhatsApp revisited (1) – EU
Commission’s analysis
Advertisers
Google
Facebook
LinkedIn
Online advertising
Facebook
Wapp
Wapp (?) FB
Messenger
Threema
Google
Plus
Users
Social networking services Consumer communications
services
Unilateral effects analysis (no
clear theory of harm)
No concern
User data
Theory of harm: Market power /Foreclosure à
↑P advertising à ↑P goods/services; but lack of
incentives and technological obstacles

8. 8
IV: Facebook/WhatsApp revisited (2) –
Alternative analysis
Advertisers
Google
Facebook
LinkedIn
Online advertising
Facebook
Wapp
Wapp
FB
Messenger
Threema
Google
Plus
Users
Social networking services Consumer communications
services
Theory of harm: unilateral effects: elimination of
close competitor à ΔP privacy
No concern
User data
Theory of harm: market power/foreclosure à
↑P advertising à ↑P goods/services; , strong
incentives and surmountable technological
obstacles
Change in privacy policy = ΔP

9. IV: Facebook/WhatsApp revisited (3) –
What the Commission got…
…right
• Zero-price markets
• Privacy as parameter of
competition
• Data as source of market
power
• Direct and indirect network
effects
• Consumer lock-in
…wrong
• Cross-platform effects
• Privacy-related theory of
harm (Δ in privacy policy =
Δ P)
• Incentives:
– Elimination of competitor à
gains Δ privacy > losses Δ privacy
– Multi-homing
– Closeness of competition
– Strategic complementarity
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10. • Methodological shortcomings of the conjoint analysis?
• Weight and importance of privacy-related consumer harm in
merger analysis?
• Will competition on privacy lead to an optimal level of privacy
policies / market failure?
• Are privacy and efficiency incommensurable values?
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Conclusions