On 6 October 2017, the German Competition Authority (the “FCO”) launched a new series of papers on “Competition and Consumer Protection in the Digital Economy” with its first paper on “Big Data and Competition” (available in German) (the “Paper”). The FCO sets out its view of the specific characteristics of digital, data-based markets, the role data may play in the competitive analysis of such markets and the importance of data protection in competition law proceedings.

The FCO has already considered these issues in its May 2016 joint paper published by the FCO and the French Competition Authority on “Competition Law and Data” (the “Joint Paper”). While this paper does not reflect a significant departure from the Joint Paper, it reaffirms the FCO’s intent to be part of the discussion about the appropriate approach to applying competition law to data in digital markets. In addition to the Joint Paper, the German Monopolies Commission’s report on Digital Markets (June 2015) and the FCO’s Working Paper on Market Power of Platforms and Networks (June 2016) have also considered elements of this issue.

Specific features of Digital Markets

Following the approach adopted in the Joint Paper, the Paper identifies a number of factors that the FCO believes typically characterise online industries and that are relevant for the analysis of competition on these markets, including the double-sided nature of some of these markets, network effects, multi-homing and information asymmetry. The FCO also notes that rapid changes and frequent innovation creating market entry opportunities for new competitors are typical of digital markets. Generally, market positions in these markets can rapidly shift. The FCO concludes that it is necessary to carry out a case-by-case analysis of each market.

The Role of Data in the Competitive Analysis

The Paper discusses the role of data in the competitive analysis of digital markets, considering the contexts in which data could raise concerns, and examining specific potential anti-competitive practices involving data. However, the FCO does not raise significant new issues that were not addressed in the Joint Paper.

Data as a source of market power – According to the FCO, data may create entry barriers and increase market power of individual undertakings when: (i) access to the specific data is important for the undertaking concerned to be successful in the market, and (ii) other market participants cannot collect the relevant data either themselves or via third-parties.

The FCO makes it clear that possession of large amounts of data does not in itself raise competition concerns, particularly if the data is non-rivalrous (an undertaking possessing /using a dataset does not prevent others, including competitors, from possessing/using the same data). However, the FCO does suggest that an issue may arise when very small companies or new entrants are not able to collect and/or process data as a result of their size.

Data, market transparency and competition – As in the Joint Paper, the FCO confirms that the availability of data and increased transparency can have pro-competitive effects, including reduced information asymmetry and increased price and quality competition. However, the FCO also states that there is a potential for collusion and other potentially concerning conduct that could result from increased data availability and transparency in highly concentrated markets (through data comparison and monitoring).

Data pooling and cooperation – In the Paper, the FCO recognises that cooperation and data-pooling between undertakings may generate efficiencies and have pro-competitive effects (e.g., by encouraging innovation and enabling new products and services). However, it also reiterates the potential for the facilitation of collusion and increased barriers to accessing data.

Reflecting the potentially double-sided nature of these issues, the FCO confirms that it is necessary to balance the pro- and anti-competitive effects of such practices.

Data-related specific anti-competitive practices – The FCO discusses three particular situations in which it believes that access to or use of data may give rise to anti-competitive concerns.

• The collection and use of data could raise competition concerns in transactions primarily intended to ensure access to new data, thereby increasing concentration and impeding entry/expansion on the market. A merger may also create vertical or conglomerate effects in data-related markets if it enables the merged entity to impede or deny access to data by upstream/downstream competitors. Concerns are more likely when the data is not replicable.

• A dominant undertaking impeding or denying access to data by its competitors could be anti-competitive. The FCO admits that there are no cases to date where data has been found to be an “essential facility”, such that a dominant undertaking with control of the data is forced to provide access. It concludes that this suggests that access to data may be less important than the public debate suggests, and confirms that the burden of showing that data is “indispensable” to operate on the market is quite significant.

• Data may lead to price discrimination, particularly through individualised pricing. The FCO recognises the positive effect of individualised, lower prices for consumers. However, it also states that a high degree of price discrimination or fully individualised prices could have anti-competitive effects if it leads to information asymmetries between sellers and buyers that result in higher search costs and increased prices.

Data Protection and Market Power

The FCO briefly addresses the interplay between data protection and competition law. While it acknowledges that the enforcement of data protection rules is not the responsibility of competition authorities, it reaffirms its view that the manner in which undertakings handle data and apply data protection rules can be relevant in competition law proceedings (as a non-price parameter of competition). In addition, the FCO sets out its view that the use of certain terms and conditions relating to the way data is collected may be abusive.