Privacy and Antitrust: Underpants Gnomes, the First Amendment, and Subjectivity

Abstract

Privacy has begun to creep into antitrust discussions. In some ways, this should not be surprising. Some of the largest and most ubiquitous companies, like Google and Facebook, give away their services in return for consumer data. If information about ourselves really is the price we pay for content, why shouldn’t antitrust limit companies’ ability to collect and analyze consumer data? Although this logic has some facial appeal, this paper identifies three major concerns with the inclusion of privacy in antitrust analysis. The first concern is conceptual. The analogy between privacy and quality begins to break down once we recognize that unlike selecting lower quality levels to enjoy lower costs, firms invest in collecting and analyzing data to improve content and to enhance matching between sellers and consumers, who have heterogeneous tastes for privacy. Second, an antitrust rule that limits firms’ ability to collect and analyze consumer data is likely to raise some First Amendment concerns. Third, allowing antitrust enforcers to consider privacy would inject an undesirable level of subjectivity into antitrust enforcement decisions, which is likely to attract socially wasteful rent seeking expenditures and to deter beneficial data collection efforts.

Keywords: advertising, Bing, CNN, currency, databases, DoubleQuick, downloads, email, FTC, Federal Trade Commission, Fox News, free, Gmail, J. Thomas Rosch, monetization, MySpace, network, Pamela Jones Harbour, Peter Swire, profits, public choice, Robert Lande, search results, Tara Koslov, targeted, tracking

JEL Classification: C35, D72, K21, K23, L41, L42, L43, L44, L51, M37