The impact of search engine data sharing on competition and consumer welfare

Abstract

Search engines match user queries with webpages. Search efficiency increases when data-driven
network effects attract more users and generate economies of scale and scope in data aggregation. Network effects enhance user welfare but also trigger antitrust concerns because they may “tip” the market towards a single dominant search engine – Google Search. The EU Digital Markets Act imposes an obligation on very large gatekeepers search engines to share their user data with smaller search engines, to facilitate market entry and competition. The available empirical literature on search engine efficiency shows that asymmetric data sharing, from larger to smaller search engines, may increase competition but reduce user welfare because it fragments the user data pool that is crucial for efficiency, in particular for rare queries. Tension between competition and user welfare can be overcome by symmetric and mutual data sharing between all search engines, irrespective of market share.

Keywords: search engines, digital competition policy, data governance, access to data, economies of scale and scope in data aggregation.

JEL Classification: K21, D23, D43