The Law and Economics of Data and Privacy in Antitrust Analysis

39 Pages Posted: 1 Apr 2014 Last revised: 11 Nov 2014

Geoffrey A. Manne

International Center for Law & Economics (ICLE)

Ben Sperry

International Center for Law & Economics (ICLE)

Date Written: August 2014

Abstract

While several scholars and policymakers have proposed that threats to privacy and competition from concentration of data be incorporated into antitrust analysis, no one has yet articulated a coherent theory as to how degrading privacy or aggregating data can be anticompetitive — nor even what, precisely, privacy harms are in this context. In this paper, we survey and evaluate the various attempts to incorporate privacy concerns into antitrust’s domain. We find that those more skeptical of antitrust law’s ability to deal with privacy concerns have the better of the argument.

We approach the question by applying law and economics insights, including the error cost framework associated with antitrust scholars such as Frank Easterbrook, Joshua Wright, and Douglas Ginsburg. This is the first paper in the literature to evaluate all of the proposed approaches in a systematic way. While there have been a few skeptics of incorporating privacy into antitrust, we complement those papers by considering the literature arguing the aggregation of data can itself be a privacy harm that has developed since their publication.

We highlight several problems with the theories advanced thus far. First, some of the theories rely on outdated economic models that assume big is bad, rather than on modern consumer welfare analysis. Second, none of the proposed approaches adequately defines the market for data. Third, none of the proposed approaches adequately explains how concentrations of data alter a firm’s ability or incentive to degrade privacy, nor why such degradations would amount to anticompetitive conduct. Fourth, the theories of harm identified by advocates of including privacy in antitrust analysis are inconsistent with one another: Some of the competitive harms identified have little to do with privacy, and some of the privacy harms identified are not antitrust-relevant, or at least not of the type normally condemned by antitrust law. Finally, there are no reasonable or antitrust-relevant remedies available for alleged anticompetitive harms arising from data or the privacy threats supposedly posed by increased data aggregation.

Insofar as privacy harms need a public policy response, common law remedies of tort and contract supplemented by the FTC’s ongoing enforcement of consumer protection law are a better alternative to antitrust law. There are pro-competitive reasons for allegedly privacy-invasive practices like data collection, analysis, behavioral advertising, and even price discrimination. Applying an error cost framework suggests that barring such activity outright will lead to a decrease in consumer welfare. Targeted enforcement against anti-consumer abuses through common law and consumer protection law could preserve the benefits of data collection and analysis while ameliorating and deterring privacy harms.

This paper is an outgrowth of a presentation given by Geoffrey Manne at the George Mason Law Review’s Symposium on Privacy Regulation and Antitrust on January 17, 2013. We do not wish the proposal to be considered for the poster session.

Keywords: antitrust, privacy, data, competition, consumer protection, common law, advertising

JEL Classification: K21, L12, L13, L16, L41

Suggested Citation

Manne, Geoffrey A. and Sperry, Ben, The Law and Economics of Data and Privacy in Antitrust Analysis (August 2014). 2014 TPRC Conference Paper. Available at SSRN: https://ssrn.com/abstract=2418779 or http://dx.doi.org/10.2139/ssrn.2418779

Geoffrey A. Manne (Contact Author)

International Center for Law & Economics (ICLE) ( email )

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Raymond Sperry

International Center for Law & Economics (ICLE) ( email )

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Suite 407
Washington, DC District of Columbia 20002
United States
8147245659 (Phone)
8147245659 (Fax)

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