Competition in Dissimilarity: Lessons in Privacy From the Facebook/WhatsApp Merger

Abstract

This note comments on the Commission’s decision in the Facebook/WhatsApp merger regarding the competition in privacy and privacy policies between the two firms. In assessing the competition between WhatsApp and Facebook Messenger, the Commission used the differences in privacy policies as a factor that makes the messaging services complementary rather than competitors. The Commission’s approach is based on the conventional view that the more identical the products are, the more substitutable they are and the more fiercely they compete. This article questions the application of such an approach to competition in privacy. First, if privacy and data security are competition parameters, one way this competition can be manifested is through deploying privacy enhancing technology (e.g. end-to-end encryption) and privacy policies (offering better conditions of data collection and processing). Thus, when it comes to privacy and privacy policies, competition is more sequential than simultaneous and dissimilarity either in the technology or policy can be just the beginning of a competition that exerts competitive pressure on others, rather than make the firms complementary. Secondly, when a service attempts to draw users from an established network by offering superior privacy, the existence of an established network such as Facebook, albeit with a different privacy policy, can still discipline the former’s behavior.