By Tom Fairless
BRUSSELS--As Google Inc. prepares to fight charges that it has
violated Europe's competition rules, lawyers here are already
limbering up for the next battle: big data.
At issue: whether the way that major technology companies such
as Google and Facebook Inc. mine people's personal data should
worry antitrust officials.
Personal data is an increasingly important asset for digital
businesses, some experts argue, even though people hand it over
voluntarily when they use free online services.
Major Internet firms compile huge data sets that could, these
experts say, give them an unfair edge because they effectively act
as a barrier to new competition. Incumbent firms might have
developed such sophisticated profiles of consumers, and can target
advertising with such precision, that new rivals cannot hope to
catch up.
"I think big data is the next big topic" in the European Union
for U.S. technology companies, said Alec Burnside, an antitrust
lawyer with Cadwalader, Wickersham & Taft LLP who represents a
number of complainants in the EU's antitrust case against
Google.
Lawyers who represent major U.S. tech companies in the EU
express similar sentiments. But they argue that the concerns are
misplaced: Data isn't exclusive, they say, because many companies
can hold the same information on people's names, addresses and
credit-card details, for instance. Numerous online platforms also
compete for users' attention, and switching platforms is easy.
"Big data are ubiquitous, widely available and of fleeting
value," said Maurits Dolmans, an antitrust lawyer with Cleary
Gottlieb Steen & Hamilton LLP in Brussels, whose firm
represents Google in antitrust matters.
Data are also subject to diminishing returns, Mr. Dolmans said:
Search engines such as Bing and DuckDuckGo "are well beyond the
size where scale-effects matter."
Either way, the question is being raised on both sides of the
Atlantic. But it has particular resonance in Europe in the wake of
Edward Snowden's revelations that the U.S. National Security Agency
carried out widespread monitoring of European citizens.
Those revelations have prompted a surge in scrutiny of U.S. tech
companies in the EU, in particular around how they process personal
data, but extending to issues such as unfair competition and tax.
The heightened suspicions also appear to have compounded Google's
antitrust woes in the EU.
In a preliminary conclusion on the issue last year, the EU's top
data-protection official, Peter Hustinx, wrote that "in the digital
economy personal information represents a significant intangible
asset."
"This has potentially far-reaching implications for the
interpretation of key concepts including transparency, market
dominance, and consumer welfare and harm," Mr. Hustinx wrote.
Questions around big data could be a particular concern for
Google, its critics argue, because its services span markets that
range from shopping to travel to email and music. That arguably
gives the company a profile of consumers so sophisticated that no
competitor could hope to match it.
Not only do large data sets potentially act as a barrier to
entry to would-be competitors, they are also valuable assets that
could be relevant in analyzing mergers, Mr. Burnside said. For
instance, a dominant firm could decide to reduce the level of
protection of confidential data after a merger without fear of
losing business. If consumers are seen to be damaged by this, it
could provide a reason to block a deal.
So far, the EU's competition regulator has shied away from
vetoing mergers over concerns around data, and argued that privacy
issues should be governed by data-protection rules rather than
competition law.
During the EU's review of Facebook's $22 billion acquisition of
messaging service WhatsApp last year, Europe's telecommunications
operators had lobbied against the deal, warning it could give the
merging companies excessive market power and control over users'
data.
Facebook didn't respond to requests for comment.
As part of its findings, the EU provided estimates that Google
controlled about 33% of data collection across the Web, more than
any other company, with Facebook coming in at 6.4%.
But in its decision, the EU said Facebook's WhatsApp purchase
didn't pose a concern because "there will continue to be a large
amount of Internet user data that are valuable for advertising
purposes and that are not within Facebook's exclusive control."
It also ruled that "any privacy-related concerns flowing from
the increased concentration of data within the control of Facebook
as a result of the transaction do not fall within the scope of EU
competition law."
That may yet change. While the EU's former antitrust chief,
Joaquín Almunia, was skeptical of approaching privacy-related
concerns, his successor Margrethe Vestager has expressed an
interest in the big-data debate since her five-year mandate began
in November.
Big data "works very much as a currency on the Net right now,"
Ms. Vestager told The Wall Street Journal in an interview in
February. "I'm not sure people realize that they do pay because
these pieces of information about yourself, well, they are worth
money in the Old World."
She said that the area was "still developing very rapidly," and
that technology companies had very different business models.
"Google, Facebook, SAP, they're very different," she said. "I think
we have to do a very thorough... analysis... in order to fully
understand what are the possible consequences of big data."
Sam Schechner contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com
Access Investor Kit for Facebook, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US30303M1027
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P5089
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P7069
Subscribe to WSJ: http://online.wsj.com?mod=djnwires