Presentation on theme: "“Privacy and Antitrust”"— Presentation transcript:
1 “Privacy and Antitrust” Professor Peter SwireOhio State UniversityCenter for American ProgressIAPP Spring ConferenceMarch 2008
2 The Basic Idea Basic idea: Price competition is part of antitrust Non-price competition is part of antitrustPrivacy can be a form of non-price competitionAll 5 FTC Commissioners recognized this idea in the Google/DoubleClick opinionSo, privacy considerations will be part of antitrust analysis going forward
3 Overview My background Other arguments for how privacy matters to antitrustSen. Kohl: privacy and be skeptical of bignessRotenberg: privacy as fundamental rightMicrosoft last fall: beware of exclusionary conductMy approach: privacy as non-price competitionWhat that means for privacy professionals
4 My Background Privacy background Chief Counselor for Privacy at OMB,“Privacy Year in Review” to all IAPP membersLead author of official book for Certified Information Privacy Professionals examAntitrust backgroundPracticed in antitrust before entering law teachingTeach antitrust lawSubmitted testimony on privacy & antitrust to FTC this October:
5 History of Privacy & Antitrust Traditionally, mergers were for productsExxon/MobilBeer manufacturersEtc.Information about individuals was not a major factor in the mergersPractices about personally identifiable information were not a major factor in the businesses
6 Sen. Kohl – Bigness is Bad The populist strain of antitrust lawBigness is itself a cause for worryFear of the big “trusts” at time of Sherman (1890) and Clayton (1914) Acts1950 amendment to Section 7 of the Clayton Act continued the populist tradition – block mergers that “may substantially affect competition”1960s cases stopped mergers to <10% of the market, to prevent gradual mergers into bigness
7 Big is BadSen. Kohl is Chairman of the antitrust subcommittee in Senate JudiciaryIn hearing this fall on Google/DoubleClick and privacy:“The antitrust laws were written more than a century ago out of a concern with the effects of undue concentrations of economic power for our society as a whole, and not just merely their effects on consumers’ pocketbooks. No one concerned with antitrust policy should stand idly by if industry consolidation jeopardizes the vital privacy interests of our citizens so essential to our democracy."
8 Legal Status of Big is Bad Sen. Kohl very important as chair of the committeeBut “big is bad” or “undue concentration of economic power” has faded from antitrust jurisprudenceRecent focus instead on whether merger will harm competition: will the result be reduced price or non-price competition?
9 Rotenberg: Privacy as Fundamental Right EPIC complaint to the FTC: “The right of privacy is a personal and fundamental right in the United States.”Therefore, “unless the Commission establishes substantial privacy safeguards by means of a consent decree, Google’s proposed acquisition of DoubleClick should be blocked.”On this view, as for traditional antitrust concerns, a merger can increase the risk of harm to consumers, so mergers are an important opportunity to protect privacy rights
10 Fundamental RightsU.S. example of a fundamental right is 1st Amendment:Intermediate or strict scrutiny of limits on free speechDo Not Call rule has exception, for instance, for political speechFor fundamental rights, government actors must take them into account in official actionsIn Europe, privacy clearly a fundamental rightThat strengthens the case for privacy concerns to be explicitly considered in E.U. competition reviewIn U.S., much weaker legal basis for privacy as that sort of rightWould quite likely require statutory change to have privacy (as privacy) become a factor in merger review
11 Exclusionary Arguments A standard antitrust issue is whether a merger “excludes” effective competitionMicrosoft GC Brad Smith critiqued Google/DClick:“These privacy issues have antitrust consequences. Given the nature and economics of online advertising, this concentration of user information means that no other company will be able to target ads as profitably. It will substantially reduce the ability of others to compete.”Standard antitrust issue if can identify an exclusionary effect
12 My Approach: Privacy as Non-Price Competition NY Times May 2007: “Strictly speaking, privacy is not an antitrust issue”Swire testimony for Town Hall in October, 2007The basic idea:Privacy can be an important aspect of competitionWhere it is, then a merger or other practice can reduce competition, triggering antitrust scrutiny
13 Price and Non-Price Traditional focus on price competition Would G/DC merger affect prices of online advertising?Longstanding antitrust attention to non-price competitionImagine an agreement not to compete on warrantiesOr, a merger where competition on warranties would be greatly reducedOn those facts, there would be an antitrust injury to consumers
14 Non-Price and Quality DOJ 2001 speech where price is “synecdoche” Price stands for the full range of issues that can affect competition in a marketQuality of a product one example, such as if quality of shirts would decline due to mergerPrivacy as quality of a product or serviceOne quality of a service, such as surfing the net, is whether it is high-surveillance or low-surveillanceConsumers who care about privacy are harmed if there is less competition on privacy, and privacy protections decline
15 2 Key QuestionsIs privacy a non-price factor (a quality of a product or service) that is important to consumers?Will the merger or other action reduce competition in privacy, creating antitrust injury to consumers?
16 Does Privacy Matter? Quite possibly yes Personal information practices – privacy & security – clearly more important in the information economyWestin surveys consistently show:“High privacy concern” group at %Large “medium privacy concern” group as wellFor these diverse consumer preferences, there is competitive advantage to having a good privacy reputation
17 Competition in Privacy? Again, often yesSearch privacy :Google announcement on deleting logsMicrosoft announcement on logs & other issuesAsk announcement of AskEraserThis is evidence of competition on privacy, by major players, in a major market
18 What Implications for Antitrust? Have just said:Privacy as potentially important non-price factorEvidence of competition on privacyClayton Act § 7, for mergers: “may substantially affect competition”This is the logic of how a merger could reduce competition in privacy, affecting competition in a significant non-price wayCould be reason to block a mergerOr, place “conditions” on a merger, to assure no harm to privacy
19 Current MergersI have specifically not taken a position on the facts for Google/DoubleClick or Microsoft/YahooI have done work for companies potentially affected by these theories – the views here are mine, as an academicMy point – is part of the job for antitrust agencies to look at privacy as a non-price aspect of competitionThe agencies receive confidential information & presentationsThose on the outside thus don’t see critical information on market definition and market effects
20 FTC Decision on Google/DoubleClick Majority upheld Google/DoubleClick merger (4 votes)It specifically referenced the approach here: “We investigated the possibility that this transaction could adversely affect non-price attributes of competition, such as consumer privacy.”Accepted the analysis, but held the facts not thereCommissioner Harbour dissentedShe cited my testimony, saying antitrust law should ensure competition “based on privacy protections or related non-price dimensions.”
21 Second RequestsAnother important way that privacy may well become part of antitrust casesCommr. Harbour: companies seeking a merger in data-rich industries should receive detailed questions about privacy in “second requests”Companies can thus expect to provide detailed answers and data about their privacy practices, and how the merger will affect those practicesA new role for the CPO in mergers & other transactions
22 To RecapSignificant, but limited, effects of privacy issues on mergers & other antitrust analysisThe significant effects:Unanimous FTC support for the idea that antitrust law should examine whether any loss of competition in privacy due to the mergerIncreased questions likely as part of mergers about privacy practices, and thus a role for CPOs as part of the antitrust due diligence
23 Limits of This Antitrust Approach This approach fits within existing U.S. law, with focus on competition & antitrust injury to consumersNot treating privacy as a fundamental rightNot a free-floating investigation into privacy practicesSection 7 looks to the effect of the mergerIf privacy practices are lousy, but unchanged by the merger, then antitrust authorities don’t intervene
24 More to Explore Issues for possible discussion: How should we assess the likelihood that a merger will reduce competition for privacy?How should we weigh possible harm to privacy felt by some consumers with possible benefits to consumers from more intensive personalization?How well will antitrust agencies deal with these privacy-based problems? Would the FTC do better at this than DOJ?Let the debates begin
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