On February 19, 2018, the Competition Bureau (the “Bureau”) released “Big data and innovation: key themes for competition policy in Canada”. This report is a concise reiteration of the analysis in “Big data and Innovation: Implications for competition policy in Canada”, the white paper the Bureau released for consultation on September 18, 2017. In short, while big data is precipitating rapid change, the Bureau is of the view that its existing analytical principles and enforcement tools are appropriate for dealing with competition issues regarding big data.
In a prior article, we reported on the highlights of the white paper. This summary report reiterates the same themes, with its focus on (i) mergers and monopolistic practices, (ii) cartels, and (iii) deceptive marketing practices.
1. Mergers and Monopolistic Practices
The Bureau recognizes that different types of businesses have become popular in the big data era, such as multi-sided platforms (e.g., Uber, which has riders on one side and drivers on the other) and products that rely on network effects (e.g., Facebook, which becomes more useful as more members join). This fact means that merger reviews for such businesses may not play out in the customary way.
For example, a business may be found to have market power because it owns valuable data, despite having a low market share. Also, the anticompetitive effects of a merger are typically evaluated by looking to predicted price increases or the lack thereof. That doesn’t work for free products, such as Google or Twitter, where non-price effects, such as service levels, take centre stage.
Nonetheless, these variations to the typical merger review process still fit within the existing merger review framework; the Bureau’s Merger Enforcement Guidelinescontemplate that market power does not necessarily require high shares and may include non-price effects.
Interestingly, the Bureau probed the nexus between competition law and privacy law in stating that the way a business deals with privacy matters may affect the perceived quality of its products and, therefore, privacy can be a non-price effect to be evaluated.
The Bureau clarified that its usual approach still applies where big data is involved:
- Hard-core cartels will be subject to criminal investigation and prosecution.
- Conscious parallelism, while it may reduce competitive vigour, is not prohibited by the cartel provisions of the Competition Act (the “Act”). Conscious parallelism occurs where competitors unilaterally mirror each other’s practices, but where there is no agreement between them.
- Facilitating practices are not in and of themselves prohibited, but maybe evidence of an agreement. Examples include pre-announcing or sharing price lists and, in the big data era, sharing pricing algorithms.
The takeaway is that while big data can lead to novel ways in which to engage in cartel behaviour, the traditional principles apply in assessing whether there has been a breach of the Act. Curiously, the Bureau flagged predictions that in the future, artificially intelligent technologies may collude without human involvement, but declined to provide guidance because such a scenario is too speculative.
3. Deceptive Marketing Practices
Here, the Bureau continues to focus on privacy, advising that if businesses deceptively collect data from consumers, that could constitute a materially false or misleading representation, contrary to the Act.
On the other hand, the Bureau warns businesses not to use big data to deceive consumers and provides a few examples:
- Engaging in astroturfing (i.e., fake positive reviews) or native advertising (i.e., disguising an advertisement to make it appear as if it is not advertising, but is rather a news article, for example).
- Making ordinary selling price claims based on inaccurate data.
- Creating personalized advertisements that are targeted to “vulnerable” consumers.
- Making performance claims based on data from third parties that has not been substantiated.
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The overall message is that, at this stage, the Bureau sees no reason to change its policy and enforcement approach in cases involving big data. The Bureau’s view is that big data is changing the landscape, but that these changes can be accommodated by the existing framework. Nonetheless, the Bureau will continue to actively monitor big data’s impact and we may see a different approach in the future.
To date, the Bureau has taken a cautious approach to enforcement action under the existing framework in cases involving big data. For example, the European Commission fined Google €2.42 billion for abuse of dominance, alleging that Google favoured its own comparison shopping service and demoted rival comparison shopping services in its search results. In contrast, the Bureau discontinued its abuse of dominance investigation into Google in 2016. In so doing, the Bureau gave notice that it will continue to monitor developments in the big data economy.