Non-personal data and antitrust: Much ado about nothing?

The report on Non-Personal Data Governance Framework (report) espouses the need for open data to encourage competition and to provide a level playing field among other things. To that end, the report makes substantial recommendations such as the mandatory sharing of non-personal data. With antitrust regulators across the globe looking keenly at data-driven markets and data-related harm, this article analyses some of the observations in the report on competition law and the underlying assumptions.

The report asserts that large data-driven enterprises cause network effects and have created significant entry barriers because of the large amounts of data they have amassed. In doing so, the report conflates barriers to entry with costs of entry. Costs of entry are what an enterprise has to incur to enter a market. Barriers to entry, for example high marketing expenditure by incumbent enterprises, impose additional costs of entry that discourage other enterprises from entering a market. While collecting and processing data incur costs, such costs are typically not insurmountable and cannot be considered as entry barriers.

The report concludes that the mere possession of data creates a barrier to entry, but does not provide any empirical evidence to support this. This conclusion is incorrect for several reasons. First, enterprises may collect large amounts of data, but much of it may not provide useful or actionable information. Mere access to unusable data would not enable an enterprise to restrict access to markets or to limit competition. Second, data is dynamic and most data sets held by enterprises may have limited useful life such as data relating to sales promotions or time-bound marketing programmes. Third, data sets may not be unique, non-replicable, competitive nor excludable. In which case, the collection and possession of data by one enterprise should not affect the ability of other enterprises to collect the same data.

Fourth, different data sets can be created from the same data by using different tools and processing methods. Data sets held by enterprises may consist of first-party data, third-party data or a mix of both. Even where two enterprises collect the same or similar first-party data, the respective processed data sets may not be identical. In other words, the two enterprises would have unique data sets. Lastly, to assume that the mere possession of unique data sets would create entry barriers is not only incorrect but is also premised on a highly over simplified understanding of how data-related markets function.

The report observes that “mandatory data sharing will be required to open up competition.” It does not set out any thresholds for data-sharing and only identifies specific purposes. Merely providing access to large amounts of data will not result in a level playing field if the enterprises gaining access are unable to obtain actionable information from the data, or cannot turn the data into usable form. The report proposes data-sharing as a panacea without examining the competition-related concerns that are likely to arise in data markets. Regulatory intervention must be undertaken to address market failures. The premise of the report seems to be that unregulated markets will not produce desirable market and social outcomes. This could not be further from the truth. Imbalances in market dynamics will not necessarily result in market failures. Even if there are market failures or their possibility is imminent, the framing of regulations without identifying the likelihood, nature and impact of market failures will only do more harm than good.

Leaving aside the question of whether non-personal data should even be regulated, the report’s recommendations do not consider potential inter-regulatory conflicts. The report proposes setting up a Non-Personal Data Authority (NPDA) with power to address market failures and harm, including the “lack of sufficient levels of competition” resulting in exclusionary and exploitative harm. The report concludes that the role of the NPDA would be distinct from that of the Competition Commission of India (CCI), as the former would have the proactive role of approving data-sharing requests. Though the report does recommend that the NPDA would work in consultation with the CCI, overlapping regulatory powers will probably result in inter-regulatory conflicts.

While the jury is still out on whether data-related harms should be redressed under antitrust laws, the introduction of heavy-handed regulatory mechanisms that also conflict with existing laws may not best provide the economic development that the report is urging.

Karan S Chandhiok is a partner and Lagna Panda is a managing associate at Chandhiok & Mahajan.

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