The Roles of Innovation in Competition Law Analysis
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The Roles of Innovation in Competition Law Analysis

Edited by Paul Nihoul and Pieter Van Cleynenbreugel

Rapid technological innovations have challenged the conventional application of antitrust and competition law across the globe. Acknowledging these challenges, this original work analyses the roles of innovation in competition law analysis and reflects on how competition and antitrust law can be refined and tailored to innovation.
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Chapter 5: Data protection considerations in EU competition law: funnel or straightjacket for innovation?

Nicolo Zingales

Abstract

As the advancement of digital technologies dramatically reduced the costs for processing data, a variety of companies seized the opportunity to provide personalized products or services, by identifying relevant consumer characteristics that enable a better matching to the actual or likely needs of their users. The business models generated by the acceptance of this premise tend to reward actors with greater capacity to collect, retain and analyze those data, thereby affecting the structure and the dynamics of competition in the market. In this context, where user data constitute valuable inputs for the attainment of efficiencies, EU competition and data protection law are important tools to ensure that undertakings with exclusive access to strategic data sets do not abuse their privileged position to the detriment of consumers. However, the difference in the operation of these instruments is significant when it comes to the evaluation of the efficiencies claimed by the undertakings processing those data sets. In particular, competition law identifies specific types of (economic) efficiencies that can be used to outweigh anticompetitive effects, while imposing stringent conditions for such trade-offs to occur. In contrast, data protection law relies on the notion of “legitimate interest”, which implies no judgment on the type of interest pursued by the controller, so long as that interest is acceptable (i.e. legal) under applicable law. Likewise, while in both cases the legality depends on a balancing test, the inquiry has a substantially different focus: in competition law, the balancing test is based on a counterfactual of the competitive process, which refers to the general market conditions in the absence of the conduct. In data protection law, the balancing revolves around the fulfillment of the reasonable expectations of the data subject, which depend on the individualistic benchmark of his/her relationship with the data controller. An in-depth explanation of these differences exposes two contrasting approaches to the incorporation of innovation into legal analysis, with important consequences for competition enforcement. This chapter opposes those approaches and substantiates the problematic effects that it could have on innovation. At the same time, recognizing that the fundamental right to data protection should be taken into account by competition enforcers in their action, it proposes to confine those considerations within the notion of “objective justification” (both in the context of articles 101 and 102 TFEU).

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