Tantalus in cyberspace: data is (not) everywhere

by: in Law

Data is intangible, non-rivalrous, and produced in vast quantities with little to no incentive. How then can it be a source of competition issues in digital markets? This blog seeks to explain.

  • Data is an especially valuable input for firms operating in digital markets
  • Despite its seeming abundance, differences in access to data can lead to competition issues
  • Remedying these issues may conflict with the intellectual property rights of database owners

The phrase “data is everywhere” brings to mind the story of Tantalus from Greek mythology. Briefly, for offending the gods at a banquet, Tantalus was placed in a chamber with water that came up to his neck and the branches of fruit trees hanging above him. As he grew hungry he would reach for a piece of fruit, but the branches would pull the fruit out of his grasp. As he grew thirsty, he would bend over to drink, but the waters would part before him. His punishment was to suffer eternal thirst and hunger despite his abundant surroundings.

Due to the nature of data, market entrants in digital markets could be said to be in an equally well-stocked chamber. Data is a valuable resource as it helps firms to develop products, tailor existing services, and operate ad-financed business models. In exchange for providing a free service, platforms can create large and detailed data sets from information that users submit, data that is generated from observing users (aka: tracking), and data that is generated by inferring information about users using algorithms. Additionally, data is non-rivalrous, meaning that more than one party can use it at a time. This enables users to “multi-home”, where they use multiple platforms for the same service, which adds to the availability of data.

However, just as Tantalus, market entrants may have difficulty in accessing that which they need. Firstly, firms need to invest in the development of a platform on which to gather users. Secondly, they need to invest in a marketing campaign to attract those users. While these alone can represent significant barriers to entry, they are compounded by “network effects”, which is the positive correlation between the number of users on a platform and the value of that platform to other users. As a result, market entrants with smaller communities will have a comparatively low value in this regard and so struggle to attract users. Conversely, market incumbents, with large datasets of user profiles, stand to benefit from a “snowballing effect”. The accumulation of data from users and money from advertisers can be used to develop better products that attract more users and therefore more advertisers. In this way, data could play a role in enabling incumbents to create and cement a position of market power that even multi-homing may not overcome.

Market entrants in digital markets are perhaps not as damned as Tantalus, but the notion that they are surrounded by easily accessible data is misleading. They are faced with significant obstacles to overcome. This is so without even considering the anticompetitive conduct of incumbents which we have not discussed. Promoting access to data may be a necessary part of addressing such competition issues. However, this may involve compromising the intellectual property rights of those in possession of the datasets.

This relationship will be contemplated in greater depth at the COMIPinDigiMarkts2022: Competition and IP in the Digital Markets, to be held in Brussels this June.

This guest blog was written by Myles Rogerson for the IGIR and METRO Faculty of Law Maastricht #COMIPinDigiMarkts2022 project - More blogs on Law Blogs Maastricht

This guest blog is part of the project #COMIPinDigiMarkts2022. These blogs have been specially prepared by participating internal and external project members and focus on competition law and IP law, with particular reference to the digital markets.