The Federal Trade Commission is hosting a series of historic public hearings on the future of antitrust law that begin today. Gene Kimmelman, the President of Public Knowledge, is participating in the hearings. To continue these efforts to examine developments in competition throughout the economy, the FTC should launch two important studies to examine: 1) the impact of big data on platform power, and 2) the impact of consolidation on America’s workers. Americans are concerned about competition, but we don’t have the information we need in order to know whether it is stronger agency enforcement or possibly other policy tools that are needed to address these concerns.
The FTC should study the impact of big data on platform power.
Digital platforms control an increasing portion of our economy. Smaller companies are customers of the platform, in that they rely on their services to sell their product. However, they also often compete with the platform in a downstream business. In addition to usage fees or commissions on each sale, online platforms and web services may exact a high price in data that they can then use to unfairly compete. Key data from these “customer-competitors” often must be handed over to platforms in order for the system to function. This data has the potential to give platform operators a significant competitive advantage over their customer-competitors.
For example, the Amazon Marketplace enables retailers to sell their products right alongside Amazon’s own retail sales. This makes the Amazon Marketplace more attractive to consumers because they can find more products easily on Amazon. The Marketplace is what earned Amazon its perception as “The Everything Store.” As part of this exchange, itappearsthatAmazonreceivesimportantproprietaryinformationfromtheretailer, including which of their products is selling best to which customers and at what price. Amazon could potentially use that information to know exactly which products are most profitable and which customers should receive that product’s marketing, quickly beating the original retailer at their own game. Currently, Amazon claims that the company isn’t misusing all this data, but an FTC study could help us understand exactly how Amazon is using it.
Google allows advertisers on its platform to upload their customer data in order to better target internet users they already know are their customers. Google calls this their Customer Match program. This information would be very useful to Google to supplement their own profiles of customers, to market other advertisers’ ads to them, and to market their own products, such as Google Express. However, Google states clearly that they don’t use this data for their own customer profiles and don’t share it with other advertisers. What has led Google to take this strategy? Will it continue to make business sense for them to treat the Customer Match data this way?
(For another example, see PK’s own Harold Feld writing about how CPNI can be used by the home telephone company to gain an advantage over their own customer-competitors.)
Based on publicly available information, it’s hard to know how this dynamic is actually impacting these smaller customer-competitors. Through data brokers, large stores of user data are available for companies to purchase. Is there actually something special about the data that platforms obtain from their customer-competitors? The FTC has the ability to compel responses, including non-public information, through its 6(b) studies. This type of study was very effective in bringing forth new information about patent trolls. (See the FTC’s Patent Assertion Entity study for more info.) The FTC must examine the scope of this problem across platforms and share the findings publicly. This will give the public a better understanding of what, if any, policy intervention is needed.
The FTC should study the impact of consolidation on workers.
It’s commonly known in economics that having fewer buyers competing to buy a product can lower the price of that product. It’s also well known that oligopolies, or industries with very few competitors, are more prone to coordination such as collusion and tacit collusion on price and quality. If labor markets have indeed been growing more concentrated over the past few decades, this may be to blame for depressed wages. It could also allow employers to offer fewer benefits, if the small number of employers in a region agree to offer fewer benefits or simply fall in line with what they see other employers offering. With fewer employers competing, it’s less likely that a company will try something new like offering higher wages or better benefits to entice employees away.
Our antitrust enforcement agencies have already identified someproblems with employers barring workers from accepting a similar role at another company and refusing to compete for each others’ workers. However, these “non-compete” agreements and “no-poach” policies are often secret. The economic analysis needed to determine employer consolidation over time is significant. This makes it hard for the public to know the scope of the problem. An FTC study, such as a 6(b) study into contract terms or an internal retrospective of the impact of mergers on wages and worker benefits, would help the public know whether enhanced enforcement and new legislation is needed to ensure competitive equilibrium in employer/employee relationships.
FTC studies will democratize their processes.
The FTC has faced fiercecriticismrecently for failing to bring lawsuits in cases that the public thought they should have brought. Citizens need to know the scope of these problems, and whether the FTC can solve them with its current authority. If it cannot, Congress, citizens, and activists need to focus on legislative solutions to protect competition on digital platforms and throughout the marketplace to protect workers from any undue power amassed as a result of consolidation.