With Big Data looming in the competition law consciousness, this fantastic piece on disruption is rather timely. Our debut Big Data and Competition Law conference will take place on 25th October 2016, and we hope that this discussion will stir the debates even further.
The last 6 months have seen a continuous stream of activity by competition regulators across Europe and here in the UK and the remainder of 2016 will clearly be no different.
At a time when the industrial internet of things (often referred to as the IOT) takes hold in many industries, where devices and assets can be routinely digitally connected to each other (Gartner predicts that 6.4 billion connected things will be in use worldwide in 2016, up 30% on 2015), and where concepts like blockchain takes hold in industries that are as diverse as banking, agriculture and transport (essentially decentralised databases with multiple computers holding identical copies of data to prove its accuracy and allow instant transactions), then what regulators are doing in the space of big data in 2016 and these disruptive technologies will be relevant to everyone.
Martin Wolf, the respected economist, writing recently in the Financial Times on what next for Brexit and the EU (there! I had to mention it), tells the story of the condemned man and the king. To avoid his own brutal ending, the condemned man quickly tells the king to delay execution, as he could teach the king’s horse to sing within a year. Returning to his prison cell his cellmate tells him he’s clearly mad. He will never teach the king's horse to sing. "But”, explains the condemned man, “it’s a whole year, and I didn’t have a year before. A lot of things can happen in a year. The horse might even start to sing.”
In the digital and big data world, a year is indeed a long time. The latest wave of digital disruption is focused on the IOT and how to get increased all-pervasive connectivity on a 4x2 inch screen on a hand held device. If you don’t have capacity to readily connect to your customers in the way they expect and demand, you are quickly dead in the internet water.
Connectivity in the big data world really means new, emerging technologies, such as quantum computing using analytics whilst customers are online - like some sort of high technology key cutting drop in service that tailors products and services directly to that customer’s needs in real time. At the same time, whole industries are identifying their potential new challengers and champions, and realising that these are not limited to their current direct competitors already active in their markets. It’s players in other markets they can’t currently see operating in their market that might be the future challenger for them. So it is exactly this with big data and its impact.
Regulators in the UK and European Commission are not missing these developments and the first 6 months of 2016 has seen a series of market studies, reviews, policy statements and discussion documents setting out future policy in the space of big data and competition law.
Having access to the right data and knowing how to interpret that data is key and determines the chances of commercial success in the field of big data. To take a simple example, Sportech, who run the UK’s iconic “Spot the Ball” competition, were recently on the right side of a court of appeal decision in which it was decided that they could have refunded to them £97m from the UK’s HMRC because the competition to spot an absent football was a pure game of chance and not skill. Games and competitions involving skill are taxed by HMRC, the UK tax collector. Those that are pure luck are not. The competition works by publishing a photo of a recent football match with several players descending at speed onto where the football is but with the football then removed. Those paying an entry fee then simply mark where the football was before it was removed. Sportech called it a guessing game, even for those who happened to see the match! But what the court was told was that a team of judges decided where the ball should be, not where it actually was. The judges are a group of experts (ex-players/referees/officials) who decide between them where the ball should be, as opposed to where it actually was! HMRC may appeal but it’s useful to know when entering the competition that the question your answering isn’t where is the ball, but rather where might a panel of experts decide the ball should be. That’s quite different.
Today, in 60 seconds, current estimates (by Excelacom) are that globally 150 million emails are sent, 120 new LinkedIn accounts are opened, 2.4 million Google search queries are made and 701,389 Facebook logins take place. That’s not to mention the 1,389 Uber rides, 51,000 App store downloads and 38,000 posts to Instagram. There are also 347,222 new tweets.
Aviva are not alone in trying to join up, in one single operating platform (in this case, MyAviva), the products and services we offer to customers to provide the sort of cohesive and connected digital platform consumers increasingly demand. The challenge for any insurer is to always ensure they are not just best in class but best - period - when measured against both peer group, non- peer and emerging challengers in any industry or service. Our Homechecker service hopes to revolutionise how those looking for data relating to their possible new home, the area, local services, chances of subsidence, crime figures etc. access that data and will turn to this service as a one stop to view data feeds currently only available from a wider range of providers, thus saving search time and bringing the information into one convenient place.
With this in mind, what regulators are saying in the field of big data and where their focus might now go in the rest of 2016 and 2017 is of critical interest to us and everyone else operating in the field of big data. So, let me spend the last third of this blog outlining the key events that have caught my attention and pointing out what is still to come;
An EU Policy Paper dated 25th May 2016. This launched an EU 6-month study and raises the question of whether there should be new dispute resolution mechanisms dealing with big data, as well as focusing on the dependency of smaller players and their use of online platforms.
The House of Commons published the Big Data Dilemma study on the 12th February 2016 and with a government response on the 26th April 2016 (doesn’t that seem a long time ago!).
The House of Lords looked at online platforms and the digital single market on the 20th April 2016.
The EBA is running a consultation on innovative uses of consumer data by financial institutions until the 4th August and focusing on profiling and consumption pattern identification.
Finally, both the French Autorite de la Concurrence and the German Bundeskartellamt launched a joint venture study which was published on the 10th May 2016 and is very much the “big daddy” of the studies done so far this year.
So pulling out what is important for me, I would say the following jumps out and grabs the attention of those operating in the field of big data and competition law.
House of Commons, 10th February 2016; the Big Data Dilemma.
A dilemma because at one and the same time, big data offers to open up markets and introduce new levels of competitive force previously not dreamed of but it could bring with it new challenges and new concerns about markets and how they operate in this new environment.
They point out that just 12 percent of data currently held by companies is analysed. They are also keen to say the obvious, that big data is a success story but it raises challenging questions about UK infrastructure, skills, the use of government data sets, especially on care, data protection and its regulation (and that was before Brexit) and calling for a new Council of Data Ethics. This last proposal has been accepted by the UK government, who gave a detailed response on the 26th April, and which sets out points for policy looking forward over the next few years.
House of Lords, Online Platforms and the Digital Single Market. April 2016.
This focused on regulation, e-commerce, consumer protection and competition. It makes the very helpful and pointed comment that online platforms are too complex for broad strokes legislation. They called for a more proactive CMA to properly deal with issues case by case, recognized that exclusive access to multiple users’ data can give an unmatchable advantage, that algorithms will have a big impact in online platforms and looked at the impact of lower levels of privacy.
The CMA have not explicitly proposed any procedural next steps after their 2015 review into big data but they did suggest ways in which positive developments might be encouraged, including companies responding to customer feedback, identifying how data is collected and used with consumers which could support well-functioning markets and that firms be transparent with consumers as to how they use data in order to raise customer awareness.
When EC Commissioner Vestager published their “Competition in a Big Data World" study in January 2016, she made the point that the Commission continues to look carefully (at big data and competition) and said; “ but we haven’t found a competition problem yet”. Where big data has come up in merger cases such as Facebook, WhatsApp or Google, despite the serious data volumes involved, no serious data issues have been identified. More recently, the French have started a sector inquiry into data and the digital economy and the German authority is looking at Facebook’s terms and conditions and the fairness in social network usage.
French and German Joint Venture Study
I mentioned the big daddy of big data studies earlier in this article. The French and German joint study, published in May 2016, is certainly the place for big data newcomers to begin, to see some of the key themes and discussion points relevant to big data and competition. It looks at the interplay between data, market power and competition. It gives a definition to big data, which is refers to as the 4 V’s; Velocity, Variety, Volume and of course Value. It makes the point that the collection and exploitation of data may raise barriers to entry (into markets) and could be a source of market power but (and this is indeed a big but) it can also reinforce market transparency and aid new competitor entry. The other really interesting discussion point is that where data collection might be used to fix prices by using complicated algorithms to observe similar pricing or indeed using machine learning, where there are no examples of active or tacit coordination between firms makes this a particularly difficult area to regulate, especially where the benefits to market transparency are an aid to consumers by increasing supply or giving better levels of buy side data.
The conclusion? There is a need for refined and individual case investigations in the big data space and, for that to work, resources must be sufficient for regulators to do a proper analysis on the facts on a case-by-case basis.
