Big Data or Big Brother?
Data privacy is a hot topic. Following the Cambridge Analytica scandal and other instances of data abuse, the big data collection companies and others are under intense public and political scrutiny.
Which? magazine asked us to provide a microeconomic perspective on the issue, and ask: what are the implications of big data and privacy regulation for competition between firms? Is regulation fit for purpose?
Like or Unlike?
The answers we gave on competitiveness and privacy were necessarily tentative because the use of data in myriad ways is evolving rapidly. But just because giant companies are exploiting big data and earning fabulous profits, it does not mean there is necessarily insufficient competition.
Because of the nature of platform markets, there may be reason for concern where a firm in a dominant position has access to critical, unique data that have predictive power. Competition policy frameworks might therefore need to be updated to take account of the evolution of platforms.
While governments are under pressure to do more to protect privacy, enhancing competition and privacy do not always go hand in hand. Regulation can have feedback effects on competition. It may impose costs that weigh disproportionately on smaller and newer companies. Thus, as ever in economics, trade-offs will have to be made, and regulation needs to tread carefully.
Read our full report, Control, Alt or Delete? The Future of Consumer Data published by Which?