Data investment could be deterred by enforcement

Pallavi Guniganti

07 June 2018

Data investment could be deterred by enforcement

L-R: George Paul, Elaine Ewing, John Harkrider, Stephen Kinsella and Marina Lao, GCR Live

The second-highest official at the US Department of Justice’s antitrust division has said that investment in data collection could be chilled by obligations to share the data, but a lawyer for Google complainants has scoffed at the concern. Pallavi Guniganti at GCR Live

Andrew Finch, the principal deputy assistant attorney general for antitrust, said today that consumer data requires investment to be extracted and made valuable. He gave the opening keynote address at GCR Live New York.

Consumer data is valuable and especially for advertising purposes, Finch said, but the market for it appears to be working like the markets for other resources.

“Companies that invested in gathering data are reaping rewards,” yet it is still possible for others to make similar investments, he said.

If forced to share this source of competitive advantage, he said, “companies might stop investing in these drivers of value”. Finch noted that investment can come in the form of providing products and services for which consumers would be willing to pay money but receive in exchange for their data.

He cited the Indicator podcast’s description of an economic analysis that found consumers on average would demand more than $3,000 a year to give up free digital mapping services, and $7,000 for free online search.

Venture capitalists “can tell you it requires enormous investment” to produce those free services, Finch said.

But in a panel following Finch’s remarks, Sidley Austin partner Stephen Kinsella said, “I don’t know of any evidence” that such investments are chilled by a company’s being obligated to share data if it is found to be dominant.

The idea that a company will think, “I will not innovate because I might be required to share inputs” is implausible, Kinsella said. Based in London and Brussels, he represents complainants to the European Commission against Google.

While those who challenge big data theories on the one hand say it’s almost worthless for establishing dominance, he said, they respond to the suggestion of sharing data by now regarding it as “the crown jewels”.

Two lawyers on the panel whose firms act for Google – John D Harkrider of Axinn Veltrop & Harkrider and Elaine Ewing of Cleary Gottlieb Steen & Hamilton – disagreed with Kinsella.

Ewing compared his argument to saying that if the length of time that a patent owner is protected from having its patent being freely used by others were halved, that would not make a difference. “But it would, right? If you had half the patent period you have today, there would be less innovation,” she said.

Antitrust is about changes at the margin, Harkrider said, and recognising that a price increase will result, not in a total end to purchases, but to lower output as people buy less than they otherwise would have done.

Similarly, he said, if antitrust enforcement decreases the return on investment in data through forced sharing, companies will spend less on that investment.

White & Case partner George Paul moderated the panel, which also included Seton Hall law professor Marina Lao. GCR Live 6th Annual New York concludes later today.

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