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Free Isn’t Free? Competition law starts grappling with ‘zero-price’ services

Posted on    by CREATe Team

Free Isn’t Free? Competition law starts grappling with ‘zero-price’ services

By 18 October 2021No Comments

The latest edition of the Competition Policy International (CPI) Antitrust Chronicle is dedicated to an examination of ‘free’ from the perspective of competition policy. The Antitrust Chronicle considers the challenges of non-monetary payments, the role of data, and the overall question: is free truly free?

Salil Mehra’s piece in the Antitrust Chronicle provides an eloquent answer to that question, by explaining why online services aren’t free: there may be non-monetary payments which signal the existence of a market, someone else may be paying, or consumers’ brains may be altered. Indeed, all the contributors to the piece seem agreed that users of ‘free’ online service have to give something up to use the service, be it data, attention, time, or something else, even if consumers may not always be aware of it, as noted by Helen Jenkis, Dave Jevons and Andrew Mell.

Since the provider of these ‘free’ services generate revenue and compete with each other to do so, it is imaginable that they may engage in practices which  restrict competition and generate (consumer) harm. Katherine Forrest considers that data can be a product conferring market power, whose use may reduce consumer welfare. Helen Jenkis, Dave Jevons and Andrew Mell discuss the potential problems for competition when companies undercut each other in data prices  or attention prices.

The question then becomes not whether a service is ‘free’ but how to apply our traditional tools when consumers don’t pay in dollars, euros, yen, pesos or other currencies. Andrew Stivers explains that injury in cases involving zero-price goods may be different to those in traditional cases, where consumer harm could (to some extent) be expressed in the increased monetary price paid by consumers. If no money exchanges hands, however, monetary remedies may not be appropriate. Stiver’s piece is logically followed by an explanation by Jacqueline Downes, William Georgiou and Mellisa Camp of Australia’s developing approach to competition and privacy risks associated with free services.

Magali Eben, Competition Lead at CREATe, contributes to the analysis by reflecting on the feasibility of applying traditional price-based tests of market definition to ‘zero-price services’.  Market definition is an important first step in competition law cases, but one which often relies on consumer reactions to changes in price.

Magali argues that, if there is a relationship of an economic nature between the user of a platform and the platform provider, it should be possible, at least in principle, to define a market. The question is not whether a market can be defined for zero-price services, but rather how this should be done. In her short contribution, she assesses whether personal data can be conceptualized as a price, to enable a substitution analysis for zero-price services. She considers whether users are in an exchange relationship with service providers, providing data for access, and whether they know they are. This is essential: only if consumers consciously exchange their personal data for a service can we derive any useful information from their behaviour in the case of an increase in data collection. Then Magali discusses what substitution analysis could look like if monetary price were replaced by personal data-price (revising the so-called ‘SSNIP test’): what would it look like to ‘increase’ the data price and what would the difficulties be in implementing such a test?

Magali concludes that there are still some questions to resolve before personal data can be integrated into market definition, questions which are relevant beyond competition law: how aware are consumers of the categories of data collected and can companies and regulators in any way contribute to improving their knowledge; do consumers value data and accept that they exchange it for access to services; are consumers able to compare services even if some charge data and others charge money? A personal data-based test will only be viable if satisfactory (even if imperfect) answers can be provided to these questions. Over time, with trial and error, a consistent practice could develop. The SSNIP test is not the ‘be all and end all’ of market definition, but it can provide systematism to a complicated exercise. This is sorely needed in the area of zero-price services, not just for market definition, but also for the understanding of market power and consumer harm, and the design of appropriate remedies. The contributions of scholars and practitioners alike will be indispensable in solving these problems. The contributions in the Antitrust Chronicle show that we are well on our way.