Data acquisition doesn’t equate to price hikes, FTC's Hoffman says
12 April 2018. By Lewis Crofts, Joshua Sisco and Leah Nylen.
Companies that gather more data from their customers aren’t imposing the equivalent of higher prices or lesser-quality service, said Bruce Hoffman, a senior official at the US Federal Trade Commission.
As antitrust agencies review the effect of mergers and large platforms on data markets, Hoffman said enforcers were starting to grapple with some theories, but flagged the problems of linking data and price.
Speaking at an event* Thursday in Washington, DC, Hoffman said a recent review of Amazon’s purchase of retailer Whole Foods explored whether the online giant would gain more data about customers and whether this was equivalent to a price increase.
“Our understanding is, at the moment: There is neither a theoretical or empirical basis for assuming in every case that a firm acquiring more data from customers is imposing the equivalent of a price increase or quality decrease,” said Hoffman, who is the FTC’s acting director of the Bureau of Competition.
“None of this means that data can’t be like price or quality, and [that] we wouldn’t be concerned about a transaction that requires consumers to yield more data. But it’s a very fact-specific issue where the state of our knowledge is very limited right now,” Hoffman said, speaking in a personal capacity.
At a separate event** in Philadelphia earlier this week, Hoffman pointed to a German antitrust investigation into Facebook that focuses on whether the social network is abusing its market power by extracting data from users that it can then monetize through selling ads.
“The Bundeskartellamt has essentially taken the position that data is the equivalent of price,” Hoffman said. “And so a firm that is providing a service and acquiring data in exchange is effectively charging a price.”
“I think the analogy between data and price is not precise and could break down in a couple of ways,” he told the audience.
For example, he said, it wasn’t clear how much value consumers placed on data. Moreover, an individual can give his “data to an infinite number of people,” which distinguishes that exchange from a normal cash transaction.
Hoffman said there were “some analytical problems” with the approach the German regulator was taking, which “may or may not be narrowed or changed, or we may all believe they are right.”
“It’s very early in this process,” he said.