Data sharing in the light of competition law | In Principle

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Data sharing in the light of competition law

Sharing, exchanging or jointly collecting data may be valuable for the businesses involved and for the development of a given industry sector, technological innovation, and, as a result, consumers. Indeed, data are of fundamental importance for the development of the digital economy, either alone or as a basis for functioning of artificial intelligence. Hence, the competitiveness of companies on the market depends on access to relevant data.

Issues related to access to data have been addressed, among other places, in the “Competition policy for the digital era” adopted by the European Commission. This policy notes that discussions between undertakings on data sharing cannot be conducted in isolation from the nature and type of data, how it is used, and the specifics of the market in question.

Businesses holding certain data may find it risky or not economically justifiable to share it at all. They may fear the loss of competitive advantage, wrongful appropriation of the data, or use of the data in breach of contract. There may also be concerns about possibly violating competition law. The latter concern is also recognised in a Commission document, the “European data strategy.” It highlights the need to update the Commission guidelines on horizontal cooperation, so that the Commission provides additional guidance on the compliance of data-sharing and -merging arrangements with EU competition law.

Pro-competitive effects of data sharing

As noted in the introduction, data sharing arrangements will often be pro-competitive. Thanks to increased availability of data, businesses can take actions aimed at developing their existing goods and services or launching new, innovative goods and services. For example, in the pharmaceutical sector, access to relevant data enables optimisation of the drug development process. On the other hand, in the automotive sector, data sharing will be crucial for the development and safety of autonomous (driverless) vehicle technologies.

A positive effect of the exchange of information (data) was mentioned by the Commission in its “Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements,” where par. 57 states:

Information exchange is a common feature of many competitive markets and may generate various types of efficiency gains. It may solve problems of information asymmetries, thereby making markets more efficient. Moreover, companies may improve their internal efficiency through benchmarking against each other’s best practices. Sharing of information may also help companies to save costs by reducing their inventories, enabling quicker delivery of perishable products to consumers, or dealing with unstable demand etc. Furthermore, information exchanges may directly benefit consumers by reducing their search costs and improving choice.

Anticompetitive effects of data sharing

Nevertheless, in certain cases, the exchange of data between companies may constitute a manifestation of an illegal, anticompetitive agreement, as referred to in Art. 6 of the Polish Competition and Consumer Protection Act or Art. 101 TFEU.

As indicated by the Commission in its report “Competition policy for the digital era,” data-sharing arrangements may be anticompetitive when, among other things:

  • Competitors that have been denied access (or have been allowed access on less favourable terms) may, as a result, have their market access reduced
  • Shared data include sensitive data from a competition-law perspective
  • Data sharing or collection discourages competitors from developing their own data collection and analysis systems.

One negative aspect of information exchange is that it can reduce undertakings’ uncertainty about the behaviour of their competitors. Uncertainty as to the actions of a rival is the essence of competition. On the other hand, increased market transparency may allow competitors to take optimal actions from their point of view, but at the expense of customers (A. Bolecki, “Information exchange between competitors in the assessment of competition protection authorities,” CARS 2013, p. 77).

If shared data are sensitive, the undertakings may be charged with concluding an anticompetitive agreement. Therefore, it is always necessary to assess each time whether certain data can be shared, i.e. whether such action will have a positive or negative impact on competition. In this respect, guidance can be sought in the Commission’s existing decision-making practice and in the jurisprudence of the EU courts.

Typically, an exchange of information will be anticompetitive when it involves:

  • An undertaking’s pricing policy (Metro v Commission, Case 26/76 (ECJ 1977), par. 21)—as the legal doctrine indicates, the anticompetitive potential of the exchange of price information is higher than in the case of other types of information exchange (A. Bolecki, op. cit., p. 56)
  • Costs
  • Production volume and capacity utilisation
  • Sales (including customer information)
  • Future marketing.

On the other hand, data whose exchange usually does not raise objections from the competition perspective includes data of a technical nature or know-how. However, in practice it may be difficult to distinguish between data that can be freely traded and data whose exchange infringes competition law. In this respect, we can look forward to the Commission’s update of the horizontal guidelines, as well as further guidance to assist in the assessment of specific agreements.

It should be pointed out that exclusive access to relevant data may result in strengthening the market position of the undertaking holding such data. Most often, this happens to the detriment of other market participants. This aspect of data access was highlighted by Margrethe Vestager, Competition Commissioner at the time, at a conference in Berlin in 2019: “Data allows you to be competitive. You can develop excellent and innovative technologies but if you do not have access to data at the same time, you will not be able to offer clients good service.” A refusal to grant access to data may be regarded as abuse of a dominant position, which in turn violates Art. 9 of the Competition and Consumer Protection Act or Art. 102 TFEU (but breach of these provisions is beyond the scope of this article).

How a data-sharing agreement should look

Finally, it is also worth taking a closer look at the data-sharing agreement itself. An agreement linking businesses should introduce appropriate data-sharing mechanisms and ensure that there is no anticompetitive exchange of information between the parties. Possible cooperation between undertakings could be based on the following principles (outlined by B. Lundqvist in “Data collaboration, pooling and hoarding under competition law,” Stockholm Faculty of Law Research Paper Series):

  • Data will only be shared to the extent necessary to achieve the purpose of the contract.
  • If data are available to an undertaking with significant market power (or dominance), access to data will, in principle, be open to other market participants on a fair and non-discriminatory basis.
  • Technical solutions will be implemented allowing access only to strictly defined data covered by the contract, and by strictly defined persons.
  • The agreement will set out detailed rules on confidentiality and use of data.
  • In the case of creating a data set fed by data originating from multiple undertakings, each of the undertakings must be ensured the possibility of leaving such a system.

This article originally appeared on the blog.

Agnieszka Jelska, attorney-at-law, Dr Antoni Bolecki, attorney-at-law, Competition and Consumer Protection practice, Wardyński & Partners