Data sharing for digital markets contestability: towards a governance framework

As the European Commission is preparing its Data Act, this new CERRE Tech, Media, Telecom report provides concrete recommendations for effective data sharing governance, more specifically when a party has significant incentives not to share data. The forthcoming data act should provide better incentives to stimulate two forms of data sharing: individual users’ data sharing and bulk data sharing between firms.

Data sharing is seen by many as an effective means to safeguard competition in digital markets, allowing smaller players to get access to precious data. The authors of the CERRE report, Richard Feasey and Alexandre de Streel, have analysed current EU rules imposing data sharing and conclude these do not provide the comprehensive governance framework needed for data sharing to effectively take place.

“Given the incentives a gatekeeper platform may have not to share data, and the potential for this platform to leverage into other markets, we recommend imposing an obligation to share data”, explains Richard Feasey. “The most important and difficult task for regulators lies in determining the type and scope of data that is to be shared and which organisations should be obliged to share it. We conclude that better incentives and governance are needed to stimulate two forms of data sharing in the EU: data about individuals and bulk data between firms.”

Regulating recipients as well as donors

Regulation for data sharing should not be viewed as being limited to the oversight of a small number of large platforms that might be obliged to share data. It also requires strict oversight of potentially a very large number of smaller firms that might seek access to such data. Regulators will need to establish an effective and comprehensive system of regulation of both donors and recipients of data to guard against misuse and to ensure trust on all sides.

Sharing individual users data

Over time, the sharing or porting of data about individual users’ data could accumulate and be used for other purposes. For this reason, the authors recommend that obligations to share data about individual users should be quite extensive and apply to digital platforms which may be described as meeting the ‘gatekeeper minus’ threshold.

The report encourages regulators to require the sharing of individual user data without any payment. If high transaction costs and uncertain users’ benefits prevent the effectiveness of this approach, policymakers should consider more radical approaches, such as allowing the use of an ‘opt-out’ option (rather than, the current ‘opt-in’) for the sharing of personal data in order to ensure fair competition in digital markets.

The European Commission should consider provisions in the forthcoming Data Act to enable the use of ‘opt-out’ arrangements for the sharing of personal data to preserve market contestability under certain prescribed conditions. Although this may represent some loss of consumer sovereignty over their data, such a trade-off may need to be made if data sharing arrangements are to achieve their aim of ensuring contestability in digital markets.

Bulk sharing of user data

The competitive impact of the bulk transfer of aggregate user data could be significant since the volume of data to be shared is likely to be very substantial and may represent a significant proportion of the donor platform’s data assets.

Since obtaining individual consent from every user would not be feasible in these circumstances, regulators and policymakers should consider other mechanisms to enable the bulk sharing of non-anonymised user data.

Alternatively, regulators should consider requiring the platform that controls the data to allow third party access to the full data set so that third parties may train algorithms or otherwise derive the same sorts of insights from the data that are available to the incumbent.

Recipients of aggregated data should be required to pay for the data, with the payment varying according to the volume and value of the data being shared (and not simply the costs of implementing the data sharing arrangements or storing the data). The primary concern here is to preserve incentives for both parties in the sharing arrangement to innovate and invest in existing or new digital services to acquire additional data for themselves.

The Commission should undertake a study to consider how regulators would establish wholesale prices for data that was to be shared.

The challenge ahead

European policymakers should consider legislative changes with the Data Act to enable the sharing of personal data on an ‘opt-out’ basis under certain narrowly prescribed circumstances and to ensure contestability in digital markets.

Finally, data sharing remedies that the report considers arise from the assumption that digital platforms will continue to derive significant market power from their centralised control of big data sets. Regulators and policymakers should also keep an eye on new technologies which might enable a much greater degree of decentralisation and wider distribution of data, thereby removing the very sources of market power which this report has sought to address.

This report follows another CERRE research paper analysing the processes that turn data into economic value for online search, e-commerce and media platforms.