A third challenge comes from the growing importance of firms’ use of
digital platforms and their access to data. Many technology firms offer
their services for free to customers, but earn their revenues by charging
fees for the placement of advertisements on their digital platforms. In
reality, however, the services are not “free” to consumers; the price they
pay is the large amount of personal data they make available to the
technology firms.
How do the firms use this data? Increasingly, they are analyzing this “big
data” to learn about their consumers and their preferences, information
that can lead to creative and profitable systems of price discrimination, as
discussed in Chapter 10. More problematic for competition is that firms
can use these data to learn about emerging business rivals and then in
some cases take actions to either undermine their positions or eliminate
the threat directly by acquiring them.
The challenge to policymakers is to determine how much information and
what types of information pose the most significant threats to
competition, and how firms’ anti-competitive behaviour can be reduced
while maintaining the consumer benefits stemming from the innovative
products and services.