As Datonomy reported recently, the UK Competition and Markets Authority has launched a call for information into the commercial use of data. In addition, it has now announced the appointment of researchers to look in more detail at how three specific sectors – games apps, clothing retail and motor insurance – use consumer data. With consumer data the new “currency of the Internet”, competition authorities at EU and UK level have been taking a keener interest in the issue for some time. Lucy Davies, an associate in Olswang’s Competition Team, explains what the CMA’s first formal steps in this area could mean in practice.
What’s new? The call for information and appointment of researchers
On 27 January 2015 the CMA launched a project to review the commercial use of consumer data by publishing its “Call for information: the commercial use of data”. As described in detail in our earlier blog post, the call for information is a fact-finding exercise to “understand the potential for the collection and use of consumer data to generate concerns, both in terms of competition and markets, as well as consumer protection”. Those wishing to respond have until the 6 March to do so.
The call for information follows the publication of the CMA Strategic Assessment in November 2014 which identified a need for the CMA to acquire a better understanding of developments and practices relating to global online commerce. In particular, the commercial use of personal data, peer to peer/collaborative markets, and online markets such as cloud computing and the Internet of Things were identified as specific areas which the CMA needed to focus on. The commercial use of personal data is particularly important given the value of personal data – the Strategic Assessment estimates that “the value extracted from European consumers’ personal data was worth €315 billion in 2011 and has the potential to grow to nearly €1 trillion in 2020”.
The CMA is concerned that the data provided by consumers to online businesses could become a potential source of competitive advantage or market power. In order to better understand the implications of the use of data, in addition to seeking stakeholders’ views, the CMA has now appointed researchers to establish why businesses collect data and how they use it. The CMA has decided to focus the research on three sectors: motor insurance, clothing retailing and games applications. The research on games applications is limited in scope to consumer data collected through games applications used by adults and will not review gambling applications. The CMA hopes that the research (which will take account of all available evidence as well as information obtained from businesses and third parties) will better inform its understanding of how the commercial use of consumer data affects consumers, businesses and competition.
What’s the status of the CMA’s research?
Both the call for information and accompanying research fall outside the CMA’s formal process for the review of markets. This has two immediate implications: (i) stakeholders cannot be compelled to submit the information requested in the call for information to the CMA or to respond to any data request they might receive from the researchers; and (ii) there is no statutory deadline by which the CMA must reach a conclusion with respect to the information collected. Nonetheless, stakeholders should be wary of ignoring this CMA initiative; failure to comply now could result in the initiation of a formal market study.
If the CMA is conducting research within the parameters of a formal market study it has statutory powers to compel businesses to provide it with evidence and specific documents relating to the study; failure to comply attracts criminal liability as well as administrative penalties. A formal market study in this field would see the CMA examining the regulatory and economic drivers of the consumer data market, as well as patterns of consumer and business behaviour in the market.
What might the next steps be?
On concluding a formal market study (which must be within 12 months from the publication of the market study notice, the document which formally signals the start of the market study), the CMA has the power to order certain remedies to address the concerns identified in its market study report. These include:
- creating a CMA-led, consumer-focused project aimed at raising consumer awareness with respect to a particular issue (for example, how businesses use consumer data);
- encouraging self-regulation for businesses operating on the investigated market (for example, the creation of a code of conduct for businesses which collect and use consumer data);
- making recommendations to Government with respect to changes in policy or regulation (for example, to address short-comings in consumer protection in the collection of data online);
- pursuing enforcement action against certain businesses operating on the investigated market which the CMA suspects have infringed competition law or consumer protection rules; and
- making a market investigation reference in circumstances where the market study report gives the CMA reasonable grounds to suspect that features of the investigated market might restrict, distort or prevent competition. The market investigation entails a second, more detailed investigation conducted by a new team within the CMA. The statutory deadline for the completion of a market investigation is 18 months from the date of the reference.
Alternatively, the CMA may conclude that there are no concerns on the market examined and close the investigation without any further consequence.
It is too early to tell whether this initial call for information will result in a formal market study – much will depend on the information the CMA receives from stakeholders at this early stage. However, if after the conclusion of this initial round of information collection the CMA decides that it still needs more information to determine whether there are consumer protection and/or competition problems on the consumer data market it may well look to commence a formal market study in the future.
Datonomy will keep you updated as the CMA investigation continues.