Privacy as a Non-Price Competition Parameter : Theories of Harm in Mergers

It is widely accepted that firms compete by offering consumers lower prices, high-quality products, and a wide range of choices. With the increasing commercialization of personal, there is now a growing consensus that the level of privacy protection and deployment of Privacy Enhancing Technologies (PETs) could be subject to competition by companies. A case in point is the recognition by the European Commission that data privacy constitutes a key parameter of non-price competition in the market for consumer communications and for professional social networks. This approach treats privacy as a quality, choice or innovation component of the product/service offered to consumers and certain privacy harms as reductions in these parameters that need to be accounted for in the competition analysis. However, little attention has been paid in laying out a concrete theory of harm that outlines how data privacy can be incorporated into competition analysis as a non-price parameter and what constitutes reduction in privacy. This paper is an attempt to fill in this apparent gap. To this end, the paper provides a critical analysis, in light of EU competition law, of three theories harm for incorporating privacy as a non-price competition parameter into merger assessment, namely the privacy-as-a-quality, the consumer choice theory and the maverick-firm theory. Additionally, the paper examines what dimensions of privacy are relevant for competition and what is the (added) value of incorporating privacy into competition analysis