Data as an input to market power

In the present digital economy, data has emerged as a valuable economic commodity that entities leverage to gain a competitive edge over their rivals. [1] Data is an input into production, so businesses that control data can have market power and impede the entry of potential competitors. Market power refers to a firm's ability to influence the price, output, or other market conditions in its favour, without being constrained by competitive forces. [2] 

Data as an input to market power means that access to information can help a business limit the competitive pressure it faces. Information about searches, clicks or purchases can improve services and advertising. If competitors cannot obtain comparable information at a reasonable cost, they may struggle to offer an attractive alternative. This can allow a platform to raise prices or worsen quality or privacy protections without losing enough business to make doing so unprofitable. This matters even when a service is free, because competition also concerns advertising charges, personal information and the choices available. Data can be used repeatedly and by several businesses without being used up. However, access can be restricted through contracts and technical controls. Nevertheless, holding a large dataset alone does not establish market power.

Google Search illustrates this mechanism. Google controls over 91% of global search engine traffic [3] and uses information about users’ searches and the results they click to improve the relevance of its rankings. A larger volume of searches gives it more opportunities to learn, including about unusual queries that smaller search engines encounter less often. Better results can attract further use, producing additional information and reinforcing the advantage. A new search engine may therefore struggle to attract users while lacking the information needed to improve its service. Data access can constitute a significant barrier to entry when this type of analytics is necessary to participate in a market, particularly when alternatives are limited. 

A platform’s control over data access can shape who is able to compete with it. By determining whether, and on what terms, rivals can access that information, a platform can influence the competitive opportunities available to others. This suggests that regulation should examine access to strategically important data alongside prices and market shares. Article 6(11) of the EU Digital Markets Act [4] reflects this approach: certain large search providers must, on request, share specified search data with rival search providers on fair and non-discriminatory terms, with relevant personal data anonymised. The aim is to help rivals compete while protecting users. A data advantage does not, by itself, establish unlawful conduct.

Would access to equivalent data enable a rival to compete effectively? The concept cannot answer this on its own. Additional data may eventually add little value, become outdated, or have substitutes. Firms also need the skills and computing resources to use it. Google’s default positions in browsers and devices can further restrict rivals’ access to users even if data become available. The unresolved issue is how much competitive advantage comes from data itself and how much comes from these other resources and arrangements.