Competition, consumer protection, and the right [approach] to privacy

• Date: 01 January 2015

COMPETITION, CONSUMER PROTECTION, AND

THE RIGHT [APPROACH] TO PRIVACY

M

AUREEN

K. O

HLHAUSEN

A

LEXANDER

P. O

KULIAR

*

Many people view Samuel Warren and Louis Brandeis’s 1890 work, The

Right to Privacy,

1

as the starting point for the consumer privacy laws in the

United States. Alarmed that “[i]nstantaneous photographs and newspaper en-

terprise have invaded the sacred precincts of private and domestic life; and

numerous mechanical devices threaten to make good the prediction that ‘what

is whispered in the closet shall be proclaimed from the house-tops,’” they

argued for the right to prevent invasions of privacy by the press, particularly

by photographers, and “to be let alone.”

2

Noting the protections for private

letters and for works of art and literature, which they characterize as “a gen-

eral right to privacy for thoughts, emotions, and sensations,” Warren and

Brandeis asserted “these should receive the same protection, whether ex-

pressed in writing, or in conduct, in conversation, in attitudes, or in facial

expression.”

3

Warren and Brandeis’s concerns about the ability of technology to invade

the private sphere continue to resonate today, 125 years later. The technology

encroaching on privacy now is, of course, the Internet—or, to be more pre-

cise, the technologies that permit the tracking and aggregation of individual

consumers’ online behavior and that support the many services that finan-

cially sustain the broader Internet ecosystem. These technologies also facili-

tate the advent of “big data”—a term used to describe the collection, storage,

and analysis of datasets that have large volume, significant variety, and high

velocity, sometimes fed by the melding of online and offline data.

* The authors are, respectively, Commissioner and Attorney Advisor to Commissioner

Ohlhausen, Federal Trade Commission. The views expressed herein are those of the authors

alone and do not represent the views of the FTC or any other Commissioner.

1

Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 H

ARV

. L. R

EV

. 193 (1890).

2

Id. at 195.

3

Id. at 206.

121

122

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NTITRUST

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AW

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OURNAL

[Vol. 80

Nearly everyone agrees the Internet has transformed how we live and inter-

act, largely for the better. Similar optimism exists about the benefits of big

data.

4

But not everyone agrees on how much this transformation has, or

should, cost in terms of privacy losses. Ardent advocates of an “Internet of

Things” believe that people are consciously choosing to trade at least some

privacy for otherwise free and improved content and services. For instance,

Facebook CEO Mark Zuckerberg famously claimed privacy is disappearing as

a social norm.

5

Many consumers, however, are worried about the privacy

losses associated with extensive collection and manipulation of consumer in-

formation online.

6

As was the case in Warren and Brandeis’s day, numerous proposals have

surfaced for how to defend expectations of personal privacy while still realiz-

ing the benefits of commercialized technology. Those defending free market

principles argue that the best solution is little-to-no government interven-

tion—consumer demand for privacy will create a market for privacy protec-

tions.

7

Other commentators propose increased governmental scrutiny of the

collection and use of consumer data online, and some even advocate unifying

the competition and consumer protection laws to examine privacy through a

competition lens.

8

Evaluating this last proposal—using competition law to address privacy

concerns—is the focus of this paper. To do so, we first look to history. To-

4

E

XEC

. O

FFICE OF THE

P

RESIDENT

, B

IG

D

ATA

: S

EIZING

O

PPORTUNITIES

, P

RESERVING

V

ALUES

34 (May 2014) [hereinafter B

IG

D

ATA

R

EPORT

], available at www.whitehouse.gov/sites/default/

files/docs/big_data_privacy_report_may_1_2014.pdf; id. at 5 (“Used well, big data analysis can

boost economic productivity, drive improved consumer and government services, thwart ter-

rorists, and save lives.”).

5

Bobbie Johnson, Privacy No Longer a Social Norm, Says Facebook Founder, T

HE

G

UARD-

IAN

(Jan. 10, 2010), www.theguardian.com/technology/2010/jan/11/facebook-privacy. Internet

pioneer Vint Cerf neatly summed up the personal tension between privacy and interconnectivity

at a talk at the Federal Trade Commission, noting: “Technology use today has far outstripped our

social intuition[.]” Paul Roberts, At FTC Forum, Experts Wonder: Is Privacy Pass´e?, T

HE

S

E-

CURITY

L

EDGER

(Nov. 20, 2013) (quoting Vint Cerf).

6

See, e.g., TRUST

E

, TRUST

E

2014 US C

ONSUMER

C

ONFIDENCE

P

RIVACY

R

EPORT

(2014)

(noting increased concerns about privacy among consumers).

7

See, e.g., Slade Bond, Doctor Zuckerberg: Or, How I Learned to Stop Worrying and Love

Behavioral Advertising, 20 K

AN

. J.L. & P

UB

. P

OL

’

Y

129 (2010); Kent Walker, The Costs of

Privacy, 25 H

ARV

. J.L. & P

UB

. P

OL

’

Y

87, 87–88 (2001) (“Legislating privacy comes at a cost:

more notices and forms, higher prices, fewer free services, less convenience, and, often less

security. More broadly, if less tangibly, laws regulating privacy chill the creation of beneficial

collective goods and erode social values. Legislated privacy is burdensome for individuals and a

dicey proposition for society at large.”).

8

See, e.g., Robert H. Lande, The Microsoft-Yahoo Merger: Yes, Privacy Is an Antitrust Con-

cern, FTC: W

ATCH

N

O

. 714, at 1 (Feb. 25, 2008); Peter P. Swire, Submitted Testimony to the

Federal Trade Commission Behavioral Advertising Town Hall 5–6 (Oct. 18, 2007), available at

www.europarl.europa.eu/meetdocs/2004_2009/documents/dv/testimony_peterswire_/Testimony

_peterswire_en.pdf; Joseph Farrell, Can Privacy Be Just Another Good?, 10 J.

ON

T

ELECOMM

. &

H

IGH

T

ECH

. L. 251 (2012).

2015]

T

HE

R

IGHT

[A

PPROACH

]

TO

P

RIVACY

123

day’s debate about privacy is part of a long-running discussion about the

meaning and proper legal protection of privacy in the face of commercial

technological change. Earlier periods within this discussion reveal important

concepts that offer lessons for current analysis. For instance, Warren and

Brandeis established the need for personal privacy in the 1890s; the Federal

Trade Commission showed the risk of undisciplined enforcement with its

early failed attempts to expand its competition mandate to reach consumer

protection issues; the debate over credit reporting practices in the 1960s and

legislation like the Fair Credit Reporting Act of 1970 (FCRA) created a poten-

tially instructive path for balancing reasonable privacy protections with new

commercial technology that uses personal information; and, finally, the re-

view of mergers in data-driven industries by federal antitrust agencies demon-

strated how valuable personal data can have competitive significance and is

susceptible to antitrust analysis using existing empirical tools.

9

We explore these events for insights into the best role for the antitrust and

consumer protection authorities in the United States in dealing with ongoing

concerns about privacy. From this historical analysis we derive three factors

to approach privacy concerns under the right analytical framework. First, the

character of the harm—whether it is commercial, personal, or otherwise—is

paramount to the analysis and helps identify the right legal approach to the

conduct. For example, conduct that creates harm by reducing economic effi-

ciency is likely best resolved under the antitrust laws. Second, if the potential

harm undermines the terms of the particular bargain between a company and

an individual consumer, the solution is less likely to lie in competition law

than in consumer protection or another area of law. Third, the remedy availa-

ble under the law must be able to address the problem effectively and effi-

ciently. The appropriate body of law will be the one that offers remedies best

calibrated to address the identified potential harm.

10

This article proceeds in three main parts. We begin with the historical de-

velopment of privacy protections in the United States and the tension between

9

See, e.g., Press Release, Statement of the Department of Justice Antitrust Division on Its

Decision to Close Its Investigation of the Internet Search and Paid Search Advertising Agree-

ment Between Microsoft Corporation and Yahoo! Inc. (Feb. 18, 2010), available at

www.justice.gov/atr/public/press_releases/2010/255377.pdf; Press Release, U.S. Dep’t of Jus-

tice, NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandon Their Proposed

Acquisition of NYSE Euronext After Justice Department Threatens Lawsuit (May 16, 2011)

[hereinafter DOJ NASDAQ/NYSE Release], available at www.justice.gov/opa/pr/2011/May/11-

at-622.html; Standfacts Credit Servs. v. Experian Info. Solutions Inc., 294 Fed. App’x 271, 272

(9th Cir. 2008) (noting relevant market consisting of wholesale credit data).

10

For example, blocking a merger of two companies with large consumer datasets solely to

protect privacy under the competition laws may not be the right approach because those compa-

nies could still enter a data-sharing arrangement that could subvert the intent of the enforcement

action. Rather, it may be more prudent to monitor the merged entity’s subsequent treatment of

consumer data and ensure it is keeping its promises under its privacy policies.