Current Legal and Economic Problems of Privacy Protection, Data Sharing, and Market-Opening in the Digital Economy

• Published date: 01 December 2023
• DOI: http://doi.org/10.1177/0003603X231200938
• Author: Hans-Bernd Schäfer
• Date: 01 December 2023
• Subject Matter: Articles

https://doi.org/10.1177/0003603X231200938

The Antitrust Bulletin

2023, Vol. 68(4) 641 –656

© The Author(s) 2023

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DOI: 10.1177/0003603X231200938

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Article

Current Legal and Economic Problems

of Privacy Protection, Data Sharing,

and Market-Opening in the Digital

Economy

Hans-Bernd Schäfer*

Abstract

This paper is dedicated to my esteemed colleague Richard S. Markovits. It deals with ownership of

data and with alternative methods to regulate Internet platform providers. It rejects the view that the

subjects of information should have ownership rights over their personal data, which extend beyond

what is necessary for privacy protection. Also, data controllers should not have an exclusive ownership

right but share anonymized data with competitors. Even though the wealth of data harvested and

stored by Internet firms are only weakly protected by trade-secret law, this together with effective

encryption technologies develops into an exploitative de facto property over information, if effective

market opening rules do not exist. The paper shows that the rule of abuse of dominant position of

traditional competition law could not sufficiently check unfair trade practices of platform providers.

Its adjudication is information intensive and leads to overly lengthy and costly proceedings. The Digital

Markets Act of the European Union drew a radical conclusion from these experiences and regulates

the biggest Internet firms with simple per se rules, which are relatively easy to administer but less

flexible. Still, the Digital Markets Act should be welcomed as an important step forward.

Keywords

Property of data, abuse of dominant position, Internet platforms, Digital Markets Act, rules versus

standards

I. Introduction

The competences over the use and transfer of “big data” by the subjects of information of Internet

users, by the controllers of information, who harvest and store the big data, and by other firms, which

transact or compete with the data controllers, are the subject of this paper. The Internet users produce

valuable personal data when they browse, shop, sell, or communicate on the Internet. They do not own

their personal data, but public law protects their privacy. Individual autonomy implies that they can

transfer their rights from privacy protection against a consideration. The controllers of the information

*Affiliate Professor of Law and Economics, Bucerius Law School, Hamburg, Germany; Prof. Em. of Economics, University of

Hamburg, Hamburg, Germany

Corresponding Author:

Hans-Bernd Schäfer, Affiliate Professor of Law and Economics, Bucerius Law School, Jungiusstr. 6, 20355 Hamburg, Germany.

Email: hans-bernd.schaefer@law-school.de

1200938ABXXXX10.1177/0003603X231200938The Antitrust BulletinSchäfer

research-article2023

642 The Antitrust Bulletin 68(4)

are the Internet firms like Facebook, Google, Amazon, WhatsApp, Twitter, LinkedIn, and payment

media like PayTm and GooglePay. These platforms collect and store personal data about the users and

their activities and non-personal data. They have no property rights in these raw data and are only

weakly protected by trade secret law. But factually, their position comes close to de facto property

ownership. A third group contains firms that sell goods and services on digital markets or compete with

data controllers. As customers and competitors, they want to be protected against an abuse of the domi-

nant position of the Internet giants. As competitors, they want access to raw data for producing and

marketing new data sets for different purposes.

We first criticize the opinion that the subjects of information should have property rights in

“their own data” because they produced them. An ownership right in data for the subjects of infor-

mation can in our view not be derived from the Lockean labor theory of property, whose condi-

tions for the natural emergence of property rights are not met for the data of the subjects of

information. We highlight that the actual property right of the subjects of information results from

privacy protection, which is again based on fundamental human rights. Privacy protection is there-

fore unrelated to a labor input. It exists independently from economic efficiency consideration. Its

policy aim cannot justify a property right, which includes anonymized personal data. We share the

view that the prices for which the subjects of information waive their privacy protection are too

low and that a mandated transfer or brokerage might help to correct this. However, the transfer of

rights from privacy protection raises difficult problems of contract law, which do not arise in the

transfer of a copyright right.

Second, we criticize the data protection of the Internet firms, which harvest and store the personal

raw data from Internet users. They are protected worldwide by a trade-secret right, which is on its face

a weak, only contractual protection compared with a copyright or patent right. But effective encryption

technologies transform this into a de facto property right. We argue that no convincing economic argu-

ments for a strong intellectual property right exist to incentivize the data controllers to harvest more

personal raw data. Ideally, the treasure troves of anonymized raw data should be like a global common

because these data can never be overused. The raw data should be shared with others, who need them

to develop new data sets for commercial, political, medical, and scientific reasons. If the raw data are

not anonymized, they should be a similar to a common too, provided the subjects of information traded

off their privacy protection.

Third, we describe unfair and inefficient business practices of Internet firms and their effective

removal. Platforms with two-sided or multilateral users are often engaged in unfair practices vis-a-vis

their customers, who market products and use the services of Internet firms. These practices lead to

entry barriers for competitors or even to their removal from the market and to exit barriers for custom-

ers. Competition law tries to solve all these problems with the rule against the “abuse of a dominant

position.” We show that in Germany and in the European Union this legal norm failed to tame the

Internet giants and establish an efficient digital market. The main reason is that adjudicating this rule is

traditionally extremely information-intensive and costly. This led to procedures that lasted a decade or

more before courts could end a suspicious business practice, if at all. This sobering experience with the

Internet firms in courts triggered legal reforms of competition laws in EU member states (including

Germany) and to the enactment of the Digital Market Act in the EU. We show that this Act is a radical

reform, which has the capacity to drastically change the digital economy for the better. This author does

not know another example of a regulatory Act in which a present but not effective legal norm was

replaced with such far-reaching changes. Still, the Digital Markets Act, which relies almost totally on

crystal-clear legal commands and per se rules without allowing defenses, invites some critique, known

from the economic literature on legal rules versus legal standards. It lacks flexibility, gives too little

leeway to the European Court of Justice, and with rapidly changing market conditions needs probably

frequent legislative changes.