Essential data.

• Author: Abrahamson, Zachary
• Position: Applying the essential facilities doctrine to data

Certain firms in the Internet economy may exclude competitors by refusing to deal data. Such conduct may impede innovation. But antitrust law lacks a coherent response to monopoly of data. This Comment proposes a policy inspired by duties to share. Over a century ago, courts devised an "essential facilities" doctrine that required monopolists to share inputs essential to competition with rivals. These inputs included phone lines and bridges. I contend that the essential facilities doctrine sometimes should require open access to data.

This Comment proceeds in two Parts. Part I describes the problems with data monopolies and provides an example of an essential data dispute. The Part goes on to explain the essential facilities doctrine and identify criticisms that led to the doctrine's rejection. It closes by describing an essential data claim. Part II contends that criticisms of the essential facilities doctrine attenuate when a dataset becomes the facility to which a rival seeks access.

1. ONLINE DATA AND ESSENTIAL FACILITIES

   Part I has three sections. Part I.A explains the role of data in the online economy and provides an example of an essential data claim. Part I.B introduces the essential facilities doctrine, as well as the doctrine's demise. Part I.C sets forth the elements of an essential data claim and situates the concept in commentary and precedent.

   1. Online Data

      Sometimes data cause disputes. A company called PeopleBrowsr faced one late in 2012. According to PeopleBrowsr, its service helped clients monitor and analyze conversations online and relied on data from a social network called Twitter. (1) PeopleBrowsr also claimed that it had used Twitter data for years. (2) But Twitter told PeopleBrowsr that the social network would revoke access to its data at the end of November 2012. (3) Twitter alleged that its business model had evolved. (4) According to PeopleBrowsr, Twitter thought the monitoring company no longer "fit." (5)

      PeopleBrowsr alleged that a Twitter shutoff "would [have] devastate[d] PeopleBrowsr's business." (6) So the company stated that it negotiated with Twitter for access. (7) PeopleBrowsr said that negotiations failed and then it sued. (8) Shutoff, PeopleBrowsr said, would violate California competition law. (9) "[Competition in the market for analysis of Twitter data" would founder and innovation in the data's use would slow. (10) Not so, Twitter said: shutoff preserved the incentives of entrepreneurs to innovate and violated neither California nor federal antitrust law. (11) Twitter, the company said, "has the right to control its data." (12)

      This Comment challenges that and similar claims. Refusals to deal data can help firms free ride on rivals' investments and maintain monopolies by excluding competitors. (13) But courts supply no consistent response to the antitrust questions that data pose: PeopleBrowsr and Twitter settled and PeopleBrowsr got access for about eight months. (14) Two software developers a decade apart sued online marketplaces for withholding data and got no answer on their antitrust claims. (15) The Federal Trade Commission in 2011 reportedly opened an inquiry into claims that Twitter hobbled a potential rival by revoking access to data. (16) The Commission never filed a complaint. (17)

   2. The Essential Facilities Doctrine and Its Critics

      Antitrust law generally preserves the "right[s] of trader[s] or manufacturer[s]" to choose the "parties with whom [they] deal." (18) But in "limited circumstances" a refusal to deal violates Section 2 of the Sherman Act, which prohibits monopolization. (19) Under the essential facilities doctrine, a duty to deal arises when a monopolist refuses to share inputs essential to competition despite the feasibility of doing so. (20)

      The essential facilities doctrine dates at least to 1912, when "a group of railroad operators obtained ... the only railroad bridges across the Mississippi River at St. Louis." (21) Because the "most extraordinary" topography of the region rendered it "impossible for any railroad company to pass through ... without using [the group's] facilities," the Supreme Court required that the group deal with outsiders on "just and reasonable terms." (22)

      The Supreme Court never adopted the essential facilities doctrine by name. (23) But lower courts and commentators drew on the doctrine. (24) The Court in (1972) made a power company share transmission wires with the company's rivals. (25) A decision of the Court a decade later required two ski mountains to continue offering a joint ticket after one sought to withdraw. (26)

      Today, little remains of the essential facilities doctrine. Commentators weakened the doctrine with three criticisms. First, monopolists could not extract additional profits from consumers by refusing to deal. (27) So efficiency and not exclusion likely motivated behavior scrutinized by the essential facilities doctrine. Second, the doctrine weakened incentives to compete: dominant firms would not erect infrastructure lest a court appropriate the investment for a rival's use. (28) Finally, the doctrine placed courts into the role of regulators, though they lacked the capacity to administer the sharing that the doctrine required. (29) These concerns held sway: the Supreme Court in 2004 denied "[]ever recognizing]" the doctrine of essential facilities. (30)

   3. Essential Data

      This Comment argues that a claim to essential data--data essential to competition--should require the same elements as a claim to an essential facility. First, the monopolist must control and deny access to the data that the plaintiff seeks. (31) Second, competition must fail without the data. (32) Third, the plaintiff must lack means to duplicate the data. (32) Fourth, the monopolist must have means to share the data. (34) Fifth and finally, an essential facility plaintiff must demonstrate the defendant's monopoly power in an antitrust market. (35)

      Several recent claims fit this description. One is Twitter's attempt to disconnect PeopleBrowsr, discussed at the beginning of this Part. A second relates to a 2000 dispute between eBay and Bidder's Edge, an aggregator of auction prices (36) : eBay, which reportedly controlled eighty-seven percent of auction traffic, (37) refused to deal with an ecosystem firm that made tools for users to access auction prices. (38) A third concerns a dispute that reached federal court in 2012 (39): Craigslist, a dominant provider of online classifieds, sued 3Taps, a start-up that obtained and shared data based on Craigslist's classifieds. (40)

      Each dispute started with data created by users of a monopolist's platform. Competitors could not duplicate the data because of network effects: each user who used the monopolist's platform made that platform more valuable to every other user. So no competing dataset emerged. For example, the set of messages that Twitter controlled faced no competition from a rival network: users who wanted to listen went where people were talking. The set of prices that eBay controlled faced no competition from a rival auction: sellers went where people were buying. (41) The disputes in each case involved refusals to deal monopolized inputs protected by barriers to entry. Those circumstances invite the application of the essential facilities doctrine. (42)

2. RESPONDING TO CRITICS OF THE ESSENTIAL FACILITIES DOCTRINE

   This Part contends that criticisms of the essential facilities doctrine attenuate when rivals invoke the doctrine against a defendant that has withheld data. Refusals to deal data may raise monopoly profits and lower consumer welfare. Essential data remedies benefit consumers without depriving innovators of incentives to invest. Finally, courts may administer access to data more easily than access to physical facilities.

   Data essential to competition--essential data--can exist when firms act alone or with others. (43) Courts have forced access in the latter case but not the former. (44) Firms that act alone may originate data or build platforms for others to originate data. Microsoft and Intel, for example, originated technical data (45) essential to competition in downstream markets. Marina Lao has argued for access to data in such a case. (46) This Comment extends the case for access to platforms: that is, to firms whose data monopolies derive from users who must originate data to consume the functionality that the firms' technology enables.

   1. Motive to Refuse

      Critics of the essential facilities doctrine begin by asking why monopolists would refuse to deal. Single monopoly profit theory holds that monopolists may extract monopoly rents from a market without selling to consumers. (47) Assuming there is a competitive market for the end product whose input the monopolist controls, monopolists may charge downstream firms one fee or royalty per product and thereby induce downstream firms to produce only the monopoly quantity. The monopolist could do no better if it sold to consumers itself.

      Data monopolists in emerging industries lie beyond this model. First, one dataset can supply zero or infinite final goods and services. When 3Taps gets data from Craigslist ads, 3Taps can serve that data to anyone who wants to see goods and services listed for sale on Craigslist's exchange. Second, a data monopolist may lack the ability to monitor the...