Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective

Nicholas Economides () and Ioannis Lianos ()
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Ioannis Lianos: Professor of Global Competition Law and Public Policy, Faculty of Laws, University College London, and Hellenic Competition Commission

No 21-02, Working Papers from NET Institute

Abstract: We discuss how the acquisition of private information by default without compensation by digital platforms such as Google and Facebook creates a market failure and can be grounds for antitrust enforcement. To avoid the market failure, the default in the collection of personal information has to be changed by law to “opt-out.” This would allow the creation of a vibrant market for the sale of users’ personal information to digital platforms. Assuming that all parties are perfectly informed, users are better off in this functioning market and digital platforms are worse off compared to the default opt-in. However, just switching to a default opt-in will not restore competition to the but for world because of the immense market power and bargaining power towards an individual user that digital platforms have acquired. Digital platforms can use this power to reduce the compensation that a user would receive for his/her personal information compared to a competitive world. Additionally, it is likely that the digital platforms are much better informed than the user in this market, and can use this information to disadvantage users in the market for personal information.

Keywords: personal information; Internet search; Google; Facebook; digital; privacy; restrictions of competition; exploitation; market failure; hold up; merger; abuse of a dominant position; unfair commercial practices; excessive data extraction; self-determination; behavioral manipulation; remedies; portability; opt-in; opt-out. (search for similar items in EconPapers)
JEL-codes: K21 L1 L12 L4 L41 L5 L86 L88 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2021-01, Revised 2021-01
New Economics Papers: this item is included in nep-big, nep-com, nep-ict, nep-law and nep-pay
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Citations: View citations in EconPapers (6)

Forthcoming, Journal of Competition Law and Economics

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Related works:
Working Paper: Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective (2020)
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