Ohio State law professor Peter Swire has just published his testimony to the Federal Trade Commission about the Google purchase of DoubleClick. He calls it Protecting Consumers: Privacy Matters in Antitrust Analysis.
Protecting Consumers: Privacy Matters in Antitrust AnalysisBy Peter Swire
October 19, 2007
Executive Summary
As search and online advertising giant Google seeks to merge with online advertising leader DoubleClick, the debate has been greatly confused about how privacy issues fit into antitrust analysis. This testimony draws on my experience both as a professor of antitrust and privacy law. It explains as a general matter how privacy harms are relevant to antitrust analysis.
In brief, privacy harms can reduce consumer welfare, which is a principal goal of modern antitrust analysis. In addition, privacy harms can lead to a reduction in the quality of a good or service, which is a standard category of harm that results from market power. Where these sorts of harms exist, it is a normal part of antitrust analysis to assess such harms and seek to minimize them.
These sorts of privacy harms have not historically been important in antitrust analysis. For a clothing merger, higher prices and lower quality of clothing are relevant harms to consumers. For an auto merger, it is the price and quality of cars. But for a merger that combines world-class databases, the way customer data is used after the merger becomes relevant. This testimony uses examples from the proposed merger to illustrate how a merger or dominant firm behavior might reduce consumer welfare or product quality.
The analysis here shows why it is logical to consider privacy remedies as part of merger analysis. Traditional antitrust analysis examines a proposed merger and often sets conditions on approval—the merger can proceed for aspects that create consumer welfare, but cannot proceed for aspects where harms outweigh the benefits. Where consumers suffer from lower product quality and reduction of consumer welfare, such as through privacy harms, it thus is logically consistent to consider merger conditions that address privacy harms.
This testimony does not make any recommendation about the pending merger proposal of Google and DoubleClick. Instead, it seeks to address a fundamental intellectual issue in the FTC's examination of online behavioral profiling—how, as a general matter, privacy fits into the antitrust analysis of industries that depend on intensive use of consumer information.
Please read the whole thing and post comments here. Peter is a really brilliant legal thinker and he clearly sees stuff here that I had not considered.
I am working on a privacy section that I hope will make it into the book. I will post it in a week or two. Meanwhile, please let me know what you think of Peter's argument.
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Comments (4)
Swire never comes and spells out the apparent reduction in "quality" that will come due to the merger. Conventional wisdom would say that the directly observable quality of ads shown online would improve if more targeting information is available and used. Swire never says how reduced privacy leads to loss of quality.
To quote:
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If the merger is approved, then individuals using the market leader in search may face a search product that has both "deep" and "broad" collection of information. For the many millions of individuals with high privacy preferences, this may be a significant reduction in the quality of the search product—search previously was conducted without the combined deep and broad tracking, and now the combination will exist. I am not in a position to quantify the harm to consumers from such a reduction in quality.
My point instead is that this sort of quality reduction is a logical component of antitrust analysis. Before a merger, a consumer may be able to surf subject to one level of tracking, kept in a database of one magnitude. After the merger, doing a search or doing other surfing may carry with it a significantly higher level of tracking, in a larger database. To the extent that is true, then antitrust regulators should expect to assess this sort of quality reduction as part of their overall analysis of a merger or dominant firm behavior. [11]
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He might as well have said "I don't know".
/A
I'm watching this GoE book with particular interest since I'm still on the fence about whether to usher my sense of alarm in this direction. I use Google's services, so obviously I'm not in panic mode yet.
A couple of questions about the privacy concerns, and excuse my technical naivete in this area-
1. how much of these privacy concerns can be addressed through user behavior, ie: blocking certain and deleting all cookies regularly?
2. isn't targeted advertising a gift? We complain about those expensive, interruptive mass-media commercials, billboards etc - whose tactic is simply to be as loud as they can to the most number of people in hopes of catching the attention of the right ones, and to that end, their ads employ psychological techniques meant to change entire cultures and avenues of intellectual development. Should we dare ask the question, "how can we better help Google etc. offer better targeted ads to us"?
3. as far as IP privacy, how hopeful are we about projects like EFF's Tor, and isn't this a better tactic, ie: encouraging the development of technical counter-measures instead of standing in the way of others?
Again, I'm not dismissing the call to alarm over Google's growing influence and power. An article like the one excerpted here - "for [certain people] this [may be bad]...[but I don't know how much]" isn't likely to catch my attention, even, outside this blog. Legal naivete on top of technical perhaps...
I don't think it is necessary to spell out a reduction in "quality" in order to understand Swire's point, which includes, maybe more successfully (?), a discussion about consumer welfare. The harm that he is speaking of that would come to those with "high" and "medium" privacy concerns, I think, is real. Maybe not quantifiable, but real. Are privacy concerns a separate issue as Google would like to argue? I'm not sure, but I do know that there are many consumers who would be concerned enough to want assurance that their preferences were honored. I don't think that the potential "harm" to these consumers can simply be discarded.
The merger of the two databases (Doubleclick is the world's leading distributor of cookies and tracking technologies for the largest international companies) and Google's subsequent ability to leverage and mine the vast array of expanded user data across platforms (PC broadband, mobile, and eventually TV) will give Google a commanding lead as the key online monetization gatekeeper. The degradation will occur for users as Google's search and related services will be subtly shifted over time to better serve the Fortune 1000 type advertisers who are Doubleclick's client base. Better securing the business of these deep pocketed brands is at the core of Google's plans to expand its ad business. User privacy should be addressed when the two leading online marketing companies merge. I urge you to read the Electronic Privacy Information Center complaint filed at FTC asking them to block or condition the merger unless user privacy is protected. My group is a signatory to that complaint: http://www.epic.org/privacy/ftc/google/
Jeff Chester
Center for Digital Democracy
www.democraticmedia.org