Can Antitrust Accommodate Privacy Concerns?

posted by Frank Pasquale

The proposed Google/DoubleClick merger has provoked a complaint from EPIC and concern from many privacy advocates. EPIC claims that Google’s standard M.O. amounts to a “deceptive trade practice:”

Upon arriving at the Google homepage, a Google user is not informed of Google’s data collection practices until he or she clicks through four links. Most users will not reach this page. . . . Google collects user search terms in connection with his or her IP address without adequate notice to the user. Therefore, Google’s representations concerning its data retention practices were, and are, deceptive practices.

One key question raised by the proposed merger is whether privacy concerns like these can be folded into traditional antitrust analysis. Peter Swire argues that they can; he believes that “privacy harms reduce consumer welfare [and] lead to a reduction in the quality of a good or service.” I am broadly sympathetic with Swire’s aims, but I worry that contemporary antitrust doctrine is too etiolated to encompass his concerns.

First, here is Swire’s perspective on how things may change for the worse for consumers after the merger:

Google often has “deep” information about an individual’s actions, such as detailed information about search terms. Currently, DoubleClick sets one or more cookies on an individual’s computers, and receives detailed information about which sites the person visits while surfing. DoubleClick has “broad” information about an individual’s actions, with its leading ability to pinpoint where a person surfs.

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.

Initial points of contention here include a) the definition of the products at issue and b) how to weigh the costs and benefits of a merger. The combined company would have different segments of “customers” in a multi-sided market:

1) searchers trying to find sites

2) ad-buyers trying to reach searchers

Swire argues that many people care about privacy, and “[i]t would be illogical to count the harms to consumers from higher prices while excluding the harms from privacy invasions—both sorts of harms reduce consumer surplus and consumer welfare in the relevant market.” But the web searcher category not only includes people who care about privacy, but also includes many people who don’t care. According to Eric Goldman’s work on personalized search, some may even consider the gathering of data about them to be a service. The more information is gathered about them, the more targeted ads to them may become. If you’re going to “pay” for a service by viewing ads, you may well be paying less if the ads bear some relation to things you might buy.

So while Swire models advertising and data collection as a cost to be endured, Google/Click is likely to say that “deep and broad tracking” (and the resulting ads) are a service to customers. Swire might respond that individuals hyperbolically discount future privacy protection for small monetary gains in the present, and that public policy should prevent that.

But in my view, privacy might better be considered an “irreducibly social good” than some quantum of enjoyment individuals trade off for money. As Sunstein and Frank suggested in their work on CBA and relative position, given the importance of positional goods in today’s society, people who trade off safety/privacy/etc. will likely “outcompete” peers who won’t do so. Though their work was inspired by health and safety regulations, its upshot applies equally well to privacy:

When a regulation requires all [individuals to purchase] additional [privacy], each . . . gives up the same amount of other goods, so no [one] experiences a decline in relative living standards. The upshot is that an individual will value an across-the-board increase in [privacy] much more highly than an increase in safety that he alone purchases.

A collective commitment to privacy may be far more valuable than a private, transactional approach that all but guarantees a “race to the bottom.”

Can contemporary antitrust accommodate such concerns? Many now believe that consumer welfare only takes into account allocative efficiency. For example, the DOJ was hard-pressed to adequately factor in a basic democratic commitment to diverse communicative channels during many media mergers. The FTC might find it equally difficult to address the political and cultural implications of search engines now.

But what if we shift from thinking of loss of privacy as a “cost” of web searching, to considering it as a reduction in the quality of the product of web searching? Swire quotes National Society of Professional Engineers v. U.S., to validate this consideration:

“The assumption that competition is the best method of allocating resources in a free market recognizes that all elements of a bargain: quality, service, safety, and durability – and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers” (435 U.S. 679, 695 (1978)). The Merger Guidelines, § 4, specifically mention “improved quality” among the possible effects of efficient market behavior, along with lower prices and new products

Here I think Douglas Kysar’s work on the product/process distinction may help Swire’s case. Kysar has claimed that consumers should have a right to make choices of products based on how the products are made, not just how well they work. Kysar argues “in favor of acknowledging and accommodating consumer process preferences within theoretical frameworks for policy analysis, given the potential significance that such preferences may serve in the future as outlets for public-regarding behavior.”

Admittedly, the valuation problems here might be difficult; how exactly are we to determine how much consumers are willing to pay to avoid privacy-eroding companies? But on the other hand, consider the array of incommensurables already entering into the decisionmaking process: the different markets for “Google/Click”’s products, the weighing of the value of potential new services against the potential diminution in quality of old ones, etc. Perhaps, as Heinzerling and Ackerman suggest in their book Priceless, we should stop even trying to pretend that these decisions can be made on anything approaching a quantitative basis. Or at least acknowledge that the numbers can be cooked in many different ways to produce a desired end result.

Perhaps consumer concerns like the ones Kysar raises can’t fit easily into contemporary antitrust analysis. But that might be one reason to establish a regulatory body that could take a more holistic view of the role of search in the contemporary economy–and to suspect any proposals to move from ordinary regulation to antitrust as the sole constraint on business conduct in certain fields.

One final point on the merger’s non-privacy implications: In our piece Federal Search Commission?, Oren Bracha and I briefly mention some complexities caused by Google’s purchase of YouTube. For example, does Google weight its merger with a company in its ranking algorithm? How well are YouTube’s rivals doing in searches on Google for videos? And how will DoubleClick’s current rivals do in search results for ad-serving companies after the merger? Just as Google wants the carriers to be open about how they manage traffic, it might be proper for Google to be transparent about exactly how its acquisition of a company affects that company’s position in its search results. As Google becomes the centralized clearinghouse of information about us, someone needs to be in a position to watch this watcher.

 October 23, 2007 at 11:00 am   Posted in: Antitrust, Culture, Cyberlaw, Economic Analysis of Law, First Amendment, Google & Search Engines, Intellectual Property, Philosophy of Social Science, Privacy, Technology    Print This Post

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