Data as an essential facility: Understanding the flipside

[By Khushi Saraf & Jhankar Katare]

The authors are students at National University of Juridical Sciences, Kolkata.

 

Introduction

In the modern digital era, data is of paramount importance, and getting access to data is quintessential to entering new markets. The holding and acquisition of data provide entities with the much-needed inputs they require to provide their services more efficiently and effectively. Access to data can enable the reduction of search costs, reduce entry barriers, and allow for easy entry and expansion into markets. With the ever-increasing importance of data in the survival of smaller entities, data has come under the lens of the essential facilities doctrine. Competition authorities across jurisdictions are criticising the practice of refusing to share data with competing entities.

On the flip side, refusal to share data may not be competitive in every case. The availability of data on a large scale and its replicability suggests that not all data gives one a competitive advantage.  Against this backdrop, the present article explains the concept of the essential facilities doctrine (“EFD”). It has also sought to analyse the concerns associated with the refusal to share data by bringing it under the lens of the EFD. The last leg suggests that every kind of data may not fall under the ambit of EFD.

Essential Facilities Doctrine

The EFD propounds that monopolists must provide certain inputs that are essential to competition. A facility is considered essential if it is impossible or difficult to duplicate owing to technological, economic, geographic, or legal constraints. EFD doctrine has not been explicitly defined in India, but its development can be traced through various case laws in India and other jurisdictions. EFD is seen to be a subset of ‘refusal to deal’ cases. The doctrine can be seen as a limitation to the general rule that a firm is not obliged to share its resources with other firms. Further, EFD may be applied to §4(2)(c) of the Competition Act, 2002, which prohibits those practices that result in the denial of market access.

Because no court in India has delved into the idea of data being an essential facility, the EU jurisprudence is worth noting.

Is data an essential facility?

For data to be considered ‘essential data’, i.e., data essential to competition, it must fulfil the same criteria as essential facilities. There must be a predominant monopoly over the data, it should be indispensable and irreplicable, and there must be a justified reason for denial of access due to the viability of the data. The applicability of EDF has been reviewed in the EU Commission Report, which states that data can be considered essential for competition under the purview of Article 102 TFEU. Whether data can be ‘indispensable’ is a heavily impugned topic.

Owing to its non-competitive nature, many question the applicability of EFD to data. This is furthered by the opinion that the monopolisation of data by one dominant position in the market does not prevent competitors from gathering equivalent data from other sources. There are also cases where data can be exclusive for contracts or database secrecy, giving the monopolist the right to deny access. The irreplaceability of data is contingent on the type and relevance of the data. In Telefonica UK/Vodafone UK/Everything Everywhere/KV, the Commission held that even though joint ventures can process more consumer data, it doesn’t hinder the competitor’s ability to collect equivalent data from substitute comparable resources. A recent joint report published in 2016 by France and Germany analysing the essential characteristics of the data-driven sector stated that EFD is only applicable in cases where the data is truly distinctive and unique, and the competitors are stopped from performing their services due to its absence.

The second aspect requires that for the facility to be essential to competition, it is pertinent that other firms cannot compete without it, and the firm having access to the facility can easily eliminate competition. In online markets, data can be deemed to be essential because it helps in creating positive feedback loops, as access to large data troves guides the investments that an entity makes. For instance, data analysis enables targeted advertisements and improves the efficiency of the services offered, which in turn increases the profits of a company. Some have opined that the elimination of competition’s indispensability shares a cause-and-effect relationship. Notably, in the recent Microsoft I judgment the criterion was rephrased as ‘eliminates all effective competition’. The need arises due to the fact that Microsoft does not eliminate all competition in secondary market spaces even though being a 60% stakeholder, failing the criterion of eliminating all competition.

The last criterion is ‘objective justification’ for the denial of access, which may include the capacity of platforms exceeding its limits, the impossibility of supply, and consumer welfare. The justifications used may depend on various requirements but there are no intrinsic vices that stop the application of this criterion to essential data.

Not all data is an essential facility

Data sharing and the refusal to share data is a relatively new area in competition law, which has received attention only in the recent past, ergo there is a dearth of applicable laws and guidelines. For this reason, data as an essential facility ought to be analysed on a case-by-case basis. Not all data falls under the purview of EFD. For instance, in the EU cases of Google/ Doubleclick and Facebook/ Whatsapp, the Commission, despite acknowledging the importance of the data troves held by the big firm, held that access to that data would not impact competition negatively or provide an added advantage. Furthermore, the relevance of data depends on the product-market in question, and it may be different in different markets. This implies that not all kinds of data is indispensable to competition, and it is solely dependent on the circumstances in the relevant market.

Additionally, in the Telefónica UK/Vodafone UK/Everything Everywhere case, the Commission opined that consumers share their data with multiple platforms. This again points to the fact that certain data sets may be duplicable, so it may already be present with the competitors, and hence they fail to fall under the ambit of EFD. Further, since data is non-rivalrous in nature, it can be simultaneously collected by several entities. Moreover, data collection being inexpensive, and certain data sets being abundant and short-lived does not render them irreplicable and indispensable. Alternatively, studies have shown that there may exist partial substitutes for data sets that may help competing firms improve their services. Hence, it can be aptly said that not all cases of data sharing can fall under the EFD, and each case differs depending on the merits.

In the Indian context, judicial opinion on essential data does not exist. In the case of Re: National Restaurant Association v. Zomato, NRAI had alleged that online food delivery platforms like Swiggy and Zomato were liable for anti-competitive conduct by engaging in data masking. As a result of this, restaurant partners were denied access to consumer data, which could have been used by them to their business advantage. They also raised concerns regarding lack of transparency. This case could have marked the inception of legal discourse in India with regard to EFD, however, the Competition Commission of India did not give any decision on data masking. Hence, data as an essential facility remains a moot point in Indian jurisprudence.

Conclusion

While it is true that not all types of data falls under the EFD, one should not rule out the possibility that some kinds of data sets may be able to fulfil the requirements of the EFD. The application of EFD to data is complex in various ways, as there exists a gap in case laws, precedents, statutes, or judicial authorities to govern essential data. This issue is relatively new and needs to be dealt with on a case-to-case basis, depending on the type of data in question. Herein, the recent Competition Amendment Act, of 2023 also fails to deal with concerns around data. Ergo, considering the contemporary importance of data in competitive markets, the authors suggest that the idea of data as an essential facility needs to be addressed either by the Parliament or the Competition Commission of India.

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