Giving consumers explicit rights to control their data will help tame the growing power of tech giants such as Google and Facebook, the Productivity Commission says.
Addressing The Australian Financial Review Innovation Summit in Sydney on Tuesday, commissioner Stephen King said the size, reach and market power of internet platforms were testing the limits of competition law.
That law was developed to police traditional business models, where even traditional platform businesses – such as that of media – were typically constrained by some factor, such as geography.
“The internet has raised the size and reach of these platform businesses. They sit uncomfortably with competition laws that are designed for vertical production chains,” Dr King said.
He argued that the power of platforms has been further entrenched by platform features such as “positive feedback” (where friends join a platform such as Facebook because their friends are already on it) and “zero pricing” (where consumers are drawn to using big platforms because they don’t cost anything).
But even more important is the data that consumers provide to use platforms.
“This consumer data can be used by the platform to create value. This may enhance the customer’s experience, for example when an e-book or music streaming platform provides better recommendations to a customer.
“But it can also create more targeted advertising, raising the benefit to advertisers, and allowing the platform to raise advertising revenues,” Dr King said.
“Data can also indirectly raise the value of a platform to a consumer. For example, Google’s internet search platform uses the data from consumers’ searching to update and improve its search results. This feedback makes it difficult, if not impossible, for a new entrant in search to catch up with Google.”
Dr King argued that the Consumer Data Right, which has been developed on the back of 2017 Productivity Commission report into data availability and use, will help solve some of these competition problems.
The regime will first be applied to the banking sector under the new open banking regime, before being extended into other parts of the economy.
Dr King said the ability for consumers to release their banking data to other institutions or to the client themselves would help solve “the basic competition problem relating to data – to ensure that a consumer’s data is being used in their interest, not against their interest”.
“The consumer data right allows the consumer to both access their relevant data and to transfer that data to competitors that they choose.
“It also addresses the issue of ‘lock in’. The consumer is no longer locked into their current provider simply because that provider has their data.”
But importantly, consumers will not have a right to delete their data – as such, the regime creates a shared data right.
“Again, this is important to make sure that businesses who legitimately compete with consumer data are not undermined.
“For example, in banking, consumer data is aggregated for use in broad credit modelling. If consumers could remove specific data from these models, even though the data in the models is de-identified, then the validity of these models could be undermined.
“Consumers have a right to the data they need to encourage competition but firms retain the right to use aggregated data sets to make better business decisions.”