Online Platforms and Market Power, Part 3: The Role of Data and Privacy in Competition

Chairman Cicilline, Ranking Member Sensenbrenner, and Members of the Committee:

Thank you for the opportunity to testify on the important topic of online platforms and market power. I am professor of the practice of economic policy at the Harvard Kennedy School where I focus on a wide range of economic policy issues. I recently chaired the Digital Competition Expert Panel for the UK government that produced a report titled Unlocking digital competition. I am currently advising the UK as they move forward with a key set of recommendations from this report, including the establishment of a Digital Markets Unit to act as a pro-competition regulator. Many of the recommendations in our report are applicable to the United States and I appreciate the opportunity to share some of those ideas with you today.

In my testimony today I will make four points:

1. The major digital platforms are highly concentrated and, absent policy changes, this concentration will likely persist with detrimental consequences for consumers.
2. More robust competition policy can benefit consumers by helping to lower prices, improve quality, expand choices, and accelerate innovation. These improvements would likely include greater privacy protections given that these are valued by consumers. However, it is not clear that competition will be sufficient to adequately address privacy and several other digital issues.
3. More robust merger enforcement should be part of the solution to expanding competition, including better technical capacity on the part of regulators, more forward-looking merger enforcement that is focused on potential competition and innovation, and legal changes to clarify these processes for the courts.
4. A regulatory approach that is oriented towards increasing competition by establishing and enforcing a code of conduct, promoting systems with open standards and data mobility, and supporting data openness is essential. This is because more robust merger enforcement is too late to prevent the harms from previous mergers and antitrust enforcement can take too long in a fast moving market.

I also want to recommend to the Committee the recommendations in the recent report by the University of Chicago's Stigler Center Committee on Digital Platforms on the economy and market structure, many of which dovetail with the suggestions in the report I chaired and with the recommendations in my testimony today.