(1) “A Technical Fix for Opt-out (1) “A Technical Fix for Opt-out Cookies”Cookies”

(2) “Privacy and Antitrust”(2) “Privacy and Antitrust”

Professor Peter SwireProfessor Peter SwireOhio State UniversityOhio State University

Center for American ProgressCenter for American ProgressBerkeley & Santa Clara Conference Berkeley & Santa Clara Conference

on Online Advertisingon Online AdvertisingApril 18, 2008April 18, 2008

A Current IssueA Current Issue Swire & Anton comments to FTC last week on Swire & Anton comments to FTC last week on

technical issues in behavioral advertisingtechnical issues in behavioral advertising FTC “Consumer Control Principle” – consumer FTC “Consumer Control Principle” – consumer

choicechoice New consumer poll on how important to be able to New consumer poll on how important to be able to

choose to opt out:choose to opt out: 63% rate 10 out of 1063% rate 10 out of 10 84% say 8 or higher84% say 8 or higher

Industry (NAI) says need consumer choiceIndustry (NAI) says need consumer choice But, the tool for choice is the opt-out cookie, and But, the tool for choice is the opt-out cookie, and

it’s brokenit’s broken

Not a Good Thing for ChoiceNot a Good Thing for Choice

Monday I opt out of tracking, using an opt-Monday I opt out of tracking, using an opt-out cookieout cookie

Tuesday anti-spyware software deletes all Tuesday anti-spyware software deletes all cookiescookies

Wednesday I am being tracked againWednesday I am being tracked again

Another Bad Thing for ChoiceAnother Bad Thing for Choice

Monday I opt out of trackingMonday I opt out of tracking Tuesday I delete “all cookies”Tuesday I delete “all cookies”

Browser software now deletes the opt-out Browser software now deletes the opt-out cookiescookies

Wednesday I’m being tracked againWednesday I’m being tracked again

What to Do About ItWhat to Do About It

Our comments to FTC explain simple Our comments to FTC explain simple technical fixes for anti-spyware & browser technical fixes for anti-spyware & browser softwaresoftware

We acknowledge problems with opt-out We acknowledge problems with opt-out cookie approach, but that’s the technically cookie approach, but that’s the technically feasible & scalable approach nowfeasible & scalable approach now

If don’t do the technical fix, then industry & If don’t do the technical fix, then industry & the FTC aren’t meeting their “consumer the FTC aren’t meeting their “consumer choice” goalchoice” goal

Antitrust & Privacy: The Basic Antitrust & Privacy: The Basic IdeaIdea

Basic idea:Basic idea: Price competition is part of antitrustPrice competition is part of antitrust Non-price competition is part of antitrustNon-price competition is part of antitrust Privacy can be a form of non-price Privacy can be a form of non-price

competitioncompetition All 5 FTC Commissioners recognized this idea in All 5 FTC Commissioners recognized this idea in

the Google/DoubleClick opinionthe Google/DoubleClick opinion So, privacy considerations will be part of So, privacy considerations will be part of

antitrust analysis going forwardantitrust analysis going forward

Intro on Privacy & AntitrustIntro on Privacy & Antitrust

• My background – teach antitrust & law My background – teach antitrust & law review draft on this for Junereview draft on this for June

• Other arguments for how privacy matters to Other arguments for how privacy matters to antitrustantitrust– Sen. Kohl: privacy and be skeptical of bignessSen. Kohl: privacy and be skeptical of bigness– Rotenberg: privacy as fundamental rightRotenberg: privacy as fundamental right– Microsoft last fall: beware of exclusionary Microsoft last fall: beware of exclusionary

conductconduct• My approach: privacy as form of non-price My approach: privacy as form of non-price

competitioncompetition

History of Privacy & AntitrustHistory of Privacy & Antitrust

• Traditionally, mergers were for productsTraditionally, mergers were for products– Exxon/MobilExxon/Mobil– Beer manufacturersBeer manufacturers– Etc.Etc.

• Information about individuals was not a Information about individuals was not a major factor in the mergersmajor factor in the mergers

• Practices about personally identifiable Practices about personally identifiable information were not a major factor in the information were not a major factor in the businessesbusinesses

My Approach:My Approach:Privacy as Non-Price CompetitionPrivacy as Non-Price Competition

NY Times May 2007: “Strictly speaking, privacy NY Times May 2007: “Strictly speaking, privacy is not an antitrust issue”is not an antitrust issue”

Swire testimony for FTC Town Hall in October, Swire testimony for FTC Town Hall in October, 2007, online at americanprogress.org2007, online at americanprogress.org

The basic idea:The basic idea: Privacy can be an important aspect of competitionPrivacy can be an important aspect of competition Where it is, then a merger or other practice can Where it is, then a merger or other practice can

reduce competition, triggering antitrust scrutinyreduce competition, triggering antitrust scrutiny

Price and Non-PricePrice and Non-Price

Traditional focus on price competitionTraditional focus on price competition Would G/DC merger affect prices of online Would G/DC merger affect prices of online

advertising?advertising? Longstanding antitrust attention to non-price Longstanding antitrust attention to non-price

competitioncompetition Imagine an agreement not to compete on Imagine an agreement not to compete on

warrantieswarranties Or, a merger where competition on warranties Or, a merger where competition on warranties

would be greatly reducedwould be greatly reduced On those facts, there would be an antitrust injury to On those facts, there would be an antitrust injury to

consumersconsumers

Non-Price and QualityNon-Price and Quality

• DOJ 2001 speech where price is “synecdoche”DOJ 2001 speech where price is “synecdoche”– Price stands for the full range of issues that can Price stands for the full range of issues that can

affect competition in a marketaffect competition in a market– Quality of a product one example, such as if quality Quality of a product one example, such as if quality

of shirts would decline due to mergerof shirts would decline due to merger• Privacy as quality of a product or servicePrivacy as quality of a product or service

– One quality of a service, such as surfing the net, is One quality of a service, such as surfing the net, is whether it is high-surveillance or low-surveillancewhether it is high-surveillance or low-surveillance

– Consumers who care about privacy are harmed if Consumers who care about privacy are harmed if there is less competition on privacy, and privacy there is less competition on privacy, and privacy protections declineprotections decline

2 Key Questions2 Key Questions

Is privacy a non-price factor (a quality of a Is privacy a non-price factor (a quality of a product or service) that is important to product or service) that is important to consumers?consumers?

Will the merger or other action reduce Will the merger or other action reduce competition in privacy, creating antitrust competition in privacy, creating antitrust injury to consumers?injury to consumers?

Does Privacy Matter?Does Privacy Matter?

Quite possibly yesQuite possibly yes Personal information practices – privacy & Personal information practices – privacy &

security – clearly more important in the security – clearly more important in the information economyinformation economy

Westin surveys consistently show:Westin surveys consistently show: ““High privacy concern” group at 25-40 %High privacy concern” group at 25-40 % Large “medium privacy concern” group as wellLarge “medium privacy concern” group as well

For these diverse consumer preferences, there is For these diverse consumer preferences, there is competitive advantage to having a good privacy competitive advantage to having a good privacy reputationreputation

Competition in Privacy?Competition in Privacy?

Again, often yesAgain, often yes Search privacy 2007-08:Search privacy 2007-08:

Google announcement on deleting logsGoogle announcement on deleting logs Microsoft announcement on logs & other Microsoft announcement on logs & other

issuesissues Ask announcement of AskEraserAsk announcement of AskEraser

This is evidence of competition on privacy, by This is evidence of competition on privacy, by major players, in a major marketmajor players, in a major market

What Implications for Antitrust?What Implications for Antitrust?

• Have just said:Have just said:– Privacy as potentially important non-price factorPrivacy as potentially important non-price factor– Evidence of competition on privacyEvidence of competition on privacy

• Clayton Act § 7, for mergers: “may substantially Clayton Act § 7, for mergers: “may substantially affect competition”affect competition”

• This is the logic of how a merger could reduce This is the logic of how a merger could reduce competition in privacy, affecting competition in a competition in privacy, affecting competition in a significant non-price waysignificant non-price way

– Could be reason to block a mergerCould be reason to block a merger– Or, place “conditions” on a merger, to assure no Or, place “conditions” on a merger, to assure no

harm to privacyharm to privacy

Current MergersCurrent Mergers

I have specifically not taken a position on the facts for I have specifically not taken a position on the facts for Google/DoubleClick or Microsoft/YahooGoogle/DoubleClick or Microsoft/Yahoo

I have done work for companies potentially affected by I have done work for companies potentially affected by these theories – the views here are mine, as an these theories – the views here are mine, as an academicacademic

My point – is part of the job for antitrust agencies to My point – is part of the job for antitrust agencies to look at privacy as a non-price aspect of competitionlook at privacy as a non-price aspect of competition The agencies receive confidential information & The agencies receive confidential information &

presentationspresentations Those on the outside thus don’t see critical Those on the outside thus don’t see critical

information on market definition and market effectsinformation on market definition and market effects

FTC Decision on FTC Decision on Google/DoubleClickGoogle/DoubleClick

Majority upheld Google/DoubleClick merger (4 votes)Majority upheld Google/DoubleClick merger (4 votes) It specifically referenced the approach here: “We It specifically referenced the approach here: “We

investigated the possibility that this transaction investigated the possibility that this transaction could adversely affect could adversely affect non-price attributes of non-price attributes of competition, such as consumer privacy.competition, such as consumer privacy.””

Accepted the analysis, but held the facts not thereAccepted the analysis, but held the facts not there Commissioner Harbour dissentedCommissioner Harbour dissented

She cited my testimony, saying antitrust law She cited my testimony, saying antitrust law should ensure competition “based on privacy should ensure competition “based on privacy protections or related non-price dimensions.”protections or related non-price dimensions.”

Second RequestsSecond Requests

Another important way that privacy may well Another important way that privacy may well become part of antitrust casesbecome part of antitrust cases

Commr. Harbour: companies seeking a merger in Commr. Harbour: companies seeking a merger in data-rich industries may receive detailed questions data-rich industries may receive detailed questions about privacy in “second requests”about privacy in “second requests”

Companies can thus expect to provide detailed Companies can thus expect to provide detailed answers and data about their privacy practices, and answers and data about their privacy practices, and how the merger will affect those practiceshow the merger will affect those practices A new role for the CPO in mergers & other A new role for the CPO in mergers & other

transactionstransactions

To RecapTo Recap

Significant, but limited, effects of privacy issues Significant, but limited, effects of privacy issues on mergers & other antitrust analysison mergers & other antitrust analysis

The significant effects:The significant effects: Unanimous FTC support for the idea that Unanimous FTC support for the idea that

antitrust law should examine whether any loss antitrust law should examine whether any loss of competition in privacy due to the mergerof competition in privacy due to the merger

Increased questions likely as part of mergers Increased questions likely as part of mergers about privacy practices, and thus a role for about privacy practices, and thus a role for CPOs as part of the antitrust due diligenceCPOs as part of the antitrust due diligence

Limits of This Antitrust Limits of This Antitrust ApproachApproach

• This approach fits within existing U.S. law, This approach fits within existing U.S. law, with focus on competition & antitrust injury with focus on competition & antitrust injury to consumersto consumers– Not treating privacy as a fundamental rightNot treating privacy as a fundamental right– Not a free-floating investigation into privacy Not a free-floating investigation into privacy

practicespractices• Section 7 looks to the effect of the mergerSection 7 looks to the effect of the merger

– If privacy practices are lousy, but unchanged If privacy practices are lousy, but unchanged by the merger, then antitrust authorities don’t by the merger, then antitrust authorities don’t interveneintervene

More to ExploreMore to Explore

• Issues for possible discussion:Issues for possible discussion:– How should we assess the likelihood that a How should we assess the likelihood that a

merger will reduce competition for privacy?merger will reduce competition for privacy?– How should we weigh possible harm to How should we weigh possible harm to

privacy felt by some consumers with possible privacy felt by some consumers with possible benefits to consumers from more intensive benefits to consumers from more intensive personalization?personalization?

– How well will antitrust agencies deal with How well will antitrust agencies deal with these privacy-based problems? Would the these privacy-based problems? Would the FTC do better at this than DOJ?FTC do better at this than DOJ?

• Let the debates beginLet the debates begin