Is Loss of Privacy the Price that Consumers Pay for Otherwise Free Online Services?

One of the consumer harms from monopoly online platforms commentators point to is the loss of privacy. That is, privacy is a dimension over which platforms complete, and lack of competition has generated low levels of privacy. However, some view serious difficulties in bringing actions when the anticompetitive effect relate to quality instead of price. Thus, some commentators have argued that loss of privacy should be thought of as a price that consumers pay for otherwise free services. Here I argue that the difficulties in analyzing competition over quality are likely easier to overcome than most think. I show that at the profit-maximizing level of privacy consumers will generally prefer more privacy to less even with the worse advertising matches that would result. I also show in the merger context how to quantify the anticompetitive effects in quality without the need to specifically measure quality.  

By Keith Waehrer¹

I. INTRODUCTION

The intersection of online privacy policy and antitrust enforcement has received significant attention recently. Commentators approach the subject from at least three different angles. For some, concerns over privacy should play no part in the enforcement of competition laws. For those commentators, if anything, privacy concerns are primarily consumer protection problem rather than the purview of competition laws.²

Another group of commentators see privacy as a potential concern of competition laws but see privacy as a dim