Regulating the Data Economy is Essential (part 2)

continued from part 1

The last point brought out by the British weekly is that cases like Snapchat are indicative that the competition in the digital economy is still in good health, and that a new player is still able to challenge the duopoly. Obviously, the digital economy lowers important barriers to entry, and allows a new company to become giant in record time. I think that this reasoning, being totally true, does not mean that the position of leadership allows the giants to analyze their precious data, and know when a newcomer is a serious threat to their future.

We must  strive to promote healthy and balanced competition, and the data of the users are at the epicenter of the matter. In spite of the above arguments, the British economic weekly also arrives at this conclusion, but it is less pressing, citing (in my opinion rightly) that the old ways of thinking about free competition are out of date when we start talking about the ” data economy .”  I’m in total agreement on all this, but there is still a growing need for regulation of data that. Regulation that is completely absent today.

In the online world, data only attracts more data, further reinforcing dominant market positions, since data is the great source of power. That is why the projection to the future, even under the prism of the old laws of competition, only points to a future of mass concentration that, I can not deny, implies obvious risks.

And what can be done to regulate the data economy?

To try to outline at least one possible solution, we must first consider the current problems that we are facing. Putting ourselves in the place of the competition authorities, the main problem I’m currently seeing is the same one that I have mentioned several times in previous articles – data is an important asset. Therefore, the potential regulation starts with the great disadvantage that it must be enlightened when the power of the data already surpasses that of many other assets. It is a regulation that is late, because the authorities have not been able to address the issue before with the radical change of approach that was required. It is not that technological advances are “catching” the legislation officials offguard. We’ve known tihis for quite some time.

The second order problem that lies behind this fact is that, since until recently we have not accepted that the data is an asset, there are currently not even sketches of valuation models of data assets. The purpose would be to use them as one more indicator to help determine if a merger or acquisition needs to be evaluated by the competition authorities.

To evaluate a merger or acquisition, the competition authorities should take into account all the assets of the companies affected, and of course also including the data as part of those assets. Right now the authorities do not know how to value the data, but moreover, it is difficult for them to get to know it in the current legislative and market context, since the data doesn’t have a public market price.

Only the companies that treasure that data know what they are worth, and it is not easy to reveal it with transparency because it is a factor with a highly strategic component. Therefore, the Economist proposal to weigh the data as part of the valuation that companies make of the acquired company seems to be a good indicator, as when Facebook paid 2 billion for Whatsapp, even though the company had no revenue to speak of.

The second main line that The Economist points out is that it is necessary to regulate the amount of transparency in the sector regarding data, not only in terms of privacy, but also in terms of being aware of what data is collected about us, and how it benefits the companies that collect them.

Additionally, they propose that governments publish certain information about citizens. It is a good starting point but I would go further. Data should be regulated to the point where the user is the owner of their data. Technologies such as blockchain lay the foundations to implement this approach, in addition to providing a veracity that would benefit both parties.

I believe that it would be a good initiative to declare certain data of public interest, in order to encourage competition and innovation by new players, and that it is what each company draws from this data of public interest that separates the wheat from the chaff. The raw data that we provide shouldn’t be owned by a company just for having used a free app, this data does not really belong to the company but rather to the user.

One could even think of allowing this new data model to be exploited for a few years in exclusivity by the company that produced it, until it is also automatically classified as public utility, after a predefined period fixed by law, as is the case, for example, with patents in the pharmaceutical industry before the medicine is made generic.

In conclusion, it is one thing to regulate what is not necessary, and quite another to regulate crucial matters such as the value that our data bring as assets to a company. It’s about time our politicians stepped up to the plate.

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