Let Privacy Features Compete: A Competition Approach to Privacy Regulation
The digital economy has made consumer data a central consideration in all kinds of consumer transactions. The digital economy “runs on data,” so to speak, although claims that data is “the new oil” fall short of the mark.
Various digital services employ data to improve ad targeting, search, and artificial intelligence. In some kinds of services (e.g., search or social-media platforms), products and services are “free” (i.e., consumers don’t pay an explicit monetary price) and it is often explained that they “pay with their data.” This phenomenon, in turn, has brought privacy to the center of various public-policy discussions.
Critics of so-called “big tech” argue that the global platforms’ data-collection practices go beyond traditional market exchange, and amount to a form of consumer exploitation. In “The Age of Surveillance Capitalism,” for instance, Shoshana Zuboff contends that the dominant tech firms are imposing “economic oppression” through the unilateral extraction and commercialization of personal data.
In response to both real privacy risks and hyperbolic criticism, jurisdictions around the world have embraced comprehensive privacy regulations, often inspired by the European Union’s General Data Protection Regulation (GDPR). These rules aim to protect personal data by imposing far-reaching obligations on firms that collect or process it.
While well-intentioned, these rules impose significant costs on firms, and both harm competition and consumers. This approach, which we may call “privacy absolutism,” fails to recognize an important economic dynamic: privacy is not just a right to be protected, but also a vector of competition.