Consumer financial data and non-horizontal mergers

Summary

Focus

Access to data is a critical competitive factor within and beyond the financial system. Data access may be achieved through regulatory interventions, such as open banking, or through mergers. We assess how mergers among data-rich firms can impact competition, drawing on examples from the payments and technology sectors. We review how competition authorities are considering data in merger assessments, identifying limitations and proposing new metrics to support data valuation.

Contribution

We address a gap in research literature about the valuation of data in merger assessments. Specifically, we identify that data-rich mergers can impact competition, including by impeding innovation. In this light, our paper sets out potential metrics that competition authorities may apply to value data held by merging firms. We also identify potential policy tools to mitigate anti-competitive effects. The paper is a contribution towards further interdisciplinary research to support competition policy. 

Findings

We confirm that data access, combined with technological capability, can give a firm a competitive advantage. This can bring benefits for consumers, such as better targeted and better priced products and services. However, negative impacts can arise, for instance should a firm impede others from accessing data or from innovating based on novel data sets. These issues can be exacerbated where firms engage in data-rich mergers. Despite the growing relevance of data as an economic input, we find that competition authorities typically lack formalised methodologies to value data in merger assessments. This means that competitive impacts of data-rich mergers may not be appropriately measured and mitigated at present. New metrics and tools can help competition authorities to maintain open, innovative and competitive markets in the digital and data economy.

Abstract

This article explores the potential competitive implications of non-horizontal mergers where they involve extensive consumer data, including consumer financial data. As data become increasingly central to firm strategy, mergers between data-rich firms, while potentially leading to positive outcomes, can also create market power in ways not entirely accounted for by traditional antitrust theory. The article considers some of these implications. It introduces new metrics for valuing data sets held by merging firms that could help competition authorities evaluate market impacts more effectively. The article then suggests potential tools to mitigate anti-competitive effects of data-rich mergers. It advocates for further research to adapt competition policy to data-centric mergers, all with a view to maintaining open, innovative and competitive markets in the digital and data economy.

JEL classification: E21, G34, K21, L41, O32

Keywords: antitrust, big data, big tech, competition, data, financial data, financial services, mergers, open banking, open data, open finance, payments, personal data, privacy