Competition in the digital market: the importance of Personal Data

By Caterina Carvalho



Society modernization gave rise to the digital transformation of companies. The pandemic accelerated it. A new market is emerging and, with it, new competition dynamics.

By removing manual processes, adding automated tasks (such as chatbots, targeted advertising, etc.) and improving workflows (with artificial intelligence software), companies seek to add value to their products and services and to stand out in the market. The adoption of technological measures can represent a competitive advantage in the new digital market, with more productivity, less cost, and better customer experience.


But that is not all. To stand out from the competition, companies are increasingly using the market knowledge that data processing brings. An analysis carried out by CADE's Journal of Defense of Competition found that the peculiarity of the digital market dynamics is the change in consumers' habits and the technological strategies which companies apply to make the digital world new and attractive.


According to the journal, the dynamics of the digital market can be summed up in 4 points, the main one being: data are the assets with the greatest competitive advantage.

Because data processing is much faster today than it was 2 years ago (due to the ease of its gathering and storage, thanks to better internet features), it can be said that data custody today is the greatest competitive potential of a company.


The analysis and organization of the collected data, therefore, generate an intangible which constitutes companies' intellectual property (developed from Big Data or Business Intelligence) and enable the offer of a more improved and personalized service or product for each client, because it identifies each one's purchase profile.


In addition, after organizing the data, companies have the opportunity to supply them to business partners who then disclose advertisements targeted at the profiles received. Because the commercial partners pay the data collecting companies, the latter end up charging little or no money from the end-user for their products or services, once the user actually remunerates them with his/her personal data.


Currently, companies who own systems of Big Data and Business Intelligence are ahead of the market, because they mapped the profile of consumers of their products and services and they better know their target audience. All this due to the immense collection and analysis of personal data.


However, from a competition standpoint, it is important to analyze whether such process of data gathering and processing is legal. As is well known, to regulate the commerce of personal data, several countries implemented their own data processing rules, with the European Union being the inspiration for the creation of similar laws worldwide.


In Brazil, National Congress approved, in August 2018, the General Law for the Protection of Personal Data (LGPD). The LGPD foresees, among other aspects, hypotheses in which companies can process personal data and measures which such businesses must take in order to do so, such as, for example, transparency in providing the information to its owner.


In this context, would it be possible to affirm that LGPD shall help reduce unfair competition? This question arises from the monopoly of knowledge accumulated in the hands of large digital companies, due to the immense activity generated from massive collection and storage of personal data. Does the processing of such data actually comply with the legal requirements?


It is of public knowledge that large companies in the digital market have already undergone audits for improper processing of personal data and have suffered million-dollar fines for breaching personal data protection laws. Therefore, the question: does the greatness of such companies arise from the inappropriate and uncontrolled treatment of personal data? Could it be that its competitive advantage is due precisely to the irregular practice of data processing and consequent unfair competition in the digital market?


It is known that consumers and holders of personal data will not fail to seek possible rights related to data privacy, as it can already be seen, even in Brazil.


Companies, both large and small, who are not compliant with LGPD or who act against what the law determines are subject to judicial sanctions or fines imposed by PROCON, which acts as the National Data Protection Authority while the latter is not fully composed.


Regarding market advantage due to personal data retention, it will be necessary to wait for the effective formation of the National Data Protection Authority and the entry in force of the LGPD sanctions (August 2021) to verify the actual reduction of improper handling and processing of personal data by large businesses, so that similar opportunities to all those active in the digital market are granted.


Author


Caterina Carvalho

Associate

Post-graduate student in Innovation Management and Digital Law, Fundação Instituto de Administração (FIA). See the profile here.

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