Which? report—consumer data in online markets

Businesses increasingly use consumer data to offer better and more targeted digital products and services. Many of these new business models rely on data to facilitate transactions and generate revenues in a way that was not previously possible, through either targeted advertising or better matching.

Such access to personal data has understandably raised concerns about privacy, and (in the worst cases) the selling and illegal use of data. In certain circumstances, competition in the market can mitigate concerns about privacy, but this depends, crucially, on whether consumers are able to understand the privacy implications of using a particular service and can exercise choice.

The extent to which different firms are able to access similar data is important for competition, and it depends on two key factors—the cost of acquiring data, and the rate at which a piece of data depreciates.

Messaging apps are an example of where competition can bring about good outcomes. The nature of the data has led to consumers exercising choice between messaging apps, and service providers competing on privacy-related features. By contrast, with health and fitness apps, behavioural biases (if combined with a lack of engagement with terms and conditions) can lead to privacy concerns, even when there appears to be competition in the market.