August 22, 2017

Big Data Companies Likely To Come Under Increased Antitrust Scrutiny

By Elizabeth Taras

Big data companies may become increasingly embroiled in antitrust litigation if last week’s decision by Judge Edward M. Chen of the U.S. District Court for the Northern District of California, granting hiQ Labs, Inc. a preliminary injunction against LinkedIn Corp., is any omen.

The injunction that the court granted in the case of hiQ Labs, Inc. v. LinkedIn Corp. prohibits LinkedIn from preventing hiQ’s access to LinkedIn users’ public profile data.  Although it is only a preliminary finding, the decision highlights a business sector that will likely see increased antitrust enforcement in the coming years: companies that amass user data.

HiQ, the plaintiff, is a startup that provides businesses with statistical analyses of LinkedIn users’ public profile information.  HiQ’s business is therefore “wholly dependent on LinkedIn’s public data.”  According to hiQ’s complaint, LinkedIn issued a cease and desist, demanding that hiQ stop “unauthorized data scraping,” and threatened to sue hiQ under the Computer Fraud and Abuse Act (CFAA) for accessing LinkedIn users’ public profile data.  HiQ claims that LinkedIn also employed various blocking techniques, preventing its access.

HiQ brought the lawsuit to allow it to continue to access the public LinkedIn data, relying primarily on California’s common law and Unfair Competition Law.  Importantly, hiQ alleged that LinkedIn’s decision to block its access was motivated by LinkedIn’s desire to create a competing product.  Additionally, hiQ asked the court to declare that it was not violating the CFAA or the Digital Millennium Copyright Act by accessing the public LinkedIn data.

On August 14, 2017, the court granted hiQ’s request for a preliminary injunction, which essentially prohibits LinkedIn from blocking hiQ’s access to LinkedIn users’ public profile data, at least during the pendency of the lawsuit.  Of particular interest from an antitrust perspective, are the court’s findings that “hiQ has raised serious questions with respect to its claim that LinkedIn is unfairly leveraging its power in the professional networking market for an anticompetitive purpose”; and that there is “a plausible inference that LinkedIn terminated hiQ’s access to its public member data in large part because it wanted exclusive control over that data for its own business purposes.”

Data is the currency of tomorrow.  New internet, software, or technology companies attempting to enter into this market face substantial barriers to entry, including finding a way to collect or access massive amounts of user data.  Over the next few years we will likely see an increasing focus on allegations involving large internet/data companies attempting to exclude startups from accessing user data in an effort to decrease or eliminate competition.  In essence, big data will represent a modern “monopoly problem.”

An interesting question is how refusals to deal will be treated within this sector.  Under federal antitrust law in the United States, even monopolists may generally refuse to deal with their rivals.  Exceptions to this general rule exist in certain situations, such as when there is a preexisting business arrangement between the two parties that preceded the refusal to deal.  In analyzing refusal-to-deal claims, courts will likely need to take into consideration whether public data, such as LinkedIn users’ profile data, should be considered an essential facility.  While startups seeking access to a dominant firm’s data may claim that such refusals to deal are anticompetitive under federal antitrust law, such companies may find more support under state law.  For example, under California’s Unfair Competition Law, which hiQ cited in its complaint against LinkedIn, “unfair” practices include more than actual antitrust violations, with a scope that covers threats or general harm to competition.

This may be the start of a surge of private litigation claiming exclusionary conduct in the user data sector violates antitrust laws.  Indeed, companies looking to bring such claims are likely to rely increasingly on state antitrust laws.

Edited by Gary J. Malone

Categories: Antitrust Litigation

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