Economics of Data-Driven Markets Mitigating Market Power: Options and Trade-Offs

Digitalisation has reshaped market structures by enabling large-scale data extraction and crossmarket use of consumer information. In data-driven markets, data generated in one market can be combined and deployed in unrelated markets, allowing firms to reduce costs, improve targeting, and extend competitive advantages across digital ecosystems. While such practices can generate efficiency gains and improve service quality, they can also reinforce data-driven market power, raise entry barriers, and generate privacy harms especially in markets characterised by strong network effects, economies of scale and scope in data, and user lock-in. This policy brief examines the economic mechanisms through which cross-market data use by large digital platforms affects competition and privacy, drawing on recent academic literature and selected competition cases. It analyses the trade-offs among proposed regulatory approaches to address privacy and anti-competitive concerns arising from digital platforms’ use of consumer data from one market to another market. At the end, the brief argues for a calibrated approach: combining ex-post enforcement with targeted ex-ante obligations, continuously reviewed to avoid unintended innovation harms.