Data Is the New Currency

America’s antitrust policies are stuck in the 1980s. That was when courts and regulators began relying on what’s called the consumer-welfare standard. Articulated in Robert Bork’s 1978 book, “The Antitrust Paradox,” the standard replaced classical antitrust analysis, which focused primarily on promoting competition. Courts and regulators are supposed to take into account a variety of consumer benefits, including lower prices, increased innovation and a better product quality.

But scholars, courts and regulators have ignored Bork’s multifaceted tests and obstinately focused on price alone. The result, 40 years later, is that a few tech giants have been able to dominate the market. The problem is that their offering of free services presents a new challenge for measuring anticompetitive harm and consumer welfare. If price alone is our measure, it’s hard to argue that free services are bad for consumers.

Legal analysts have difficulties applying nonprice factors to tech companies even when confronted with such demonstrations of monopoly as viewpoint-based censorship and imposing rents on developers of apps and ad tech—or even such demonstrations of actual consumer harm as privacy violations or pass-through costs on digital goods.

These tech platforms have enabled instant communication, e-commerce, information search and political engagement. In exchange for these services, customers provide data. In a new working paper, we argue that data is the new currency that these tech behemoths are capitalizing. Every click, every interaction and every transaction feeds the digital economy.

In this light, the concept of free services is misleading, because consumers do pay a price by giving away their data. Worse, they do so often without understanding the full implications. These facts demand recalibration of the consumer-welfare standard to protect consumers’ rights and promote competitive markets. Data is more than a digital footprint. It is a resource that tech companies exploit to amass control and wealth. The power dynamics in this exchange remain unbalanced, with consumers often unaware of the value of their data.

Some courts and scholars have argued that these harms are speculative and difficult to quantify. But there is a metric by which we can more accurately measure whether consumer welfare is served by tech companies: the amount of data they collect in exchange for those free services. Our paper explains several methods for deriving the value of data, especially from financial markets and structural methods. In general, these methods look at the role data plays in the production of goods and services.

Google, for example, required few data points from users when it made its search service available in 1997. Today it requires near-constant access to its users’ geolocation, spending habits and time spent on other sites. A judge could evaluate whether Google is arbitrarily requiring its users to provide more data—akin to raising the price of a product—solely to avail itself of ad revenue and more market share. To do so would be to engage in anticompetitive behavior. Antitrust law doesn’t allow this type of behavior in any other context.

Consumers run the risk and gain little new benefit every time tech companies pilfer more data from them. Even with the increase in data they obtain, the quality of their services remains virtually unchanged. These companies collect this data with few safeguards. And thanks to their buying out or merging with other companies, they lack any meaningful competitors.

Big Tech has, in effect, made data a new currency, which functions as the basis of many Big Tech companies’ business models. In the face of today’s data-driven digital markets, the fact that data is currency should compel us to revisit how we think about antitrust harm and what constitutes a competitive tech market.

Mr. Makridis is a research affiliate at Stanford University’s Digital Economy Lab and CEO/founder of Dainamic, a financial technology startup. Mr. Thayer is president of the Digital Progress Institute and an attorney who focuses on privacy, antitrust and cybersecurity issues.