Privacy degradation in digital markets isn't just a side effect of data-driven business models—it's a structural condition that shapes competitive outcomes, market entry, and user choice, according to a new analysis published by the Observer Research Foundation. The report, released in 2025, examines how control over personal data has become a decisive competitive advantage, especially as artificial intelligence systems depend on vast datasets to function. The analysis argues that when firms weaken privacy protections through extensive data collection or opaque consent mechanisms, they're altering the competitive quality of the service itself.
Big Tech firms have built massive data advantages that smaller competitors can't replicate. The report cites a 2022 survey showing Google tracked 39 distinct data types per user, Amazon tracked 23, and Facebook tracked 14. Platforms combine account data, user location, multiple profiles, behavioural telemetry like clicks and browsing history, and third-party partner data to build detailed user profiles. This combined data fuels targeted advertising and creates audience segments that smaller firms cannot access. The Stanford AI Index Report found that global public nervousness about AI privacy and data usage reached 52 percent in 2026, while only 31 percent of people trusted government oversight of personal data in key markets. Meanwhile, the proportion of web data explicitly blocked from AI scraper bots rose sharply to between 20 percent and 33 percent.
India's 2021 WhatsApp case marked a turning point in how competition law addresses privacy. The Competition Commission of India investigated WhatsApp's updated privacy policy, which required users to accept new terms permitting data sharing with parent company Meta or stop using the platform entirely. The CCI concluded in 2024 that WhatsApp had abused its dominant position by imposing conditions that went beyond what was necessary to provide messaging services, treating privacy as a non-price dimension of consumer welfare. The commission imposed a roughly $22.3 million penalty and prohibited advertising-related data sharing for five years. The National Company Law Appellate Tribunal later upheld the penalty and rejected WhatsApp's argument that privacy concerns fall exclusively within data protection law, recognizing that a dominant company's data use can raise both competition and privacy concerns simultaneously.
The report examines why traditional competition enforcement struggles with data-driven markets. Firms with greater access to personal data can develop more refined algorithms and achieve higher performance, creating self-reinforcing cycles where more data improves services, attracts more users, and generates even more data. Network effects amplify this advantage—unlike traditional network effects that grow linearly with users, data-driven network effects create exponential growth in competitive advantage. Google Search improves with every query and click, allowing the company to collect information about which results users find most relevant; better results attract more users, creating a cycle where increased usage leads to better services and further growth. AI intensifies this problem by creating another avenue for personal data to enter systems without meaningful informed consent, especially through web scraping and reusing datasets for model training. The CCI's 2025 Market Study on Artificial Intelligence and Competition recognized that data advantages combined with network effects make markets more concentrated, with exclusive access to data acting as a barrier to entry.
India withdrew its Draft Digital Competition Bill in August 2024, which had attempted to regulate platforms through ex-ante designation of "Systemically Significant Digital Enterprises" based on quantitative metrics like turnover and user base. The Parliamentary Standing Committee found the Bill's rigid ex-ante obligations could burden digital platforms without proper market analysis and might stifle innovation, deter foreign investment, and impose higher compliance costs on startups. The report argues that India doesn't need a Digital Markets Act-style regime to discipline market structure but instead needs institutional mechanisms to recognize when privacy degradation becomes a source of competitive advantage. The analysis recommends that competition law evolve to include privacy in its existing case-by-case analytical framework, allowing regulators to examine how data practices, consent structures, and privacy defaults affect competition. Real-time detection of anti-competitive behaviour through proactive monitoring tools could help, since traditional ex-post enforcement offers limited help in preventing irreversible market tipping. The withdrawal doesn't signal a lack of regulation but a need to reassess how India responds to competition in the data economy.