Data Portability and Interoperability: A Primer on Two Policy Tools for Regulation of Digitized Industries.

Robert Seamans

By Robert Seamans and Sukhi Gulati-Gilbert

Scholars and policymakers are excited by the prospect that digitization—the growing use of software across industries—can help boost economic growth in the U.S. and other countries (Furman and Seamans, 2019). However, some have expressed concern that increasing dominance by a few large companies in each sector of the economy means the gains from economic growth will not be equitably distributed. Competition policy—a set of regulations, laws, and other policies designed to lower barriers to entry, leading more firms to enter and compete in a market—may help to address the issue of increasing market dominance. The resulting competition between entrants and incumbent firms could potentially lead to lower prices and more innovative products and services, all of which benefits consumers.

There are a variety of competition policy tools available to policymakers, including sector-specific regulations (some of these are highlighted in President Biden’s “Promoting Competition in the American Economy” executive order) and the use of the Justice Department and the Federal Trade Commission (FTC) to block mergers and revisit past mergers (as the FTC is doing in its case against Facebook’s acquisition of Instagram and WhatsApp).

In this article we describe two other tools, data portability and interoperability, that may be particularly useful in technology-enabled sectors. Data portability allows users to move data from one company to another, helping to reduce switching costs and providing rival firms with access to valuable customer data. Interoperability allows two or more technical systems to exchange data interactively. Due to its interactive nature, interoperability can help prevent lock-in to a specific platform by allowing users to connect across platforms. Data portability and interoperability share some similarities; in addition to potential pro-competitive benefits, the tools promote values of openness, transparency, and consumer choice.

Read the full Brookings article.
Robert Seamans is Associate Professor of Management and Organizations and Director of the Center for the Future of Management