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Power imbalance

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At a glance

  • “Consent or pay” models must meet the standard for freely given consent. You must be able to demonstrate that people have a free choice to give consent and that they are not unfairly penalised for refusing or withdrawing consent.
  • You should assess whether there is a power imbalance between you and the people that use your product or service. This should consider all the relevant circumstances, including:
    • the type of organisation you are (for example, a public authority or someone in an employer-to-employee relationship); 
    • the extent to which people rely on your service; and 
    • your position in the market.
  • Your assessment for a power imbalance should form part of your overall assessment for demonstrating your “consent or pay” model’s compliance with data protection law. You should take a reasonable and proportionate approach to demonstrating how you’ve assessed your product or service against this factor.
  • You should consider the impact of introducing a “consent or pay” model on existing users of a product or service and whether there is a clear power imbalance with them, particularly considering any barriers to users switching and whether there are comparable alternative products or services they could use instead.
  • Where there is a clear power imbalance between you and the people that use your product or service, you are unlikely to be able to operate a “consent or pay” model without taking steps to address the power imbalance. This is because it is unlikely that people could provide freely given consent.
  • Where there is a clear power imbalance, you should take steps to address it and ensure people can freely give their consent. You could do this by offering an alternative way to access your service that doesn’t rely on the user consenting to personalised advertising or paying to avoid personalised advertising.

In detail

What do you mean by “power imbalance”?

Power imbalance refers to the nature of the relationship between an organisation and the people whose personal information they are processing. A range of factors may affect the power balance between an organisation and a user (further detail below).

Where there is a clear power imbalance, people may not have a realistic choice about consenting to personalised advertising to access a product or service. For example, they may rely on the service, leading to an unfair penalty if they can no longer access it. In these cases, it’s unlikely that they can freely give their consent. Offering a “pay” option as an alternative to consent may not address this issue. If people who rely on the service are priced out of the “pay” option, they may have no realistic choice other than to consent.

Why is power imbalance relevant to “consent or pay”?

A “consent or pay” model can only be lawful if you can demonstrate that people have freely given their consent. The recitals to the UK GDPR outline that consent is not valid if there is a ‘clear imbalance’ between you and the person whose data you are processing. They also explain that people can’t freely give their consent if they have no genuine or free choice or can’t ‘refuse or withdraw consent without detriment’.

If you have a clear power imbalance with the people who use your product or service you could potentially still rely on consent for personalised advertising, but it will be more difficult to demonstrate consent is freely given. In these cases, you should take steps to address the power imbalance and ensure people have a meaningful choice. You could provide people with alternative options to access your product or service that do not involve relying on people’s consent to personalised advertising or requiring them to pay to avoid personalised advertising when accessing your product or service. An alternative could be that you provide people with the option for access to the product or service with contextual advertising.

How do we assess whether there is a clear power imbalance?

If you operate a “consent or pay” model, you must be able to demonstrate that people have freely given their consent to personalised advertising. This means that you must be able to show that people have a genuine or free choice and will not be unfairly penalised if they refuse or withdraw consent.

To ensure that people can freely give their consent, you should carry out an assessment of whether there is a clear power imbalance between you and the people that use your product or service. You should document this assessment and keep it under review, particularly if you subsequently make changes to your “consent or pay” model.

A clear power imbalance can arise from a variety of different factors that affect the relationship between you and the people whose personal information you process. For example, recital 43 of the UK GDPR gives the example of where the organisation is a public authority and the ICO’s guidance specifies an employer in an employer to employee relationship. 

There are other factors that can cause a power imbalance. You should consider any other factors that might lead to a clear power imbalance meaning people can’t exercise a free choice in your assessment. This includes considering the extent to which people rely on your service and whether they will suffer an unfair penalty if they refuse their consent. We have provided some non-exhaustive examples of factors that can contribute to a clear power imbalance: 

  • Some groups of people may be in a more vulnerable position (eg due to their age, disability or financial situation). This could have a greater impact on their ability to refuse or withdraw consent without detriment. This is particularly relevant if your product or service is intended for children who are unlikely to have the financial independence to freely give consent within a “consent or pay” model.
  • You should give special consideration to the impact on existing users of your product or service. If you introduce a new “consent or pay” model, this is likely to impact your existing users differently from people who have never used your product or service. You should consider any evidence from your existing users indicating that they are likely to suffer detriment if you introduced a “consent or pay” model. For example, existing users are more likely to experience barriers to switching because of the presence of network effects and are more likely to face high switching costs, even if comparable alternative services are available.
  • A power imbalance can also arise from your position in the market, for example if you have a dominant position under competition law. 1 This is a relevant consideration in assessing whether people can freely give their consent despite you having market power. Your position in the market can affect people’s freedom of choice, as they might be unable to refuse or withdraw consent without detriment.

What do you mean by our position in the market and how is it relevant to power imbalance?

We are not a competition authority and it is not our function to determine questions of market power. Our concern relates to whether your position in the market creates a power imbalance with users. However, using the framework established by the Competition and Markets Authority (CMA) in its guidance to assess market power provides a helpful means of understanding whether there is likely to be such a power imbalance. We recognise that assessments of market power are context-specific and how they are carried out depends on the circumstances and the relevant regulatory context. 

Whether or not an organisation, in fact, has market power is a matter for the CMA, other regulators with competition law powers or for the courts. Where necessary, we will cooperate with the CMA and seek their views on questions of market power where this is relevant to assessing power imbalance under data protection law. The considerations about market power provided below are drawn from CMA guidance and are intended to assist you in assessing whether your position in the market creates a power imbalance. They are not intended to be exhaustive or definitive.

Market power does not have a statutory definition. The CMA’s guidance on the digital markets competition regime (external link) sets out that:

“Market power arises where a firm faces limited competitive pressure and individual consumers and businesses have limited alternatives to its product or service or, even if they have good ones, they face barriers to shopping around and switching. Therefore, an assessment of market power is largely an assessment of the available alternatives and the extent to which they are substitutable for that product or service. This includes alternatives available in the present and possibilities for entry and expansion”.

Market power is an important concept when considering whether there is a clear power imbalance under data protection law. If people cannot switch to a comparable alternative provider, it may affect their freedom of choice and whether they can refuse or withdraw consent without detriment. 

You should make assessments of whether your position in the market creates a power imbalance by considering whether you have market power on a case-by-case basis and you should consider a range of evidence. The CMA’s guidance indicates the kinds of evidence relevant to market power may include:

“…indicators such as the level and stability of shares of supply, the number and strength of competitive constraints to incumbent firms, profitability levels and levels of customer switching. … [E]vidence on the sources of market power, examples of which may include supply side factors such as network effects, economies of scale and scope, high fixed costs, data advantages, integration into wider ecosystems or control of intellectual property, as well as demand side factors, such as switching costs, behavioural biases, or the role of brand and reputation”.

How do we consider our position in the market in our assessment of power imbalance?

You must demonstrate and document that you have carefully considered whether your position in the market creates a clear power imbalance with your users. You should consider how much people rely on your service and whether they will suffer detriment if they refuse their consent. 

You should consider if your position in the market affects whether people can freely give their consent if you use a “consent or pay” model. This applies even if a competition authority or court hasn’t found your organisation to be “dominant” or to otherwise have market power under competition law. 

The extent of the assessment we expect you to carry out depends on your circumstances. It should be reasonable and proportionate. We have set out above an available framework from the CMA’s guidance to help you. However, it is your responsibility to ensure your assessment of power imbalance demonstrates that people can freely give their consent for personalised advertising. If you suspect you have a strong position in a particular market or market segment, you should take particular care with this assessment.

When assessing whether there is a clear power imbalance, we do not expect you to carry out a formal market definition as set out in the CMA’s competition law and merger assessment guidance. 2  We anticipate that, in many cases, organisations operating in commercial markets will have a reasonable understanding of the number and strength of their competitors and their likely share of any potentially relevant markets or market segments.

If you are aware that you may have market power or are in any doubt as to whether that is the case, you should be able to demonstrate that you have carefully considered the effect of your market position in creating a clear power imbalance with your users. Similarly, if a competition authority or court has made relevant findings about your market power, then you should also be able to show you have carried out a thorough assessment of whether your market position creates a power imbalance. This applies whether or not such findings are legally binding. 3

If you operate in a sector that is highly competitive, you have a low share of supply and switching costs are low, it is less likely that your position in the market will contribute significantly to a power imbalance. This is because people can easily choose or switch to a comparable alternative service. In these cases, it is likely that any necessary assessment of power imbalance as a result of your position in the market will be straightforward and allow you to demonstrate clearly that people can leave or not use your service without experiencing an unfair penalty.

However, an assessment of your position in the market, including the extent to which you have market power, is not a definitive assessment of whether or not there is a clear power imbalance under data protection law. As discussed above, other contributing factors could cause a clear power imbalance. 

What do you mean by barriers to users switching and how might they affect our assessment of power imbalance?

Barriers to switching can arise where factors like network effects and switching costs are present. The presence of these factors can indicate that your position in the market may cause a power imbalance between you and people that use your service. Network effects and switching costs are of particular interest to us in the context of power imbalance because they contribute to a person’s ability to make a genuine and free choice.

Network effects

Network effects can arise where an organisation operates a platform that supplies products or services to two (or more) distinct but related user groups. Where this occurs, the value of a product or service to different user groups can change depending on the volume of users in each group. You can broadly split the nature of network effects into two categories: 

Direct: where the value of the network to the people that use the network is affected by the volume of other users on the “same side” of the market. For example, on platforms for communications (such as social network sites or discussion forms), the more people that use the platform create more possibility of additional user-generated content, communication or interactions, increasing the platform’s value to its users.

Indirect: where the value of the network to one user group (eg consumers) is affected by the volume of users on the “other side” of the market (eg sellers). For example, on a food delivery or e-commerce website, users may derive value from an increased number of sellers.

Network effects are relevant when assessing power imbalance in the context of “consent or pay” models. This is because they may increase the likelihood that people are unfairly penalised if they cannot access a product or service. For direct network effects, this could include a lack of meaningful alternative options for engaging with friends, family and likeminded groups. In such circumstances, someone may struggle to refuse or withdraw consent without suffering an unfair penalty, if the only alternatives are to pay or not use the service. For indirect network effects, this could mean that consumers can’t access sellers’ services or purchase items that are only available through the platform.

Switching costs

Switching costs occur where people face significant barriers to switching from one product or service to another. 

This is more likely to apply to existing users of a product or service. For example, on a communications platform people may lose a record of all their chats and interactions on the platform if they switch services. Many users “invest” in a particular platform over time and building a similar presence on an alternative platform to receive a comparable service would require significant time and effort. For example, a person who uses social media to identify and connect with clients may face barriers to rebuilding the same network of contacts or followers.

Even where there are comparable alternative products or services available, there may still be a clear power imbalance if people face significant barriers to switching, for example because they have no real option to leave the service because their family and friends use it and they are unable to coordinate with them to switch to another service. 

What if there’s a risk of a clear power imbalance?

You should demonstrate that you have taken power imbalance into account before introducing a “consent or pay” model, and that people can still freely give their consent. You should consider this alongside the other factors in this guidance when assessing your “consent or pay” model.

If you identify a clear power imbalance with the people that use your product or service, it’s unlikely that they can freely give their consent. This is because it will be difficult to demonstrate people have a free and genuine choice or can refuse or withdraw consent without experiencing an unfair penalty. This is particularly the case if you only offer a choice between “consent or pay” for access to your product or service.

You should take steps to address the power imbalance to ensure that people can freely give their consent. For example, you could provide people with an additional alternative option to access your product or service with contextual advertising. This would allow people to access your core product or service without requiring them to give consent to personalised advertising or to pay to avoid personalised advertising. 

You could consider introducing effective ways for people to transfer their personal information to another provider that offers a similar product or service in line with their right to data portability under article 20 UK GDPR. However, this is only likely to be effective if there is a comparable alternative service which can offer similar functionality. In some circumstances, this still may not address all barriers to switching or other factors that can lead to a power imbalance.

You should also demonstrate that your fee is appropriate. This is especially important where there’s a clear power imbalance, as users may not have a genuine and free choice to leave or not use your service. 

You should demonstrate that you offer an equivalent service under the consent and pay options and you must ensure that you meet privacy by design standards.

1 For example, see Judgment of the Court of Justice of the European Union of 4 July 2023, Case C-252/21 Meta v. Bundeskartellamt, EU:C:2023:537. UK courts and tribunals are not bound by decisions made by the European Court of Justice. However, they may have regard to them so far as it is relevant.

2 Market definition: OFT403. See also section 9 of Merger Assessment Guidelines (CMA129).

3 For example, these may be findings relating to market power made in the context of an investigation under the Competition Act 1998, a merger investigation, market study or market investigation under the Enterprise Act 2002; or for the purpose of assessing Strategic Market Status under the Digital Markets, Competition and Consumers Act 2024.