This blog post has been authored by Ms. Saumya Mishra
INTRODUCTION
Big digital corporations have grown and become more influential in the 21st century in an unprecedented way, and this tendency is not just present in the West. Companies like Google, Amazon, Facebook (now Meta), and others have greatly increased in importance in India as well, altering businesses and sectors all throughout the country. These businesses have revolutionised how Indians interact with trade, connectivity, entertainment, and other areas by leveraging technology and innovation.[1] Big IT businesses’ rise in a variety of industries has not been without controversy and cause for worry. Several important challenges, including anti-trust practices, violations of data privacy, and the formation of unchallengeable market domination, have emerged as a result of these corporations’ substantial impact and market dominance.[2]
India has structured a regulatory framework to promote fair competition, safeguard consumers, and solve new concerns in the digital sphere in response to the large IT companies’ rapid expansion and impact. The Competition Act of 2002 and other relevant rules serve as the primary regulatory foundation for this system.[3] Due to their significant market power and propensity for anti-competitive behaviour, huge tech businesses are particularly important under the Competition Act.[4] Due to their considerable influence and wealth, these corporations could use tactics to discourage innovation and restrict competition. When analysing how large IT businesses behave in India’s fast changing digital environment, the act’s prohibitions against anti-competitive agreements and abuse of power are especially important.
THE REGULATORY FRAMEWORK
Overview of Competition Act (2002):
The Act was passed in 2002 to guarantee commercial freedom and to provide guidelines for how enterprises should operate on the market. The Act primarily deals with and governs three things: anti-competitive agreements, a company’ dominating position and misuse of that position, and combinations of different enterprises through mergers, acquisitions, amalgamations, etc.[5]
The Competition Commission of India (CCI), India’s top antitrust watchdog, is essential to fostering fair competition and defending consumer interests in the nation’s marketplaces.[6]
Anti-Competitive Agreements:
Horizontal Agreements: These agreements between rival businesses or entities with equivalent stages of manufacturing are anti-competitive. In India, some horizontal agreements are thought to have a significant adverse effect on competition (AAEC). If the parties can demonstrate that their agreement doesn’t hurt competition, this supposition can be refuted.[7]
Vertical Agreements: These agreements between organisations with various output levels are anti-competitive. Vertical agreements are typically permitted unless they result in or are likely to result in an AAEC in India. The Act includes a comprehensive list of vertical agreements that may be prohibited based on their effects on India’s competitive circumstances as well as a comprehensive list of horizontal agreements that are considered to cause AAEC.[8]
Cartel Conduct:
A cartel is essentially an arrangement among two or more businesses or partners involved in the public provision of goods and services for the purpose of regulating deceptive price arrangements.[9]
Section 3 of the act certainly “prohibits and renders the agreement void when the business partners enter into an agreement with respect to the production of supply, distribution, storage, goods or provisions of the services which are likely to cause an ample amount of adverse effect to the competition in India.”[10]
Additionally, Section 3 has a clause that essentially forbids cartel firms from reaching anti-competitive agreements, including: –
- Deciding on the acquisition and sale of products, both implicitly and explicitly.
- limiting control over service sales, investment, and manufacturing.
- the regional market’s distribution.
- participating in collusive bidding.
- Therefore, such agreements must be regarded as invalid.[11]
Abuse of Dominance Position:
- This is given under Section 4 of the Act.[12] A business or corporation is considered to be in a dominating position if it exploits its position to take autonomous control of the market or if it has an impact on the competitors. No firm is forbidden from holding a dominating position, but the Act forbids misuse of such position when it is used for improper purposes. The Act specifies a number of actions that constitute abuse of a dominating position. As follows:
- If a position is taken advantage of to impose any unjust pricing or conditions, including predatory prices,
- If it’s applied to restrict development or production,
- restricts market entry,
- To end the contract due to unneeded conditions,
- to improve one’s position in other markets.[13]
Combination Regulation: Merger, Acquisition & Amalgamation
The Act forbids combinations that create or are likely to cause an AAEC and defines combination as the purchase of one or more businesses by one or more people, or the merger or amalgamation of businesses where the combining parties meet certain asset or revenue requirements in India and overseas.[14]
In this regard, Big Tech corporations have acquired over 400 companies worldwide in the past ten years, but in India, they have invested heavily in Reliance’s Jio Platform and have also acquired startups like Google-Halli and Where’s My Train. Killer purchases, which effectively replace innovation and eliminate competition as a result, have not yet been subject to regulatory review by the CCI.[15]
CHALLENGES FACED BY THESE ANTI-TRUST LAWS
Antitrust authorities have been closely monitoring monopolistic IT firms and their business operations in recent years, checking them for any signs of potential anti-competitive behaviour. Concerns regarding the market dominance and possibly unfair activities of dominant tech corporations in key areas have been sparked by their emergence. The biggest internet firms, including Amazon, Apple, Facebook, Google, and Microsoft, have been the subject of several inquiries, legal actions, and penalties for antitrust infractions.[16]
- Data control and Privacy: Control over data is one of the main problems motivating the crackdown on major technological businesses. Numerous personal data are available to businesses like Facebook and Google, which they may use to focus advertising and gain a competitive edge. Antitrust regulations worry that these businesses may be utilising their data control to monopolise the market unfairly and restrict competition.[17]
In Competition Commission of India v. Google LLC and Ors, in order to force its partners to utilise its search services under unfair terms, such as compelling them to share their data only with Google and forbidding them from utilising relatively similar info with other web pages, Google had exploited its dominating position. The CCI held that “this practice had resulted in a significant barrier to entry for competing search engines, as they were unable to access the data necessary to improve the quality of their search results.”[18]
WhatsApp Inc. v. Competition Commission of India, the court “acknowledged the importance of individual autonomy and control over personal data, and emphasized the need for transparency and informed consent in data processing. The court held that WhatsApp’s new privacy policy, which required users to agree to share their data with Facebook, violated the right to privacy of Indian citizens.”[19]
- Predatory Pricing: While cutting prices and making losses to attract consumers can be parts of good competition, doing so in an effort to drive out rivals is referred to as predatory pricing, which is often prohibited. Similarly, although entrance restrictions are lawful, they might result in an unlicensed monopoly.[20] For example, in order to gradually shorten shipping times in 2015, Amazon suffered a net loss of $5 billion on shipping costs, yet this was nonetheless a success for the corporation because other merchants lacked the resources to compete. Customers turned to Amazon in search of lightning-fast shipping speeds.[21]
- Self-Preferencing: When a business advertises its very own services or that of its affiliates on its network while also competes with other service suppliers on the same site, this practise is known as self-preferencing.[22] In the Alphabet Inc. case, “it was alleged that Google unfairly privileges ‘Google Pay’ by prominent placement on the play store, Android OS and Android based smartphones by skewing the search results on the play store in favour of Google Pay and pre-installing it on android smartphones. It was held in contravention of Section 4 i.e., abuse of Dominance position.” [23]
- Search and Ranking Preferences: On every platform, users may search using keywords to get data based on algorithms. Search engine algorithms should show the best-selling or most highly rated items or services at the top, without any prejudice. If any other products, such as promoted products or orders that the marketplace itself fills, supersede, it suggests search bias in favour of those items. The CCI had remarked that the question of preferential ranking should also be regarded in connection with the aforementioned in the same 2019 case involving Amazon and Flipkart (exclusive tie-ups). Through greater discounts and preferred listing, competition on the platforms may be impacted in behalf of the exclusive brands and merchants. Because of this, it is necessary to do a thorough analysis to determine how vertical agreements function, what their main clauses are, and how they affect competition.[24]
There are various other challenges like restricting third party applications, deep discounting done by big tech companies which make it difficult for the present regulatory framework to deal with it.
WAY FORWARD AND INDIA’S PRESENT APPROACH
New laws and regulations for the digital marketplace are required immediately, and suitable ex ante legislation should be used to create new requirements. Through the Digital Markets Act, the EU has already acknowledged this requirement. It is time for India to enact similar legislation.[25] A legislative panel in India has suggested that the government create a law governing digital competition to control Big Tech firms’ anti-competitive business activities on their platforms.[26]
Prior to a merger or acquisition, a country’s anti-trust watchdog will exercise tougher oversight in addition to the financial requirements. This will require a thorough study, including extensive due diligence on a proposed deal, by the regulator.[27]
Need for Ex-ante regulation in India: Despite the fact that the competition rules address that oddity, they are just too slow to act in highly technological industries. By the time an order is passed, the dominant player, in Google’s instance, has acquired an advantage. To avert market failures and reduce potential anti-competitive behaviour, ex-ante legislation is urgently needed in this situation.[28]
The Competition Amendment Bill, 2022 contains the government’s proposed changes to the competition legislation.[29] In April 2023, the Bill wins presidential assent. The CCI must create regulations that specify the criteria for determining whether an organisation has significant commercial activities in India. The Commission’s assessment process will be strengthened, especially in the digital and infrastructure sectors, where the bulk of transactions were not previously notified because the asset or turnover amounts fell below the jurisdictional requirements.[30]
In conclusion, the fast rise of Big Tech companies in India has presented the digital environment with never-before-seen difficulties. In tackling anti-competitive behaviour and defending consumer interests, the current regulatory structure, particularly the Competition Act of 2002, has achieved progress. However, it has shown to be ineffective in tackling the complex issues of the digital era, such as search bias, self-preferencing, predatory pricing, and data privacy. Ex-ante regulation and new legislation designed for the digital market must be adopted by India in order to overcome these obstacles, following worldwide best practises. Although the proposed Competition Amendment Bill of 2022 is a positive beginning, strong and progressive legislation is essential to guarantee fair competition, innovation, and consumer protection in the developing digital economy.
To learn more about the Competition Act, 2002, enrol for Diploma in Competition Law.
[1] West India Company: The Rise of New Imperialists in Digital World, OUTLOOK, (Sept. 8, 2023), https://www.outlookindia.com/national/west-india-company-the-rise-of-new-imperialists-in-digital-world-news-196952
[2] Anti-Competitive Practices by Big Tech Companies, DRISHTI IAS, (Sept. 8, 2023), https://www.drishtiias.com/daily-updates/daily-news-analysis/anti-competitive-practices-by-big-tech-companies
[3] Why big tech companies are increasingly worried about Competition Law in India, IPLEADERS, (Sept. 8, 2023), https://blog.ipleaders.in/big-tech-companies-increasingly-worried-competition-law-india/#Growing_opportunities_is_there_any_need_for_change_in_competition_laws
[4] Id.
[5] India’s Antitrust Problem with Big Tech, THE RMLNLU LAW REVIEW BLOG, (Sept. 8, 2023), https://rmlnlulawreview.com/2021/10/27/indias-antitrust-problem-with-big-tech-part-1/
[6] Competition Commission of India’s Actions Against Big Tech Companies for Antitrust Violations, KSK ADVOCATES AND ATTORNEYS, (Sept. 8, 2023), https://ksandk.com/competition/antitrust-laws-and-big-tech-cci-actions-against-big-tech/
[7] Antitrust Law In India: Big Tech Regulation & Fair Digital Competition, PARKER & PARKER, (Sept. 8, 2023), https://www.parkerip.com/blog/antitrust-law-in-india-big-tech-regulation-fair-digital-competition/
[8] Id.
[9] Understanding the legality of cartels in India, IPLEADERS, (Sept. 8, 2023), https://blog.ipleaders.in/understanding-the-legality-of-cartels-in-india/#What_are_cartels
[10] The Competition Act 2002, § 3, No. 12, Acts of Parliament, 2002 (India).
[11] Id.
[12] The Competition Act 2002, § 4, No. 12, Acts of Parliament, 2002 (India).
[13] Id.
[14] Supra note 7
[15] Supra note 5
[16] Competition Commission of India’s Actions Against Big Tech Companies for Antitrust Violations, KSK ADVOCATES AND ATTORNEYS, (Sept. 8, 2023), https://ksandk.com/competition/antitrust-laws-and-big-tech-cci-actions-against-big-tech/
[17] Id.
[18] Google LLC and Another v. Competition Commission of India Through its Secretary, 2023 SCC OnLine NCLAT 147.
[19] WhatsApp Inc. v. Competition Commission of India, 2020 SCC OnLine CCI 32.
[20] Big Tech Monopolies: The Four’s Efforts to Eliminate Competition, SHORTFORM, (Sept. 8, 2023), https://www.shortform.com/blog/big-tech-monopolies/
[21] Id.
[22] Supra Note. 2
[23] XYZ v. Alphabet Inc., 2020 SCC OnLine CCI 41
[24] Anti-Competitive Practices by Big Tech Companies, MINISTRY OF CORPORATE AFFAIRS, (Sept. 8, 2023), https://www.scconline.com/blog/wp-content/uploads/2020/07/20th-Harvard-bluebook.pdf
[25] Regulating The Big Techs and Competition in The Market, CIVILS DAILY, (Sept. 8, 2023), https://www.civilsdaily.com/news/regulating-the-big-techs-and-competition-in-the-market/
[26] India panel recommends digital competition act to rein in Big Tech, REUTERS, (Sept. 8, 2023), https://www.reuters.com/technology/india-panel-recommends-digital-competition-act-rein-big-tech-2022-12-22/
[27] Big, Bigger Tech: Trust and Anti-Trust, GATEWAY HOUSE INDIAN COUNCIL ON GLOBAL RELATIONS, (Sept. 8, 2023), https://www.gatewayhouse.in/big-bigger-tech-trust-and-anti-trust/
[28] Big Tech And The Need In India For Ex-Ante Regulation, THE HINDU, (Sept. 8, 2023), https://www.thehindu.com/opinion/op-ed/big-tech-and-the-need-in-india-for-ex-ante-regulation/article66255539.ece
[29] Supra note 2
[30] Id.