Crystal gazing into the future of competition and digital markets

The rise in the use of digital platforms and emerging technology has forced competition regulators globally to keep up, innovate and widen their competition assessment tools. The Competition Commission of India (CCI) is not far behind. The propulsion in digital markets has brought to the fore the need for new or modified methods of antitrust regulatory intervention. CCI has adopted aggressive monitoring measures and proactively moved against tech giants involved in anti-competitive practices under the Competition Act, 2002 (Act).

CCI’s tryst with digital markets began with its investigation against Google in the Matrimony.com case, culminating in an INR136 billion (USD1.7 billion) penalty for search engine bias and abuse of dominant position in online search and web advertising. CCI in its 2020 report titled Market Study on E-Commerce in India considered platform neutrality, platform-business contract terms, price parity clauses, exclusive agreements, and deep discounting as key e-commerce competition issues. CCI has initiated investigations against Oyo, MakeMyTrip, Zomato, Swiggy, Apple, Amazon and Flipkart, for indulging in vertical integration by restraining competitors, deep discounting, exclusive tie-ups, preferential listing and more. To strengthen competition enforcement in digital markets, CCI is factoring network effects, net neutrality, data masking, data collection, integration, and sharing.

While determining market dominance, CCI has redefined the relevant market by limiting it only to online market segments, without following its earlier practice of combining online and offline markets, thereby, bringing more digital players under scrutiny. Similarly, the absence of a data protection law has not stopped the CCI’s investigation of WhatsApp’s updated terms of service and privacy policy which forced users to share data with Facebook, a group entity. WhatsApp’s excessive data collection and subsequent data sharing for targeted advertisements had anti-competitive implications, inviting CCI’s scrutiny. In a first-of-its-kind order, CCI initiated an investigation against Google for abuse of dominance in the web search and online search advertising market. The investigation covers Google’s unilateral decision on fees payable to news publishers for use of their content in digital advertising; imposition of unreasonable conditions of revenue sharing; opacity and non-sharing of vital marketing data with publishers and displaying snippets on Google without paying publishers.

Constitutional courts have upheld CCI’s proactive enforcement when giants such as WhatsApp, Amazon and Flipkart, challenged CCI’s jurisdiction to investigate digital markets. Although CCI has enough teeth to oversee competition in digital markets, there is need for a regulatory overhaul to protect the interests of digital market stakeholders.

Statutory recognition of tacit anti-competitive conduct such as algorithmic collusion and hub and spoke cartels will improve competition enforcement in digital markets, given CCI’s failure to recognise Ola and Uber’s use of algorithmic collusion in price discovery. Combinations notifiable under the act may be broadened to include deal-based thresholds or conditions governing entities controlling data, thereby, bringing more digital market transactions under CCI’s supervision. The Competition Amendment Bill 2020 attempted to address this by redefining “control” to include any entity exercising material influence over the management or strategic commercial decisions. It also proposed the classification of a transaction as a combination on the basis of any other ground recognised by the government along with the CCI.

Besides amending the anti-trust laws, a robust data protection law is needed to safeguard data handling, processing, storage, integration, and use. Similarly, CCI’s investigation into Google’s abuse of dominance in the news publisher’s case demonstrates the need to recognise news publishers’ rights in a technology-driven world where online platforms exploit publishers’ content for revenue. France, Australia, Germany, and Canada have recognized such rights through statutory amendments including amendments to copyright legislation, mandating payment of license fees by platforms to publishers for the use of their copyrighted content. Likewise, the Copyright Act, 1957, could be amended to give news publishers royalties or fees for the use of snippets.

While competition laws are effectively regulating digital markets, there is room for strengthening competitive markets through suitable amendments to keep pace with the complexities of emerging technology. Surely, the future of antitrust regulation of digital markets appears promising.

Atmaja Tripathy is a senior associate at TMT Law Practice.