BY: Samriddha Sen
(This post is the first of a two part series on the topic – ‘India’s Antitrust Problem with Big Tech’)
INTRODUCTION
The term ‘Big Tech’ colloquially refers to the largest and most dominant technology firms operating in global digital markets. As opposed to its non-digital counterparts, digital markets inherently possess certain attributes which render it increasingly susceptible to tendencies of market dominance and concentration. Such attributes include fixed non-variable cost of information goods creating high entry barriers for new potential entrants; direct and indirect network effects; and low marginal and distribution costs for expanding access and distributing products or services to additional consumers, among others. These attributes enable Big Tech companies to acquire concentrated market power in a given sector and leverage said power to exercise dominance in ancillary and associated sectors. For instance, Facebook and Google’s digital advertising dominance is primarily due to their control and ownership of vast data resources across different sectors and such cross-sectoral operation enables them to recoup losses from one product or market.
In this context, three categories of market failures are apparent: (i) excessive market power (monopoly) caused by anti-competitive behaviour or entry barriers, (ii) externalities and (iii) presence of information asymmetries (absence of price knowledge etc.). Negating any theoretical preconceptions that rapid technological innovation can correct dominance-based market failures in cutting edge digital markets as is evident from Microsoft’s tying-in practice, Big Tech stifles innovation in said markets by establishing “Kill Zones” through killer acquisitions. Since market efficiency, being the fundamental basis for antitrust intervention in any given market, [1] is the opposite of market failure, therefore any overarching justification for regulatory intervention in this sector must be predicated upon accurately identifying what such market failure entails in the present context and responses to such by the current antitrust regime.
The first part of this piece attempts to identify the dimensions of anti-competitive practices of Big Tech and the relevant domestic regulatory responses thereto, whereas the second part analyses competition concerns persisting with the nature and operation of Big Tech companies which hinder the regulatory capacity of Competition Commission of India ( hereinafter ‘CCI’) in effectively responding to the issues identified in the first part as well as highlight the overlapping jurisdiction of the CCI and sectoral regulators as a consequence of the continuingly expanding horizons of Big Tech’s influence on allied and ancillary sectors.
ANTICOMPETITIVE PRACTICES OF BIG TECH
Antitrust laws aim to promote economic competition [2] and control restrictive agreements which limit access to markets or restrain competition. Big Tech’s anticompetitive practices and the relevant antitrust responses thereto under the current competition law regime in India governed primarily by the Competition Act of 2002 (hereinafter ‘Act’) can be effectively grouped into three broad categories: (i) anti-competitive agreements, (ii) abuse of dominant position and (iii) merger control (combination).
(i) Anti-Competitive Agreements:
Section 3 of the Act provides that any agreement which causes or is likely to cause an Appreciable Adverse Effect on Competition (hereinafter ‘AAEC’) is prohibited and void, further enlisting the types of agreements that are prohibited under the Act. Within such a regulatory context, Big Tech has arguably engaged in arrangements that can qualify as anti-competitive agreements for the purpose of Section 3. An example for such would be Microsoft’s practice of tying of products along with its operating systems (‘OS’)[3] or Google’s arrangement with smartphone manufacturers to pre-install a suite of Google apps in lieu of financial incentives.[4] However, while such cases of tying-in have received considerable scrutiny from western regulators, CCI has adopted a rather deferential approach as is evident from its clearing of tying-in arrangements made by Apple with respect to the sale of locked iPhones requiring customers to avail services of Airtel or Vodafone alone, which CCI did not consider to be a Section 3(4) violation;[5] and similarly clearing tying-in arrangements instituted by Facebook-owned WhatsApp wherein it integrated its payments app ‘WhatsApp Pay’ within its messaging app, on the grounds that: (a) there existed an absence of coercion in using both products together and (b) it did not amount to foreclosure of the market since there are other major competing players in the evolving UPI digital payments market.[6]
(ii) Abuse of Dominant Position:
The regulatory conception of dominance, as relied upon by the CCI, is defined in terms of a position of strength enjoyed by an enterprise, in the relevant market, which enables it to operate independently of competitive forces. In this vein, the relevant market is used to delineate the portion of the market in which competition will be assessed and is determined with reference to the relevant product market or geographic market or both. For Big Tech, abuse of dominance can manifest in the manner of self-preferencing i.e., the manipulation of the position of search results or of search engine algorithms to favour its own vertical services. An example of Big Tech’s abuse of dominance through self-preferencing was in Matrimony.com Limited vs Google LLC wherein CCI, while adjudicating on the issue of Google’s abuse of dominance in the search engine sphere, observed that the ‘relevant market’ in the IT industry which is essential for assessing abuse of dominance, need not involve an exchange of money. Big Tech has also been accused of abusing its dominant position in one relevant market by leveraging such dominance to enter into another market. In Baglekar Akash Kumar v. Google LLC, CCI rejected the contention that Google was abusing its dominant position in the email services market by integrating its video conference app (‘Google Meet’) with its email service (‘Gmail’) to enter the market of specialized video conferencing services, on the ground that it did not amount to foreclosure of market.
(iii) Merger Control:
The Act defines combination as the acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises when the combining parties satisfy thresholds specified in terms of assets or turnover in India and abroad and prohibits combinations that cause or are likely to cause an AAEC. In this regard, while Big Tech companies have made over 400 acquisitions globally within the last decade, India has seen large-scale investments by Big Tech in Reliance’s Jio Platform and in addition to such investments, has also seen acquisitions to the likes of Google-Halli and Where’s My Train. However, killer acquisitions which resultantly wipe out competition by essentially taking over innovation have not yet come under regulatory scrutiny by the CCI.
[1] Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice (West Group 1994) § 1.1.
[2] Ohio v Am Express Co 138 S Ct 2274, 2290 (2018).
[3] United States v Microsoft Corporation 253 F 3d 34 (DC Cir 2001).
[4] Patrick Todd, ‘Out of the Box: Illegal Tying and Google’s Suite of Apps for the Android OS’ (2017) 13 European Competition Journal 62.
[5] Sonam Sharma v Apple Inc CCI Case No 24 of 2011.
[6] Harshita Chawla v WhatsApp Inc and Facebook Inc CCI Case No 15 of 2020.
(Samriddha is a law undergraduate at the Department of Law, University of Calcutta. The author may be contacted via email at samriddho66@gmail.com)
Cite as: Samriddha Sen, ‘India’s Antitrust Problem With Big Tech—Part 1’ (The RMLNLU Law Review Blog, 27 October 2021) <https://rmlnlulawreview.com/2021/10/27/indias-antitrust-problem-with-big-tech-part-1/> date of access
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