Introduction
The daily lives of people could hardly be imagined without digital platforms. This is so because it is the place where people can order a taxi and live for a short time or they can buy and sell goods on online marketplaces and join the social media opportunity. During the COVID-19 phase India has witnessed the rapid use of online services, allowing digital platforms to become bigger and stronger. According to the information published by "The Economic Times" India has about 820 million active internet users, 56% of which are from rural areas.1
India being one of the fastest growing market in terms of e commerce has made a great progress in last few years. The mobile phone subscriber base has increased, and therefore the internet has grown to cover all parts of India which in return has escalated the digital economy in India.
Nevertheless, their rapid expansion and strong market positions have brought about such serious concerns with the regulators and the policymakers. The aim is to ensure the market power of these platforms is not misused to the disadvantage of the consumers and competition in the market. The Competition Act 2 was passed in 2002 as a way of solving these issues, which replaced the Monopolies and Restrictive Trade Practices Act of 1969 (MRTP Act)3, which was later repealed.
Challenges of Digital Platforms
Regulation of digital platforms is an elusive task, due to the complex models of business and fast rate of development of technologies. Traditional competition law frameworks are thus not quite responsive to the challenge at hand.
- Network Effects and Market Dominance
Section 4 of the Competition Act, 2002 talks of abuse of dominant position, and among the most significant challenges of digital platforms is the ease to establish and enforce market dominance through network effects. The network effect is harnessed from the value that accrues when one uses the service in a higher number; therefore, using a service, in this case, is more rewarding. This gets to be manifested most in social media, search engines, and e-commerce platforms.
An example is the fact that Google has such strength in the search engine market because of network effects. As more users rely on searching with Google, the platform collects more data, refines its algorithms, and subsequently becomes more attractive to new users. This is a vicious circle that creates a huge barrier for new entrants.
In the case of Umar Javeed and Others Vs. Google LLC and Another4, it was held that Google had abused its dominant status in the online search industry, leading to the exclusion of competing search applications from the market. This behaviour broke Section 4 of the Competition Act, 2002, which forbids companies from exploiting their strong position in a market.
- Data Control and Usage
Digital platforms gather large amounts of data, which gives them a competitive advantage almost impossible for entrants to acquire. This easily brings data dominance close to designing agreements and practices that have anti-competitive ways, which kill competition.
This is very much evident in the case of Amazon, which has been using third-party seller data to launch competing products. It scouts through data of sellers on its platform to be able to tell which products are selling well, and it in turn introduces similar offers at lower comparative prices.
Such practices can cause or is likely to cause an appreciable adverse effect on competition, which is infringement of Section 3 of the Competition Act, 2002.
- Self-preference and vertical integration
Self-preferencing and vertical agreements by the digital platforms can adversely affect the competition in the market. Self-prefrencing refers to incident when a platform prioritises or give preference to its own products or services over the products or services of other competitors. Vertical agreements on the other hand are the agreements amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services. Section 3 (4) of the competition Act deals with vertical agreements.
Competition Commission of India has ordered an investigation against Apple for forcing the developers of the applications to use the in-app payment solution provided by it, in Together We Fight Society v. Apple Inc.5 It is alleged that "Apple imposes commission on transactions and does not allow any alternate payment systems, hence accused in self- prefrencing with its proprietary in-app payment functionality, and having brought into operation circumstances that would not have prevailed but for this self-preferencing with the app developers.".
Strategies for Curbing Anti-Competitive Challenges
- Antitrust Investigations and Enforcement:
Observed globally on the current market activities of the major digital platforms authorities are becoming proactive. Aggressive antitrust investigations and enforcement activities are highly significant for the recognition and solution of anticompetitive behaviors. The European Commission has imposed a fine on Google for abusing its search and advertising power 6 while Facebook faces an antitrust lawsuit filed by the U.S. Federal Trade Commission (FTC).
- Data Portability and Interoperability:
Data portability is the ability of data to move with no consequence to the content, and data interoperability is the ability to integrate two or more data sets. Regulations advancing data portability and interoperability can decrease the entrance barriers and improve the competition. Have regulations in consideration enabling and fostering data portability and interoperability and enforce them. In this way, it can foster innovation and put new entrants into a position to compete on equal terms. For example, the European Union's General Data Protection Regulation (GDPR) has many clauses regarding data portability.
- Platform Neutrality:
There is a need that platforms act as neutral intermediaries in their transactions and not indicate any unwarranted favour to their own services and products. Must be legislated to the fact that platforms be neutral and ensure they do not leverage the controlling position of the platform to the detriment of competitors.
- Collaboration and Coordination:
Given that digital platforms are global in nature, collaboration and coordination across geographies amongst regulators assume a lot of significance to address anti-competitive practices effectively. At this level, developing unified standards and practices regulating digital platforms will ensure consistency and effectiveness.
The Role of CCI
In 2020, the Competition Commission of India undertook a study of the e-commerce market and reported greater price competition and greater price transparency7. The CCI also noted forebodings with e-commerce platforms which simultaneously function as a market place and compete in the same market. In that circumstance, the platforms act disfavoring other sellers to help their own or favored vendors.8 Such discrimination can be imposed in the following ways:
- Better access to transaction data.
- Manipulation of search results.
- Inserts and deletes in reviews and rating by used
CCI has passed approval for several marquee takeovers in the digital sector of late, at the same time remaining wary of anti-competitive practices. Key approvals include:
- Google/Jio (2020)9: This approval came with the caveat that future anti-competitive practices could be scrutinized.
- Google/Airtel (2022)10: The CCI expressed concerns over potential sharing of competitively sensitive information (CSI) between Airtel and Jio but approved the deal after Google committed to data-sharing safeguards.
- Amazon/Cloudtail (2022): Despite ongoing investigations into Amazon's business practices, the CCI approved this acquisition, noting that Cloudtail's online operations would cease to comply with foreign investment regulations.
The CCI has been vigilant about data-related competitive concerns:
- Privacy Policy of WhatsApp (2021)11: The CCI has been investigating the recent changes in the privacy policy of WhatsApp and is apparently abusing its dominance by pushing its users to share information with its other group companies.
- Pre-installation of Google Apps Policies in Google Android: The CCI penalized Google for its pre-installation policy regarding apps, which further resulted in the reduction of competition amongst app developers.
- MakeMyTrip and Oyo (2022)12:, Both were accused of having put unfair conditions on hotels so that the latter could not provide better prices on other platforms. The CCI imposed a fine on them as well.
Conclusion
Although digital platforms have dramatically changed markets and provided significant advantages for consumers, their dominance in the market poses significant risks for competition and consumer welfare. At the core of this is the requirement for a well-rounded strategy that boosts creativity while also preventing market exploitation. Policymakers and regulators must adjust their guidelines and work together globally to effectively address the risks of regulating digital platforms in order to maintain a competitive, dynamic, and consumer-friendly digital economy.
Footnotes
1. https://economictimes.indiatimes.com/tech/technology/how-india-is-using-the-internet/articleshow/108354854.cms?from=mdr
2. https://www.cci.gov.in/legal-framwork/act
3. https://www.mca.gov.in/Ministry/actsbills/pdf/The_Monopolies_and_Restrictive_Trade_Practices_Act_1969.pdf
4. https://www.cci.gov.in/antitrust/orders/details/1070/0
5. https://www.cci.gov.in/antitrust/orders/details/32/0
6. https://ec.europa.eu/commission/presscorner/detail/en/IP_19_1770
7. https://www.cci.gov.in/images/marketstudie/en/market-study-on-e-commerce-in-india-key-findings-and-observations1653547672.pdf
8. Market Study on E-Commerce in India: Key findings and Observations, Competition Commission of India, 08th January 2020.
9. https://globalcompetitionreview.com/guide/digital-markets-guide/third-edition/article/india-nurturing-competition-in-rapidly-evolving-digital-space
10. The Economics Times- https://economictimes.indiatimes.com/news/company/corporate-trends/competition-commission-approves-google-bharti-airtel-deal/articleshow/92578223.cms?from=mdr
11. COMPETITION COMMISSION OF INDIA Suo Moto Case No. 01 of 2021
12. https://www.cci.gov.in/images/pressrelease/en/press-release-no-512022-231666198134.pdf
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