Introduction
In December 2022, The Standing Committee on Finance released a report on the ‘Anti-competitive Practices by Big Tech Companies’ in its fifty-third report. Post the release of the recommendations in the lower house, the activities of big tech giants like Google, Apple, Amazon which were previously already under strict scrutiny are now under a more streamlined radar of various competition governing bodies across the globe, let alone the Competition Commission of India (CCI). The committee took inspiration and stressed upon the framework mirroring the Digital Markets Act (DMA) recently adopted by the European Union (EU) with the intent to regulate the entities existing in the digital market’s platform.
Traditional Vs. Digital Markets: Discordant Character and Dynamics
A major mechanism which has furthered the rise of these Big Tech Companies is the dominance of the digital markets over the functioning of traditional markets. There is a stark difference in the functioning of traditional markets vis-à-vis the digital markets. The digital markets have inadvertently led to a rise of some few players in the digital setting to acquire a monopolistic position in the industry, few of which are now known as the ‘Big Tech Companies’. And this dearth of competition may result in various anti-competitive practices by the tech giants.
The gradual but spontaneous switch of the long-established physical economy to delve into a ‘digital economy’ marks an epoch of the third industrial revolution. The ‘digital’ or ‘internet’ economy has gradually started to take an upper hand over the other modes. The chapter 3 of report enunciates on the enhancement of the competition law regime with respect to the digital markets in India.
All across the world, a tremendous change can be witnessed in the trajectory of the emergence of digital markets. In India, the government is stressing upon the digital payment methods in both rural and urban areas that have been widely accepted throughout the country for their hassle-free functioning. Many new regulations, such as the restriction of accessing the data of the user, have contributed significantly towards the promotion of privacy and security of the users.
The rapid development of technology and the rise of the digital age have transformed the way we live, work, and interact with each other. The internet, mobile devices, and social media platforms have revolutionized the way we access and share information, communicate, and consume products and services. While this digital revolution has brought many benefits and opportunities, it has also created new challenges and risks, especially in the area of competition.
Regulation of The Digital Market: An Expedient Approach
Winner-Takes- All- Dynamics: Monopolistic Nature
The committee observed that the functioning of a digital market player is such that with the advent of growth, there is a risk of rapid plummeting of marginal costs trajectory and the consequence is that of a nature of winner-takes-all. Hence, there is a tendency that the digital markets ‘tip’ quickly in a particular direction and disseminates anti-competitive practices during the process.
Recognising Potential Anti- Competitive Practices: SIDIs
One of the key recommendations by the standing committee is the dire requisite to identify the handful number of dominant players that have the potential to undertake anti-competitive practices as ‘Systematically Important Digital Intermediaries’ (SIDIs) based on the various factors like revenue, market capitalization, number of users, etc. The CCI, along with other intermediaries, must work its way synergistically to arrive at a plausible definition of the SIDIs and they should be subject to ex-ante regulation. In addition to this, the committee also addressed upon ten chief instances of Anti-Competitive Practices (ACPs) that require immediate attention. Some of the recommendations of the ACPs included Self Preferencing, Data Usage, Deep Discounting and dynamic pricing, Advertising policies, etc.
Accumulation of Data and UI by Large Tech Companies: Skimming through the Pickle!
The dominance of a few large tech companies in the digital market has raised concerns about their power and influence over the market and consumers. These companies, such as Google, Facebook, Amazon, and Apple, have accumulated vast amounts of data and user information, which they use to improve their services and products. However, this data also gives them a significant advantage over smaller competitors, making it difficult for new entrants to compete on a level playing field.
To address these challenges, many experts and policymakers have called for the need for a Digital Competition Act. A Digital Competition Act would be a comprehensive regulatory framework that would address the issues of competition in the digital market, ensuring fair competition, protecting consumers, and promoting innovation.
Call for a Change: Advent of a Digital Competition Act
The Digital Competition Act would contribute to several key underlying components. First, it would regulate the collection, use, and sharing of data by tech companies. This would ensure that companies cannot use their vast data resources to gain an unfair advantage over smaller competitors. It would also provide consumers with more control over their data, allowing them to make informed decisions about how their data is collected and used.
Second, a Digital Competition Act would address the issue of platform dominance. Tech companies like Google, Facebook, and Amazon have become gatekeepers in the digital market, controlling access to information and services. This has given them an unfair advantage over smaller competitors, who must rely on these platforms to reach consumers. A Digital Competition Act would regulate the behaviour of these platforms, ensuring that they cannot use their power to stifle competition or disadvantage competitors.
Third, a Digital Competition Act would promote innovation in the digital market. This would be achieved by creating a more level playing field for startups and smaller companies, allowing them to compete with larger competitors. It would also encourage investment in new technologies and promote the development of new products and services.
Finally, a Digital Competition Act would protect consumers from the negative effects of monopolies and anti-competitive behaviour. This would include measures to prevent price gouging, limit the use of predatory pricing, and protect consumer privacy in the longer run. The Indian competition law system will be significantly impacted with the enactment and functioning of the Digital Competition Act.
Additionally, fintech giants like ShareChat and Paytm have also reflected the same notion by emphasising on the relevance of a Digital Competition Act in the current market scenario.
Conclusion
In conclusion, the need for a Digital Competition Act is clear. The digital market has evolved rapidly, and it is time for policymakers to update the regulatory framework to reflect these changes. A Digital Competition Act would ensure fair competition, protect consumers, and promote innovation in the digital market. It is time for policymakers to take action to ensure that the benefits of the digital revolution are shared by all, not just a few large companies. More considerations are required, and the introduction of the Digital Competition Act is anticipated to take some time given the wide-ranging ramifications and effects.
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Authors: Ishita Khandelwal and Janhavi Mahalik
Designation: 4th Year B.A., LL.B. (Hons.) Students at National Law University Odisha, Cuttack
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