[By Dhanshitha Ravi & Rishabh Guha]
The authors are students of Symbiosis Law School, Pune.
INTRODUCTION
Interoperability refers to the synergy between different systems to communicate with one another. Users can access multiple complementary services through a single access point. An example of interoperability in our everyday lives is the ability to upload one’s Instagram content on Meta (erstwhile, Facebook). The Draft Digital Competition Bill, 2024 (Bill), released by the Committee on Digital Competition law on 27 February 2024 mandates interoperability of third-party applications by Systemically Significant Digital Enterprises (SSDEs) i.e., Big Tech companies, on their platforms. This coincides with the European Commission’s active role in clamping down on the practices of Tech giants to an extent where Apple was forced to allow sideloading of applications from native websites and third-party app stores. The move seeks to comply with the interoperability mandate of the Digital Markets Act (DMA) that is effective from March 2024.
At this juncture, though mandating interoperability is in vogue, it is not only crucial to decipher where this modern remedy draws its legal foundations from, but also evaluate the same in the context of technological feasibility.
INTEROPERABILITY: A MODERN-DAY APPLICATION OF THE ESSENTIAL FACILITIES DOCTRINE
Concept of Essential Facilities Doctrine (Doctrine)
Briefly, the Doctrine mandates a duty on the monopolist incumbent controlling such essential facilities to ‘share’ such inputs with the competitors. A four-pronged test was devised based on which an input shall be determined as ‘essential’, if the following factors are satisfied –
- A monopolist controls the essential facility
- A competitor is unable to practically duplicate the essential facility.
- The monopolist is refusing the use of the facility to a competitor
- Providing the facility is feasible.
Furthermore, the courts also examine whether the facility should be a necessary input in a distinct, vertically related market. Though, traditionally, the doctrine has been applied to infrastructural facilities (such as railway bridges and telecommunications networks, to name a few), however, scholars have urged its applicability to regulate Big Tech.
Warranting application of EFD to regulate Big Tech
To understand whether the Doctrine can be directly applied while regulating Big Tech platforms, it is vital to consider whether it can be deemed as an essential facility and it is not feasible for the competitors to duplicate the same. Only then it is possible to establish a link between interoperability as a remedy in the modern sense to the sharing of facilities that is mandated, once the court opines that the facility is essential.
Firstly, in evaluating whether digital platforms are truly ‘essential facilities’, the core argument revolves around the assertion that these platforms are the railroads of the modern era which connect groups of consumers on either ends i.e., business users (sellers) and end consumers. Simply put, the usage of these platforms directly determines the volume of business or visibility that a seller gets and correlates to the number of choices that a consumer, by virtue of being a ‘bottleneck’ i.e., a service/an infrastructure that controls a process for which there is no sufficient bypass. This argument can be supported by the Court of Justice in Google and Alphabet v. Commission (Google Shopping case) which held that a search engine represents a ‘quasi-essential facility’ with no actual or potential substitutes. Furthermore, even the Competition Commission of India (CCI) in XYZ v. Alphabet Inc. & Ors. (Google Playstore case) has recognised that Google Playstore is a “critical gateway between app developers and users”, thereby indirectly affirming the theory that these platforms are indeed essential in the modern times.
Secondly, the requirement is that a ‘monopolist’ controls the essential facility. While prima facie reading shows that the tech space witnesses a massive influx of new companies, a deeper probe will reveal that the majority of the market share is still held by Google, Apple, Meta, Amazon and Microsoft (GAMAM), acting as gatekeepers, equivalent to monopolists in the traditional sense. As observed by the CCI in Umar Javeed & Ors. v. Google & Anr. (Google-Android case), the status quo maintained by GAMAM is attributable to strong network effects.
Thirdly, once a facility has been deemed as ‘essential’, the Courts assess whether competitors can reasonably duplicate the facility before mandating sharing. As discussed previously, due to advantages of network effects, it is impossible to duplicate the same without incurring significant costs.
Manifestation of the doctrine
In the EU, the DMA designates certain Big Tech platforms that serve as an important gateway for ancillary markets, as Gatekeepers supplying ‘Core Platform Services’, such as online search engines, online social networking platforms and operating systems, to name a few. Similarly in India, the Bill that draws inspiration from the DMA, designates such core platforms as ‘Systematically Significant Digital Enterprise’ (SSDE) supplying a ‘Core Digital Service’ in India.
Once designated, the entities will have to fulfil a set of behavioural obligations and ensure interoperability of third parties with the gatekeeper’s own services, so as to prevent refusal to access services that act as important gateways for business-to-business and business-to-consumer communication under Section 13 of the Bill and Article 5 of the DMA.
Thus, even though the terminologies differ, at the heart of both the legislations lie the intent to regulate such platforms that possess the characteristics of essential facilities, which if in the traditional sense would have required ‘sharing’, the modern-day application of which is interoperability.
MANDATING INTEROPERABILITY: ESTABLISHING A BOUNDARY
As much as regulating abusive behaviour by these Big Tech platforms is the need of the hour, mandating open sharing of platforms i.e., ‘interoperability’ might be problematic. Currently, the DMA mandates the platform to ensure interoperability and allow sideloading as well.
Technological considerations
It is argued that technology considerations take a back seat while mandating interoperability, thereby not being truly ‘feasible’. Scholar Guggenberger has suggested a renewed approach for the Doctrine wherein after an appropriate amortisation period, the regulator would mandate horizontal interoperability that would require the platforms to provide open access to their Access Point Interfaces (API). This would mean that Amazon would display the prices offered on rival platforms and Facebook would deliver and display messages to people operating on other platforms like Twitter. Prima facie while this appears to be a great move in bolstering competition and ensuring accessibility, it comes at the cost of endangering the very fabric of technological integrity; a subject in which antitrust authorities are not well-versed.
In light of this, technology experts argue that if interoperability is allowed, privacy and security will inevitably be compromised. If we consider messaging services, it would require sharing the encryption keys with other applications, whose security standards may not be at par. A manifestation of this threat was witnessed when Facebook’s data was misused by Cambridge Analytica, after which it had to shut down the platform API used by third-party applications to access the data. Most importantly, if such a privacy concern arises, the core platform seeks to absolve itself of any liability if such interoperability is mandated. Recently, under surmounting pressure, Apple has agreed to allow interoperability to the extent of operating third-party app stores but has explicitly stated that it shall not be held liable in case there are any security threats that ensue out of the same.
To tackle this, Article 6 of DMA has imposed the obligations on the Big Tech platform to ensure that interoperability does not compromise technological integrity and security. Moreover, the Bill requires these platforms to protect what is ‘integral’ to their platform. Hence, it is argued that the regulators themselves acknowledge the potential trade-off involved in the quest to regulate Big Tech. The National Company Law Appellate Tribunal seems to have recognized this much earlier and reversed the order of the CCI that sought to allow sideloading in the Google Android case.
Thus, the regulators have to tread with heightened caution while mandating ‘sharing’ of these digital facilities.
Paradoxical Antitrust Concerns
Per Verizon Communications Inc. v. Law Offices of Curtis Trinko, if such access is mandated, then it may lessen the incentive for the monopolist as well as the competitor to invest in innovation. Also, the Court pointed out that mandated sharing would require the authority to be the ‘central planner’ which would require determination of price or quantity, leading to excessive exercise of powers. Moreover, compelling sharing between competitors could result in the ultimate evil that antitrust was tasked to thwart: collusion. Compelled interoperability could hurt the consumers in the long run, as it runs the risk of limiting product differentiation to the extent of homogenising everything into a single firm.
Clash with Intellectual Property Rights
Mandating interoperability ensues foraying into the intellectual property rights of the SSDE. In light of the Telefonaktiebolaget Lm Ericsson v. Competition Commission of India & Anr., wherein the Patents Act was given primacy over the Competition Act, a conflict is pertinent, requiring reconciliation.
SUGGESTIONS AND CONCLUSION
Schumpeter propounded that a close relationship between market power and innovation is very important and that only those with the former can sustain the cost involved in achieving the latter. Any drastic antitrust intervention may disturb the very foundation of incentive structures that foster technological innovation. This would mean that although it is enticing to mandate blanket ‘sharing’ or interoperability of such platforms through the application of the Doctrine, it would be advisable to mandate a duty to deal instead. This would be a more viable option in terms of not only ensuring fair access, but balancing technological considerations and the Big Tech platform’s incentive to innovate. For instance, recently when Google removed certain applications of Indian startups from its platform, such companies approached the CCI to hear the issue.
Despite the Doctrine being a powerful tool to deal with Big Tech, the dangers of replicating enforcement of typical remedies in the digital realm could be counterproductive, thereby requiring extensive inquiry before enforcement. Thus, it is argued that although it would be time-consuming, a case-to-case duty to deal, could deter Big Techs from abusing their power in the future, in the light of the threat of such an imposition.