Competition Law

[By Sharmita Sawant]  The author is a student at King’s College, London.  Introduction: Digital economies have posed complicated legal questions that mandate the expansion of legal ideologies and conceptions to assimilate the changing nature of businesses. The issues that we are faced with in these economies stand at the cusp of Data Protection, Consumer Protection, and Antitrust laws. The debate around using antitrust law to solve data-related issues has been a matter of discussion for a long time-pioneers being the Google/DoubleClick merger case in the US and EU[i]. A general progression is seen in the approach of regulating agencies and academia when it comes to addressing issues related to data markets. Maybe it is the fear of false positives, chilling effect on innovation, or the cultural lag; agencies are still squeamish about applying Antitrust rules to big data companies. Nevertheless, the scene is changing as a nuanced understanding of the sector is making business behaviour and theories of harm more prominent. One of the examples of this change is the WhatsApp and Facebook privacy policy case in Germany and India.[ii] The data sharing policy of Facebook and its subsidiary WhatsApp has come under the radar of the antitrust authorities for abusing its dominant position in the market and imposing unfair privacy conditions on its consumers. The critical point of discussion in both these cases has been the jurisdictional issue- whether privacy breaches fall under the jurisdiction of Antitrust and, if so, what is the correct forum for adjudication of this issue. This article will explore the Competition Law, Data Protection, and Privacy law interplay in the context of the WhatsApp privacy litigation in India. The first part of the article will outline the jurisdictional debate in the WhatsApp case, highlighting the various arguments put forth by the opposition and the Commission. Following this, the second part is dedicated to the current legal framework, which deals with privacy issues in India, its drawbacks, and its characteristics. Finally, the author looks at whether antitrust is the correct forum to answer privacy issues in the context of the WhatsApp decision. 1] WhatsApp Privacy Case 2021- An Overview: The Competition Commission of India took suo-motu cognizance of WhatsApp’s new Privacy policy with its order dated 24th March 2021. WhatsApp’s updated privacy policy included terms and conditions which allows it to share user data across all informational categories with other Facebook Companies. It notified its users to accept the new policy on a ‘take-it-or-leave-it basis to continue using the services of the App. CCI found that the new privacy policy violates Section 4 of the Competition Act, making a prima facie case for abuse of dominant position. Both WhatsApp and Facebook are made a party to the ongoing suit. CCI held that WhatsApp is a dominant player in the market for “over-the-top messaging apps through smartphones in India.” The Commission relied on its market analysis in the In Re Harshita Chawla and WhatsApp Inc. case to reaffirm that WhatsApp works on direct network effects, wherein, increase in the usage of a particular platform leads to an increase in its value for the other users[iii]. The network effects as well as lack of interoperability between various messaging platforms work in favour of WhatsApp. This makes it difficult for the users to switch apps easily, making the service provided by WhatsApp not substitutable.CCI noted that these conditions made WhatsApp is an entrenched entity which it is leveraging to impose unfair terms on its users. CCI observed that privacy is a crucial non-price factor when it comes to competition. It held that a reduction in consumer data protection and privacy is considered as a reduction in quality under the Competition Act. Lower privacy not only impacts consumer welfare but also has exclusionary effects.CCI opined that integration of consumer data reinforces the dominant player’s position in the market which it can use in neighbouring or unrelated markets to increase entry barriers. WhatsApp challenged this decision before the Delhi High Court.[iv] WhatsApp argued that CCI lacks jurisdiction in the matter due to the pending litigation before the Supreme Court, dealing with WhatsApp’s Privacy Policy under Article 21 of the Constitution. They also relied on the In Re Shri Vinod Kumar Gupta and WhatsAppjudgement wherein CCI had declined to look into WhatsApp’s privacy policy in 2016, stating that it was outside the purview of the Competition Act.[v]The court replied by clarifying that the scope of the CCI is vaster and is not confined to the issues raised before the High Court or the Supreme Court in this matter. The High Court also upheld CCI’s observation that data sharing between WhatsApp, Facebook, Facebook allied apps, or third-party apps has led to degradation of non-price factors of competitiveness, thus causing consumer harm. Stating these reasons, the court reiterated that the matter falls within the jurisdiction of CCI. It is interesting to see how CCI’s views have changed through the years on privacy and data protection. This is a welcomed change in the right direction, but with the chaos of privacy laws in India, the jurisdictional challenge is expected to get more complicated. Especially with the new Data Protection Bill, this debate is just in its nascent stages. 2] Where are we at-Privacy and Legal Framework in India:  What happens when a data giant like Facebook or Amazon breaches its user’s privacy for monetary ends? What authorities does one approach, and what redressal does one have? Indian privacy and data protection laws at present are laid out in an overlapping patchwork fashion. Various laws, regulations, and guidelines govern a specific subset of data or a particular type of data protection breach. Privacy is a fundamental right and is a quintessential element of Article 21 of the Indian Constitution.SinceJustice K SPuttaswamyand Anr vs. Union of India, the right to privacy can be enforced by anyone as a fundamental right, irrespective of any sector-specific legislation[vi]. Besides, personal data protection is mandated under the IT Act, 2000- specifically under the Information Technology (Reasonable Security Practices and

[By Sanchit Khandelwal & Amritesh Anand]  The authors are students at the NALSAR University of Law, Hyderabad.  E-commerce platforms and offline retailers and sellers on the e-commerce platforms have been at loggerheads for quite some time now. Various trade unions and industry groups have not shied away from utilising all available platforms, be it through legal battles or through electoral lobbying, to further their demand of tightening the strings on the market operation of ever bourgeoning e-commerce platforms. In response, the Government of India has recently been widening its regulatory oversight on the market practices of these platforms. The proposed amendments to the Consumer Protection (E-commerce) Rules, 2020 (hereinafter referred as “Draft Amendments”) by the Department of Consumer Affairs hints towards the State’s next attempt at tightening the noose on e-commerce platforms and absorb demands of groups voicing the interests of offline retailers and sellers on these platforms. The Draft Amendments, through the introduction of newer concepts and a stricter framework, seek to usher in transparency in the e-commerce platforms and further bolster the regulatory regime to curb the perceived unfair trade practices by ensuring that domestic manufacturers and suppliers get fair and equal treatment on e-commerce platforms. However, several provisions under the Rules proposed have a noticeable overlap with the settled domain of the Competition Commission of India (hereinafter referred to as “CCI”). This overreach is mirrored both in the form of explicit reiterations of sufficiently established antitrust concepts and imposition of restrictions that exclusively fall within the Competition law realm and are pending investigation before the CCI. The authors in this article argue that this attempt to over-reach the precincts of COPRA through over-lapping provisions of law would result in legislative ambiguity, which would then lead to unintended consequences in the form of forum shopping, enforcement failures, administrative inefficiency, enforcement overlaps and regulatory arbitrage. Rules sliding in the regulatory mandate of the CCI Abuse of dominance Rule 5(17) of the Draft Amendments proscribes an e-commerce entity from abusing its dominant position. For such assessment, the factors already laid down under the Competition Act are to be considered. This proposition is at best, redundant, and at worst, counterproductive. The Competition paradigm already provides a comprehensive framework to tackle issues stemming from abuse of dominance (u/s 4), which have been enshrined keeping in mind the CCI’s expertise in investigating complex market structures and unique challenges posed by violating entities. Although currently, the exact scope and intent behind the inclusion of this proposition remain unclear, the Draft Amendments do aim to lay down a complete code for regulating the e-commerce industry, thus engendering the possibility of misuse at the hands of the very entities that the amendments seemingly intend to target. Authorities under COPRA are ill-equipped to tackle instances of abuse of dominance since they lack sufficient know-how. These authorities have been designed keeping in mind the ultimate objective of COPRA i.e. protection of consumer interests, and not to get muddled with regulating anti-competitive behaviour. Moreover, since the Rule is a verbatim repetition of the concept as it exists under the Competition law framework and does not add the law to any extent, it serves no value addition to the current jurisprudence but only causes legislative ambiguity. However, the apparent jurisdictional overlap does provide e-commerce giants with the opportunity to engage in forum shopping and regulatory arbitrage in order to either circumvent or deliberately protract investigations and defeat the purpose of such proceedings. Businesses with deep pockets would have the capacity to leverage such intersections by filing multiple legal proceedings and delaying enforcement of orders, while newer and upcoming entities would be the ones to bear the brunt of such practices, as any delay in enforcement would be tantamount to extended persistence of the alleged anti-competitive behaviour. In light of the dynamic nature of markets and the need for swift correction, the ill-effects of such practices become even more pronounced. Even though Section 19(2) of the COPRA provides for referring a matter to another regulator after a preliminary inquiry is conducted, the concomitant extension of the investigation timeframe might diminish the efficacy of the ultimate order with regards to remedying the anticompetitive conduct. Since the Competition Act is sector agnostic, the law dealing with abuse of dominance is constant for all sectors. Ergo, no valid rationale exists for the inclusion of this proposition in the draft amendments. Ex-ante vs. Ex-post facto “The ultimate goal of competition policy is to enhance consumer well-being. Competition policy towards the supply side of the market aims to ensure that consumers have adequate and affordable choices.”  Pursuant to this objective, the Competition framework in India employs a ‘rule of reason’ approach while examining alleged anti-competitive practices, wherein the assessment is undertaken on a case by case basis. This assessment takes into account anti-competitive effects emanating from the conduct under scrutiny on the one hand, and pro-competitive justifications of the restraints which enhance consumer welfare under Section 19(3)(d) of the Competition Act, on the other. The ensuing assessment aims to do a balancing act between the anti-competitive and pro-competitive effects, and the entity under scrutiny can be exonerated if the latter outweighs the former. This assessment mechanism is widely regarded as furthering the consumer’s best interest and has become a fundamental cornerstone of modern antitrust jurisprudence. In contradistinction, some of the proposed restrictions on the activities of e-commerce entities in the draft amendments have the effect of imposing ex-ante prohibitions, premised on the unfounded assumption that such activities result in consumer harm. Furthermore, no scope for rebuttal of such prohibitions has been provided. Rule 5(16) prohibits e-commerce entities from organizing ‘flash sales’. Flash sales for such purposes have been defined under Section 3(1)(e) of the COPRA as offering products at “significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time with an intent to draw large numbers to consumers”. The accompanying proviso restricts the application to instances of selling which involve “fraudulently intercepting the ordinary course of

[By Tawishi Beria]  The author is a student at the Jindal Global Law School.  With the rise in digital activity across the globe, there has been a growth in the might of a select few companies in such digital markets. This has raised several concerns, including antitrust and privacy-related issues. Consequently, there has been increased discussion and debate on the need to alter how competition authorities conduct merger assessments in digital markets. One such proposition is the use of non-price parameters in the merger review process. This is the second part of a two-part piece that seeks to analyse two specific non-price parameters, namely, innovation and data privacy in merger review considerations in digital markets. Part I of this piece (available here) assessed the need to consider the parameters of innovation and data privacy independently. It also assessed the need for striking a balance between the two and briefly deliberated on how such a balance could potentially be achieved. This part of the piece assesses the application of the factors of innovation and data privacy in two deals involving Facebook, i.e., Facebook/WhatsApp and Facebook/Instagram given that these deals have been subject to intense debate. It concludes by highlighting the need for changes in the assessment of mergers on part of competition authorities. The Facebook Saga Facebook is one of the BigTech firms that has engaged in a significant amount of M&A activity, entering into deals with not just fairly well-known companies like WhatsApp but even targeting smaller start-ups. It has also been accused of hurting innovation by copying and killing off the acquired entities. Additionally, privacy concerns with the functioning of Facebook and its allied entities (like WhatsApp’s recently updated privacy policy) are no secret. Accordingly, an analysis of its M&A deals in hindsight is warranted. 1.     Facebook/Instagram The Facebook/Instagram deal tilts towards innovation considerations in merger review generating significant debate on the issue. Concerns of privacy invasion were also raised when the deal was announced with many users removing their data (pictures) from and even quitting Instagram. In 2012, when the 1-billion-dollar deal was approved, neither the FTC, not the UK OFT raised any problems, opining that in the short run, Instagram would not be able to compete with Facebook. The harm to innovation caused by this deal was brought to the fore recently in the US congressional hearing on the dominance of BigTechs. Facebook’s internal emails revealed communications between CEO Mark Zuckerburg with CFO David Ebersman, stating that the purpose of M&A activity was the integration of products and neutralising the competitor. In terms of privacy concerns, before the acquisition, Instagram had privacy-protective policies with the company pledging to not disclose personally-identifying information, except to certain persons. However, Instagram’s privacy policy dealing with changes in ownership now allows the transfer of information of users to the new owner. Adverse impact on consumer welfare results from this. Had the innovation and data privacy parameters been considered by the authorities at the time the deal was cleared,it would have been conditionally cleared or even not approved at all owing to its evident anti-competitive purpose. The question of a balance between the two factors does not come in here since the deal essentially compromised both. However, even if the authorities did not foresee the loss of innovation at the time, the privacy concerns were largely overlooked, despite contentions that authorities paid more attention to the users’ side. 2.     Facebook/WhatsApp The Facebook/WhatsApp deal, on the other hand, tilts towards data protection and privacy considerations and has generated significant debate on the issue. Despite indications of the privacy of users being compromised if the two companies were to match and link the data collected by each of them (user’s phone numbers through WhatsApp and identity through Facebook), this aspect was taken lightly at the time of approval. The innovation aspect was fairly minor since the underlying assumption was that consumers would merely switch to other service providers if the merged entity reduced innovation, possibly underestimating the operation of network effects. While Facebook had ensured the authorities that it would not alter WhatsApp’s privacy policies which were arguably superior pre-merger, two years after the deal went through, the policies were changed. These changes were made to improve the product offerings (possibly aiming for innovation and consumer welfare), but were, in reality, a direct effect of Facebook’s attempt to monetise its investment in WhatsApp. The Commission did assess the impact of network effects in the consumer communications app market, noting that services are often offered free to reach a critical mass and exploit such effects. However, the impact of an increase in market power arising from network effects, keeping consumers locked in, and reducing the incentive to innovate was arguably overlooked. In this case, aspects of innovation and privacy in terms of the potential to gain competitive advantage through big data and operation of network effects were looked at in some more detail than the Facebook/Instagram deal. While this may reflect an increased willingness on part of the authorities to undertake robust market analysis, dismissing the concerns that came up essentially brings the assessment back to square one. Had the closer focus been placed on the balance between the factors, the deal could have been conditionally approved or not cleared at all, instead of later imposing a fine on Facebook for providing misleading information. The way ahead While a trade-off between losing out on beneficial mergers and creation of more competition post-merger is often considered, that between factors looked at for merger review also warrants discussion. The reality post-merger is much different from what was anticipated while approving the deal; conglomerates have been seen as not becoming successful innovators as apprehended and compromising on user privacy by combining data obtained from individual companies. Facebook’s acquisition of Instagram and WhatsApp particularly appear to be horizontal mergers in hindsight, which should have undergone proper scrutiny by authorities. Several authors have suggested the need for changes in enforcement, proposing a shift from ex-ante regulation to ex-post regulation

[By Tawishi Beria]  The author is a student at the Jindal Global Law School.  Part I Introduction The rapid rise of digital activity across the globe, bringing with it a growth in the might of a select few companies in such digital markets, has raised several concerns, including antitrust and privacy-related issues. In light of the nature of digital markets, characterised by very strong network effects, use of big data, continuous innovation, the existence of barriers to expansion and entry and so on, regulation of any activity that seeks to augment the market power of these digital companies becomes necessary. Ex-ante regulation of digital markets has been suggested by some scholars as a way to face the challenges arising. Considering this, looking at how reviewing mergers and acquisitions (‘M&A’) warrants a change in terms of digital companies becomes pertinent, given that M&A is a tool that already entails ex-ante assessment on part of the competition authorities. BigTechs have been observed as being ‘remarkably active in M&As’ for various purposes. Even though M&A transactions are generally seen as entailing softer antitrust scrutiny, certain factors are analysed by competition authorities looking at the counterfactual. Deals involving digital companies, two factors that become important are innovation and data protection and privacy. Through this article, the author seeks to assess the interplay of conflict between these factors and understand the need for balance and where it lies. This is the first part of a two-part piece. In Part, I, the need for considering innovation and data privacy as factors during merger review in digital markets is assessed independently. This part further looks at the interplay and conflict between the two factors in terms of actual and hypothetical scenarios. Part II analyses two deals involving Facebook and concludes by highlighting the need for changes in enforcement. Considering the factors independently Competition authorities across the world use various determinants to assess the possible pro-competitive and anti-competitive effects of an M&A deal on consumers. Some factors can clearly be demarcated into these categories. However, the two factors that are the subject of this paper-innovation, and privacy, do not strictly classify as either inherently pro-competitive or anticompetitive and can take both forms on a case-to-case basis. In this part, the author briefly argues for considering these factors in merger review, given the debate. 1.     Innovation Although innovation has always been considered as a factor alongside traditional factors like price, quantity, consumer choice, and quality in merger assessment, it has recently gained more attention. Notably, evidence from digital markets on this front is still almost non-existent. However, killer acquisitions in digital markets are very common, requiring consideration of the innovation parameter. When entities with diverse products/services merge, the portfolio effect also comes into play, facilitating increased range, bundling, leveraging, and ultimately deterring innovation. In markets like digital markets, firms can safely be assumed to compete in ‘innovation spaces’ in addition to the relevant product market, mandating analysis. Even though not related to digital markets, the Dow/DuPont merger laid the ground for and provides valuable insights into the innovation theory of harm in M&A deals. In that case, the concern was that ongoing parallel innovation efforts would be disincentivised due to the merger of horizontal competitors. Likewise, the concern in digital markets is that of continued investment in innovation by merged entities. Further, in the case of digital companies, when data, especially in large amounts, comes into the equation, the focus shifts to an interest in data from one previously purely in innovation. Therefore, keeping a check to ensure innovation is necessary. 2.     Data Privacy The consideration of privacy concerns arising from an M&A deal has been debated, since it is argued by some that privacy is not a competition law-related factor, warranting no consideration. However, in digital markets where M&A activity is largely data-driven, the protection of this data and privacy is required. In terms of ensuring consumer welfare, the vulnerability of consumers has to especially be considered in countries like India where consumer protection laws are relatively insufficient and data protection laws are not in place yet. Even in other countries, data protection laws cannot block M&A deals and digital companies do attempt to comply with such laws; accordingly, the author believes that considering the privacy factor reflects the best approach. Given the merged entity’s larger user base, the potential competitive advantages that can be gained by accessing and using big data are relevant. Over the last few years in some data-driven markets, Big Techs have increased their market share, instead of being disrupted by new and innovative services. An increased market share (a direct consequence of any M&A activity) also means an increased volume of data rich in variety and value, along with an enhanced velocity of generation and processing of such data. Coupled with other characteristics of digital markets like network effects and barriers to entry and expansion, it becomes extremely essential to keep a check on the activities of entities that have such data at their disposal. Looking for the Balance Having set out the need to consider these factors, the author now seeks to assess the required balance. The possible interface between the two in certain approved deals and hypothetical situations is elaborated on, addressing questions like what if a particular deal adds to innovation but jeopardises privacy or what if a deal might result in excessive market power but increases innovation and enhances data protection, or how to determine the weight given to these factors. Looking at these factors in actual cases shows the non-consideration of privacy concerns in approving deals. In Microsoft/Yahoo Search! for instance, Yahoo’s continued incentive to innovate as well as Microsoft’s potential ability to make innovation for alternative intelligent solutions difficult was considered, but privacy was not. Google/DoubeClick is another deal that reflects complete disregard of data privacy (particularly in terms of targeted advertising) by the Commission. This is because, on assessment, the authorities found the data collected by DoubleClick to be relatively narrow in scope, whereas the

[By Ishu Gupta]  The author is a student at Symbiosis Law School, Noida.  Recently, the Karnataka High Court (‘HC’) pronounced its judgement in Amazon Seller Services Pvt. Ltd. & Anr. v. CCI and Ors. (‘Amazon/Flipkart v. CCI’), a writ petition filed under Articles 226 and 227 of the Constitution of India, 1950 seeking to set aside an order of the CCI under Section 26(1), Competition Act, 2002 (‘CA’02’) against Amazon and Flipkart. Amazon/Flipkart v. CCI involved the questions of 1) non-application of mind by the CCI for its prima facie satisfaction under Section 26(1); 2) the order of the CCI being ultra vires the objects and purposes of the CA’02; 3) bar on the CCI’s jurisdiction on account of a pending investigation by the Enforcement Directorate (‘ED’) under Foreign Exchange Management Act, 1993 (‘FEMA’). In this post, the author shall be discussing the judgement of the Karnataka HC in Amazon/Flipkart v. CCI while gazing at the requirement of prima facie satisfaction under Section 26(1) of the CA’02. Further, the challenge to the CCI’s jurisdiction to order an investigation under Section 26(1) of the CA’02 shall be discussed. Finally, the author maps out a three-fold test for satisfying the prima facie case requirement and the jurisdiction issue to edict an investigation under Section 26(1) of the CA’02. Factual Background- Delhi Vyapar Mahasangh (‘informant’) had filed an information with the CCI under Section 19(1) of the CA’02 alleging the violation of Section 3(4) read with Section 3(1) and Section 4 of the CA’02 by Amazon and Flipkart, owing to the existence of preferred sellers and preferential listing on the online market places of Amazon and Flipkart. Given the information supplied by the informant and having regard to the provisions of the CA’02, the CCI passed an order under Section 26(1), thereby instructing the DG to investigate the contravention of Section 3(4) read with Section 3(1) of the CA’02 and not under Section 4, since the CA’02 does not envisage an investigation in cases of collective dominance. The order of the CCI was thereafter challenged before the Karnataka HC in two writ petitions filed by Amazon and Flipkart, separately. The Karnataka HC, while disposing off the writ petitions of Amazon and Flipkart by a common judgement, refused to quash the order of the CCI. Decision- Based on the arguments of the petitioners, the Karnataka HC framed the following questions: What is the nature of the order of the CCI under Section 26 of the CA’02? Whether a prior notice and opportunity of hearing are mandatory at the stage of issuing direction to the DG to hold an inquiry under Section 26(1) of the CA’02? Whether the order of the CCI calls for interference? In respect of questions (a) and (b), the HC decided that an order under Section 26(1) of the CA’02 is an administrative order and is not a part of the adjudicatory process. Additionally, Section 26(1) of the CA’02 does not prescribe the CCI to issue any notice to any party at the time of forming prima facie opinion. Hence, there is no requirement of serving a notice on the opposite parties. While answering question (c), the Karnataka HC relied on Competition Commission of India v. Steel Authority of India Ltd. and Ors. (‘CCI v. SAIL’) and held that the order of the CCI does not call for interference and as such the requirement of giving a reasoned order has been fulfilled by the CCI. Analysis- Prima facie satisfaction of the CCI- In Amazon/Flipkart v. CCI, it was argued by the petitioners that there was no application of mind by the CCI as the CCI had not opined on appreciable adverse effect on competition (‘AAEC’) in its order. Accordingly, the prima facie case requirement under Section 26(1) was not satisfied. In various decisions of the SC and different HCs, it has been held that the CCI’s order under Section 26(1) of the CA’02 is an administrative direction to one of its own administrative wings. It is only a direction simpliciter to investigate and does not form part of the adjudicatory process. The said position is well cemented by the landmark judgements of the SCI in CCI V. SAIL and Excel Corp Care Ltd. v. CCI& Ors. Accordingly, there is no requirement to issue a notice to the opposite party or strict compliance with the principles of natural justice while ordering an investigation under Section 26(1). The sole prerequisite for an investigation order Section 26(1) is the application of mind by the CCI in determining where the facts at hand transmit any contraventions of the provisions under Sections 3 and 4 of the CA’02. Whilst it’s true that for a contravention of Section 3(4) there must be an AAEC, which has to be proven by a market analysis based on the factors given under Section 19(3), it is incorrect to surmise that the CCI has to supply detailed reasons for its decision under Section 26(1) owing to the fact that the same can only happen after an investigation by the DG. Hence, the Karnataka HC was correct in holding that the order of the CCI does not entail an interference as the CCI had looked into the information and applied its mind in deciding the existence of a prima facie case. Jurisdictional challenge against an order under Section 26(1)- The petitioners had argued that the jurisdiction of the CCI was barred because of a pending investigation by the ED under FEMA. It is to be noted that Section 60 of the CA’02 provides for an overriding effect of the CA’02 over any other law in India. Furthermore, the provisions of CA’02 are in addition to and not in derogation of the provisions of other laws, according to Section 62. The Supreme Court of India (‘SC’) has conclusively decided on the issue of the ouster of the CCI’s jurisdiction in presence of sectoral regulators in CCI v. Bharti Airtel Ltd. & Ors. The SC had held that whilst the jurisdiction of the