Competition Law

[By Abhinav Gupta] The author is currently a student at National Law University, Jodhpur. Introduction The ever-increasing integration of technology with daily functions has led to better innovations and has revolutionized commercial transactions. One such prominent innovation is Blockchain Technology. It has varied applications and has the potential to impact the functioning of a wide array of commercial activities, from a small It is expected that the Blockchain Technology will significantly. Most of the financial institutions have shown great interest in blockchain technology because of its and significantly reduce processing time. Despite this, the businesses using the blockchain technology for their operations need to be very careful of anti-trust issues, especially in cases where they have to interact with their competitors. However, blockchain does not pose any inherent competition threat to the firms. It has to be analyzed on the basis of each situation, judging by the information that was exchanged. In this article, the author seeks to explore the anti-trust challenges posed by the use of blockchain and whether the current provisions of the Competition Act, 2002 (hereinafter “the Act”) are sufficient to tackle these challenges. Blockchain Technology Blockchain is a ledger of transactions. It is a distributed ledger that resides on each participant’s device. In order to complete a transaction on a blockchain network majority of the participants need to consent. This is known as a consensus mechanism. Each copy is updated whenever a transaction or set of transactions is completed. By using the blockchain, the stakeholders are placing their trust in a technological platform and this rules out the need for intermediaries such as banks, governments, brokers. In order to better understand the underlying anti-trust challenges, it is important to understand the types of blockchain networks. Public/Open Blockchain: Public Blockchain is based on an open network. The information on the network can be accessed and joined by anyone, as it is available in the public domain. For e.g. Bitcoin Blockchain is a public blockchain, where anyone can read the data on available on it. Private/Permissioned Blockchain: As the name suggests, a private blockchain or permissioned network requires a permission/invitation for access, hence restricting the participant pool. The essential feature of private blockchains is that it cannot be accessed and identified by outsiders and only parties to a particular transaction can access the information available over such a network. Anti-Trust Practices Collusive Behavior: A major issue posed by the advent of blockchain technology is that it might lead to collusion among the competitors in a market. The major players in the market might come together and form a blockchain consortium. Concern has been raised that blockchain is merely a means of colluding and getting away with it. A discussion paper on ‘Blockchain Technology and Competition Policy’, issued by the Organization for Economic Co-operation and Development states that the most essential enabling factor behind the blockchain technology is ‘authentication’.  This paper also analyses whether there is a possibility of collusion via the use of Blockchain. There is a possibility of collusion when all the competitors start using the same blockchain network. In this scenario, it will become easier for the cartel participants to identify deviations due to the increased transparency. An additional benefit is that as most of the contracts entered into between the competitors will be smart contracts backed by blockchain. Hence, in case a cartel participant deviates from the agreement there will be automatic punishments. Blockchain’s transparency can facilitate the exchange of information between the participants of the blockchain. Due to this, price coordination may emerge between the members as they will get to know about price changes as soon as it happens and can adapt to such change accordingly. Moreover, due to increased transparency provided by a market-wide blockchain, the firms in an oligopolistic market may coordinate without any explicit agreement or direct contact. A blockchain application works in different ways and hence, there cannot be a straitjacket formula of finding out if there is collusion or not. Ordinarily, where there is no exchange of personalized consumer information or disclosure of price information, it cannot be considered anti-competitive.  This means that an investigation for an alleged anti-competitive agreement over blockchain would largely be fact-based, investigating the information that was shared between the blockchain participants. Abuse of Dominance: The blockchain consortium formed by the firms in the market by coming together might acquire a dominant position in the market. If this is the case, the consortium may refuse to provide access to a new entrant. Such refusal can be considered as ‘abuse of dominance’. There can be instances where the owner of the private blockchain network does not directly refuse access to the new entrant but imposes a certain set of requirements that needs to be fulfilled in order to be part of the consortium indirectly deterring new entry into the market. The risk of exclusionary conduct is higher in private blockchains as it requires invitation or permission to access, unlike public blockchain which is open to all. This will not only hamper the competition in the market but would also deter new players from entering the market, slow down innovation and prevent the emergence of new products in the market. The (In)sufficiency of Current Legal Regime The biggest problem regulatory authorities may face while dealing with blockchain is in conducting investigations. The issue arises here due to difficulty in the detection of anti-competitive practices and the identification of the organizations involved in such practices. Considering the fact, that blockchain is based on the concept of pseudonymity it will be a daunting task for the regulators to identify the perpetrators and impose penalties on them. Furthermore, it will be difficult for the authorities to obtain the data shared over the blockchain network to conduct an investigation. The blockchain participants might share data over permissioned networks. Considering only people who have received authorization can access the network, authorities have to find a way to compel the organization to share the data to conduct the investigation. Moreover, as

[By Pragya Dixit] The author is a student at ILS Law College. Introduction In contemporary times, it is an evidentiary fact that the core stimulus of any economy is its Nascent firm industry. It is an industry that is a representative of new and developing ventures by novice entrants to bring new operations, products, and value addition into the market. They are a hub of fresh talent, ideas, disruptive innovation, and with their non-conformist approach, they become a flag bearer of evolution and development in the industry.  But what makes their existence all the more crucial is their role in maintaining balance and healthy competition in the market. They do so, by breaking into the concentrated markets and forcing the incumbent firms to either keep up with the innovations to co-exist or accept defeat in the race of competition and exit the market. As significant as their presence is for the market, it surely acts as a hurdle for the incumbent dominant firms, as they are a source of potential future threat for them. It is this fear and threat which persuades existing firms to engage in acquisitions of such novice firms. Nascent Firm Industry a Threat – But Why?  The most prominent reasons for the companies to perceive this industry as a threat are:- The Nascent firms are in a position to accrue various benefits from the government in the form of subsidies, tax cuts, etc, which gives them an advantage over others to develop. They generally possess such technologies that have the potential to knock down an entire line of product of a dominant player. Also, their gradual entry into market space takes away the consumer base of the incumbent players. Thus, contributing to monetary losses. The above-mentioned factors inter alia lead to an undesirable increase in the competition in the market for the incumbent firms. Sometimes, it also results in their complete elimination. So, as a way out, the dominant firms adopt the practice of acquiring such firms. This practice not only helps them in lessening the future competition but it also provides them with added benefits by giving them access to the resource bank of the target firm. Thus, this practice is widely followed and for some time now we have seen a surge in another trend, where Nascent Acquisitions are turned into “Killer Acquisitions”. What are “Killer Acquisitions”?  In such cases not only the competitor is killed but also the product. Hence, it is detrimental to both market competition as well as consumer welfare. The most common reasoning used behind Killer Acquisitions is that the big firms find it more convenient to buy and shut down a new firm rather than carrying on with it at a risk of putting the sales of its own product in danger or suffering a loss of revenue that it was expecting to earn from the sale of the product that it might substitute. Every industry has the potential for such acquisitions but the major prey are the firms that are specifically acquired for their potential know-how or technological advancements like pharma industries and digital markets. In a study report of  Cunningham et al(2018), it has been found that 6% of the acquisitions that take place in the pharmaceutical industries with drug projects are Killer Acquisitions. An example of such acquisition in the United States was the “acquisition of a pharmaceutical firm Mallinckrodt by Questor, who was a dominant player in the category of ACTH drugs(with its product named Acthar). In the mid-2000s, the Mallinckrodt started working on the development of a new synthetic called Synacthen, having the potential of being a direct competitor to Acthar. Sensing this threat, in 2013 Quesctor acquired the US development rights in Synacthen and followed the path of killer acquisition, acquired Mallinckrodt rights, and did not develop Synacthen at all”. The same adverse impact can also be seen in the purchase of US-based Newport Medical Instruments by Covidien, which is an established ventilator manufacturer, used in cases of viruses like flu or Covid-19. In 2010, Newport received a tender from the US government to produce ventilators for any future emergency that may arise. But, in 2012 when Covidien acquired Newport, they reached out to the government citing the reasons they needed extra funding for the completion of the deal. Later, in 2014, they rescinded the contract on account of unprofitability from the deal,  and the government had to later award the deal to Philips. This single act of Covidien delayed the supply in general, we can see its impact on the masses. The situation in cases of digital Market are no better, In 2020, a study by the world-famous researchers showed that recently companies like Google, Amazon, Facebook, and Microsoft are engaged in some 175 acquisitions, out of which 105 brands of the target firms were discontinued within a year. What Measures Does India Have In This Regard? In India, competitive matters related to acquisitions are dealt with under the Competition Act. But the competition law regime of our country is inadequate in deterring such acquisitions. Currently, only the acquisition of shares that meet the monetary and asset level thresholds which are mentioned in section 5 of the Competition Act is needed to be mandatorily notified to the CCI. The nascent acquisitions are way beyond such prescribed limits. Thus, these limitations make the scrutiny of such acquisitions impossible. Does “Competition Amendment Bill, 2020” Offer a Solution? In 2018, the government set up the Competition Law Review Committee (CLRC) to review the competition act. Committee in its report while deliberating over the issue of acquisitions in the digital markets, opined that the business models in the digital world are asset-light and have lesser turnovers, thus they easily escape the radar of the competition authorities. These regulatory gaps are a major lacuna and somehow leave a place for anti-competitive activities to flourish. Thus, there is a need for stringent regulations. With this thought in mind, the amendment bill proposed to provide powers to the

[By Srishti Suresh] The author is a student at NALSAR University of Law, Hyderabad. Introduction The recent National Company Law Appellate Tribunal (“NCLAT”) ruling in the case of Samir Agrawal v. Competition Commission of India & Ors.[i], effectively upheld the previous CCI Order[ii], in holding that the algorithms used by cab aggregators such as Uber and Ola, do not result in the creation of a hub-and-spoke cartel. In its decision, the NCLAT laid emphasis on the form of arrangement between the cab aggregator and the independent drivers, as against the substantial effect such a scheme could have on free-market competition. In the appeal, the contention raised by the informant was in relation to the centralized power of the aggregator in fixing prices for the drivers though the App, thereby effectively barring them from competing with the prices in the market. Whilst possessing asymmetric information related to personalized rider data and other crucial information such as surge demand, traffic etc. gathered from AI-fueled algorithms, drivers engaged by the aggregators were required to charge their customers, a price determined by the App (which is based on preset factors). Scope for potential negotiation and bargain is stripped away, and the market forces of demand and supply are artificially distorted. This, it was alleged, leads to a potential increase of the fares and leads to price-fixing by the aggregator. At the helm, cab aggregators operating as intermediaries between the drivers and the riders, have the leverage to fix prices, distort free competition between similarly situated service providers, and effectively violate Section 3 of the Competition Act, 2002 (“the Act”). A striking aspect of the ruling, which assumes importance for the purpose of this article, is the “connectivity” between drivers. The scheme of arrangement between the drivers and the aggregator is as follows: each driver enters into a vertical agreement with the aggregator, and each driver is well aware of the fact that multiple competing drivers are simultaneously entering into an analogous agreement with the same aggregator. No driver enters into a direct agreement with the other. The process works on an implicit acknowledgement of the role played by each driver, as well as the aggregator. NCLAT in its order, focused on the absence of connectivity between drivers inter se. For a collusion inhibiting healthy market competition to exist, an understanding or agreement between each party, with the other, is a vital necessity.[iii] However, owing to the vertical arrangement between the parties, the possibility of an anti-competitive collusion was rejected. Understanding the Hub-and-Spoke Model of Cartels Cartels conventionally involve communication between cartel participants, agreeing to engage in illicit conduct. However, in the wake a more stringent antitrust regime across jurisdictions, the hub-and-spoke model has assumed great importance[iv]. In this model, the hub is either an upstream supplier or a downstream customer, and the spokes are the various colluding competitors. Each spoke enters into a separate vertical agreement with the hub and offers sensitive information.[v] The same information is disseminated by the hub to the other spokes, while engaging with them vertically. In essence, the information that is stored centrally with the hub is schematically disbursed to the spokes, without them having to communicate with each other directly. The Shortcoming of the NCLAT ruling In analyzing the narrow approach taken by the CCI and the NCLAT, one needs to steer clear of any ambiguity that might exist in understanding Section 3 of the Act, in the context of algorithmic collusion. First, the deemed provision prohibits any agreement, which among other aspects, relates to the provision of services causing an adverse appreciable effect on competition (“AAEC”) in India.[vi] A textual interpretation of the provision seen through a human prism[vii] (conventionally), prohibits agreements that cause a direct or indirect effect on competition. But AAEC is not restricted to an exhaustive list of agreements, the form of which cannot be delineated with clarity and certainty. Any arrangement with the potential to cause economic consequences, operating to the prejudice of public interests and unduly restricting competition, can be construed to pose AAEC on the market. In the present case, the information that is curated by the algorithm creates a resource and data pool, that is commonly accessed by all the drivers. By analyzing rider data, their frequency in hailing services, and any surge in a given locality, the algorithm has the potential to reduce its output in terms of services, while escalating prices for the same. By offering drivers a lucrative opportunity to earn more, by the way of increased fare charges, the aggregator’s app is at the helm of unilateral “price fixing”. While no horizontal agreement between the drivers exists, the multiplicity of analogous arrangements with the aggregator (the “hub”), coupled with a common pool of information and resource sharing among drivers (the “spokes”), increases the possibility of collusion vis a vis a hub-and-spoke agreement. In addition, given that all the drivers are aware of other competing drivers entering into similar agreements with the aggregator, for the same purpose, makes the agreement a perfect candidate for a hub-and-spoke model. The need for a proactive approach Technological advancements in service sectors have transformed the competitive landscape. The rate at which information is accessed, analyzed and processed, has increased manifold[viii]. Algorithms have a peculiar characteristic of allowing sellers to shadow their customers, by harvesting data on their consumption behaviour.[ix] While the traditional route taken by most competition regulators mandates a concurrence of understanding through a tacit or explicit agreement between participant themselves, the new age of algorithms might not follow the traditional route of concurrence.[x] OECD in its Report has acknowledged the highly uncertain and complex nature of algorithms, but it has also issued a caveat for regulators. A lack of an interventionist approach and over-regulation, could impose a high cost on the society[xi]. Algorithms have proven to be excellent automotive tools in increasing market efficiency. In reviewing the current framework, the Competition Law Review Committee (“CLRC”) Report has highlighted the broad ambit of Section 3. ‘Algorithmic collusions’ could very

[By Anusha Shekhawat] The author is a student of Institute of Law, Nirma University Introduction The Competition Commission of India (“CCI” or “Commission”) exercises certain legal powers that are provided by virtue of the Competition Act, 2002 (“Act”), to combat anti-competitive practices and regulate a fair and healthy competition in the market. The purpose of creating a quasi-judicial body was to promote awareness among people in order to make markets work efficiently. However, these powers have often been curtailed in the past, and subjecting them to more limitations would make the work of CCI extremely challenging. Recently, the National Company Law Appellate Tribunal (“NCLAT”) pronounced a judgment that leads towards a narrower approach of viewing the Act and which is likely to create hindrance upon the ability of CCI to function effectively. This is significantly why it raises many antitrust concerns in the current times. Critical Analysis Of The Judgment The NCLAT while reviewing the matter of Samir Agrawal v. Commission, held that a “person” under Section 19(1)(a) of the Act, must be one – “who has suffered an invasion of their legal rights as a consumer or as a beneficiary of healthy competitive practices” [¶ 16]. The judgment necessitates having a direct nexus between the person filing information and the violation of legal rights under the Act; in an absence of which, a third party will not have a locus standi to approach the Commission. Contrary to the judgment, the Act of 2002 does not provide any limitation upon the locus standi of a person filing information. The reason for this was clarified by CCI in the case of Shri Sarabh Tripathy v. Great Eastern Energy Corporation, wherein it opined that the purpose behind filing information is to notify the Commission with the presence of anti-competitive practice in the market. Therefore, it is not necessary for a person to file information to be personally affected by it [¶ 15]. Similarly, the Act confers upon the Commission, the duty under Section 18 to protect the markets from practices that cause adverse effects on it and restrain consumer harm by using all reasonable measures. Furthermore, in the case of  In Re: Indian Motion Picture Producers’ Association v. Federation of Western India Cine Employee, the Commission shed light on the fact that every order passed by it is aimed towards providing “accrual benefits” to the public at large and not only to an individual/group of individuals who file(s) a piece of information. This means that orders of the Commission are “in-rem” and not “in personam” [¶11]. It does not hold much importance as to who has brought information, because if the Commission finds a prima facie violation of the Act, then it is mandated under Section 26 to start an investigation. Interestingly, for this reason, the Act was amended in the year 2007, where the word “complaint” was replaced with “information”, in order to express the intent of the legislature for providing liberty on locus standi and to avoid adversarial proceedings. Moreover, the Delhi High Court has clarified in the case of Google Inc. & Ors v. Competition Commission Of India, that the powers given to CCI for investigation are comparatively wider than those given to Police for investigation. [¶18(K)]. It is because the Police cannot begin or continue an investigation without the existence of a complaint. However, the Commission need not commence or continue an investigation merely upon receipt of information, but upon believing that a violation of the Act has occurred [¶18(G)]. Similarly, the rationale for giving wider powers was discussed in the case of XYZ v. Indian Oil Corporation Ltd,  where it was said by the CCI that the powers entrusted to it are wider in nature in order to ease the capture of wrongdoers who hamper fair competition [¶ 34]. NCLAT through the judgment describes the concern towards “unscrupulous” matters brought to the Commission [¶ 16]. However, it must be taken into account that Section 26 not only gives powers to the Commission for directing an investigation but also assures that if the information seems to stipulate no violation of the Act, is frivolous or unreasonable in nature at a prima facie stage, then the Commission can close the matter thereof. Therefore, the concern of NCLAT has already been addressed by the Act. Moreover, The COMPAT also supports this in the case of Dr. LH Hiranandani Hospital v. Competition Commission Of India, where it held that it is not necessary for the Commission to identify the locus, but it has a duty towards ensuring that the informant does not have an ulterior motive towards someone else [¶ 25]. Lessons From The European Union The European Union (“EU”) on account of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) restricts every possible practice that is against fair trade in the market. Moreover, when it comes to an investigation, it keeps itself open to any formal or informal options and provides a leeway towards filing complaints by “third parties”. The Office of Fair Trading (“OFT”) defines a “third party” as someone who is not necessarily related to the investigation. The Competition and Market Authority (“CMA”) of the U.K. also gathers information and investigates the occurrence of anti-competitive practices through various means, including leniency applications, research, and market intelligence, and whistleblowers. Moreover, the OFT for the same has analyzed that taking inputs from informed third parties or complainants has always assisted them to exercise their tasks efficiently. Conclusion: Taking A Step Back? The previous orders given by CCI, in light of the Act, justify the very reason for not limiting the third party, on the ground of locus standi to approach the Commission. However, NCLAT while interpreting Section 19(1)(a) of the Act in the impugned judgment has not referred to the provision in its true light and did not understand the legislative purpose behind creating it. The Supreme court (“SC”) in the case of Nathi Devi v. Radha Devi Gupta, has stated that it is

[By Ritvik Maheshwari and Vatsla Shrivastava] The authors are students at National Law University Odisha, Cuttack, and National Law Institute University, Bhopal, respectively. Introduction The advent of the Internet has proven to be a groundbreaker in the introduction of new ways of commerce and business. With the incessant inclination towards e-commerce, online platforms for search and comparison of products and services have become commonplace. Consequently, a special type of agreement called Across Platform Parity Agreements (hereinafter APPA), which ensures price parity across all platforms, has become extensively employed. These agreements raise some competition concerns, one of them being perpetuating the formation of a price-fixing cartel. This article explores how APPAs can be used as a means to form a price-fixing hub-and-spoke cartels. Across Platform Parity Agreements and their Significance APPAs are used to avoid a type of market failure called free-riding or free-riders effect. A buyer uses an online platform to locate a seller, but may finally conclude the transaction on an alternative venue. When this happens, the online platform does not get any commission for such transactions, which results in free-riding by the buyer. This is more likely to occur when some other platform offers the same product/service at a lower price. These online platforms have to make investments in quality, such as improving algorithms and rankings, along with other investments such as advertising to attract the parties to the platform. If an online platform does not get a commission for transactions, it would not be able to cover these costs. Thus free-riding would break down the business model. To overcome this problem of free-riding, online platform uses APPAs. These are contractual provisions that bar the seller from charging different prices for the same product/service on other platforms. An APPA is ‘narrow’ if it prevents the seller from offering a different price on other platforms; on the other hand, it will be ‘wide’ if the agreement bars the seller from offering different prices even at its own website. If the price across all channels is the same, a buyer is more likely to conclude the transaction on the platform on which it located the seller. This ensures commission for the online platform. While APPAs do seem to be necessary to run online platforms, they are likely to hinder competition in the market by being used as a means to form a price-fixing cartel. Section 2(c) of the Competition Act, 2002(hereinafter Act) states – “cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services”. This indicates that a cartel is an arrangement among economic actors at the same level of the supply chain rather than those on different levels. Section 3(3) of the Act covers cartel-like agreements and practices such as price-fixing, market control, market allocation, and bid-rigging. Section 3(3) covers only agreements and practices between the ones engaged in similar or identical trade. Hence, in the defense of narrow APPAs, it can be argued that they are not cartel agreements since they are vertical agreements entered between platform owners and sellers. However, the concern arises when APPAs lead to the formation of a special type of cartel, i.e. hub-and-spoke cartel, whose formation and operation is different from a traditional cartel. Formation and operation of Hub-and-Spoke Cartel This is a unique arrangement of economic actors that do not co-ordinate through direct links among the horizontal competitors, but coordinate through deviant exchanges via a vertically related supplier or retailer. It becomes strenuous for enforcement agencies to recognize when intrinsically legitimate transactions between suppliers and retailers transform into a prohibited arrangement, without any explicit evidence of collusion. For instance, in the case of Argos Ltd & Anor v Office of Fair Trading, Hasbro was the leading toy manufacturer in the UK while Argos and Littlewoods were the top retailers, competing with each other. Argos and Littlewood were giving low margins on some products. In order to tackle this, Hasbro came up with a “pricing initiative”. According to this, retailers were supposed to charge a Recommended Retail Price (RRP) to increase the margins. Both of them were suspicious that the other one would undercut the RRP to acquire market shares. Here, Hasbro acted like a hub indulging in anti-competitive practice by holding discrete discussions with Argos and Littlewoods and communicating the pricing strategy with both of them. Moreover, Hasbro was continuously monitoring the retailer’s conduct directly or through the information accepted by the retailers. Henceforth, Hasbro acted as a hub, while Argos and Littlewoods were the spokes connected to this hub. These kinds of cartels are called Hub and Spoke Cartels and as we shall see in the following section, APPAs can induce the formation of such cartels. Misuse of APPAs to form Price-Fixing Cartel The formation of a price-fixing hub-and-spoke cartel via price parity agreement has been previously witnessed in the case of United States v. Apple, Inc. Apple was eager to enter the e-book market by launching its iPad and the iBookstore. Amazon was prevalent in the market with the Kindle reader and its online bookstore. Most of the publishers sold their books through Amazon and Amazon used to buy those books at the wholesale price from publishers. This allowed Amazon to set the price of the books considerably low. To tackle Amazon’s primacy in the e-books market, Apple came up with an alternative for the publishers and offered the publishers an “agency model” wherein publishers would set the prices themselves for the books to be sold via the iBookstore. In this arrangement, Apple would receive a commission of 30% for each e-book sold. However, this arrangement was not enough to compete with Amazon. Consequently, Apple incorporated a parity clause in publishers’ contracts, according to which publishers were restrained from selling e-books on any other platform lower than the prices at iBookstore. It appeared that the only way for the publishers to get out of this situation was

[By Srishti Suresh] The author is a student at NALSAR University of Law, Hyderabad. Introduction In the context of digital platforms, the intricate and unique structure of two-sided models have confounded antitrust regulators’, in delineating the right approach of scrutiny to be adopted. Motivated to strike an optimum balance between excessive regulation and undervaluation of market effects, antitrust authorities have been rather skeptical in analyzing the complexity posed by such markets. In the Indian context, the Competition Commission of India (“CCI”) has often faltered in its approach in defining the “relevant” market. The right market definition assumes importance, as the legal bounds of a relevant market has a de facto fundamental consequence on the legal framework adopted by an antitrust regulator, in weighing the anti-competitive and pro-competitive effects. Understanding Two-Sided Market Platforms Two-sided markets are platforms, that serve two distinct groups of “customers” with interrelated cross demands. The interdependency between the two sides of the platform significantly reduces transaction costs that otherwise ensue, along with coordination costs.[i] Therefore, in a two-sided market platform, economic value and wealth creation cannot be created alone; economic value grows with the number of connections and options available across the two sides of the platform.[ii] Unless the two sides are ‘on board’, the platform entity cannot effectively thrive in a competitive market. For instance, Facebook connects retailers and advertisers with users, while payment apps such as Apple Pay and PayPal connect customers with merchants. These markets create value through such an interface. While this model appears seemingly innocuous, its complexity can be attributed to its indirect network effects. Indirect network effects are said to occur when the value created by one side of the platform, affects the value created on the other side of the market. The platform basically functions as a lucrative opportunity pool, catering to the needs of both groups of customers. In the case of digital platforms, with the help of advanced algorithms and filtering, companies are better equipped in ascertaining the immediate requirements of their customers. However, this advantageous network benefit also gives way to glaring asymmetric price structures.[iii] A two-sided market model differs from a traditional single-side one-group customer in this pricing aspect. A profit-maximizing two-sided model can choose to charge below marginal costs, or even a negative price for one side, while increasing the costs to the other side. Different groups can be charged different prices. Online networking platforms, search engines, dating websites, etc., offer free services to registered users, while charging higher fees to advertisers, merchants, and retailers. What attracts the supply side customers (despite higher costs) is the potential outreach to a large customer base. Defining the Relevant ‘Right’ Market Having mentioned the existence of two different sides to a platform, it is pertinent for regulators to recognize the same, while assessing the market power of the platform entity. In most cases investigating market dominance, merger inquiries, or assessment of entrenched market power, delineating the distinct markets actually involved is of fundamental importance. Market share is conventionally used as a proxy for market power.[iv] This holds true for single platforms. But this theory runs into difficulties when assessing two-sided platforms, where the pricing power and tactic used on each side depends on the degree of competition on both the sides. A true and informed market power determination relies on such a holistic assessment. However, authorities have adopted different approaches in understanding this market implication. India In Ashish Ahuja v. Snapdeal (2014), the CCI with reference to the retail market held, that “online and offline modes are just two different channels for the same product”. In All India Vendors’ Association v. Flipkart (2018), the Commission rejected the counsel’s request of defining two markets (B2C and B2B) and defined the market as “Services provided by online marketplace platforms for selling goods in India”. The two orders focus on the “product” approach. Regardless of the interdependence between different groups, as long as the two sides are transacting on the same product or service, it is deemed to be a “single” market. However, in Shri Vinod Kumar Gupta v. WhatsApp Inc., the CCI has drawn a distinction between online and offline modes of services offered by digital platforms. In light of their negative switching costs, multi-homing facilities, and lack of geographical barriers, the relevant market was defined as the “market for instant messaging services using consumer communication apps through smartphones”. As one can observe, there is a glaring inconsistency with the CCI’s approach in defining the relevant markets of two-sided platforms. The balancing of interests when a disparity of interests between the two sides arise, the CCI has offered no coherent reasoning in reaching its decisions. Moreover, under the Competition Act, 2002, Section 2(r) defines a relevant market as one that pertains either to the particular ‘product’ sold by an entity, or the specific geographical market in which an entity carries out its trade. Further, in defining the relevant market, the availability of substitutes and similar competitors plays a key role in influencing the regulator’s evaluation. However, this attenuated perspective of product and geographic definition remains oblivious to the network effects and interdependency between geographic and product markets that generally ensue in a digital two-sided platform. In platforms such as search engines and network-based payment applications, the customer outreach and motivations for participation, are not captured in the Section provided under the Act. For instance, in the recently approved Facebook/Jio Platforms acquisition, the interface between the telecommunication and social networking giant cannot be confined to a narrow product definition. The potential outreach and impact on different sectors and user groups, warrants a more thorough and delineated understanding of impacted markets. Only when these factors are considered, can the Commission define the “relevant” market and proceed to a market power assessment in the future. European Union The EC has recognized, that where more than one side exists to a market with interdependency and cross demands, certain additional questions arise. Most importantly, should the welfare of one side of users be aggregated

[By Sajith Anjickal] The author is a student at the National Law School of India University, Bangalore. Introduction Section 53A of the Competition Act, 2002 (‘Act’) deals with the scope of the Appellate Tribunal’s power to hear appeals against directions issued, decisions made, or orders passed by the Competition Commission of India (‘CCI’). In terms of the powers of the CCI under Section 26, Section 53A(1)(a) allows appeals only under two circumstances: (i) Section 26(2) – when the CCI is of the opinion that no prima facie case exists and passes an order to close the matter; and (ii) Section 26(6) – when the Director-General (‘DG’) finds no contravention and the CCI, agreeing with the DG, passes an order to close the matter. Orders passed under other subsections of Section 26 are not appealable. Thus, no appeal shall lie in circumstances wherein: (i) the CCI, after forming an opinion that a prima facie case exists, directs an investigation under Section 26(1); (ii) the DG finds no contravention but the CCI disagrees with the DG and directs further investigation/inquiry under Section 26(7); and (iii) the DG finds contravention and the CCI directs further inquiry under Section 26(8). This scope of appeal under Section 53A(1)(a) was clarified by the Supreme Court in Competition Commission of India v. Steel Authority of India (‘SAIL’). However, ambiguity still exists with respect to circumstances wherein the DG finds contravention but the CCI disagrees with the DG and closes the matter. The Act does not account for orders made in this regard. Consequently, there is no clarity as to whether the CCI’s decision to close a matter, despite a finding of contravention by the DG, is appealable. Should closure orders, passed after a finding of contravention by the DG, be appealable? In the SAIL case, while justifying the scope of appeal under Section 53A(1)(a), the Supreme Court distinguished between the nature of orders passed by the CCI under sub-sections (2) or (6) of Section 26 and other sub-sections of Section 26. The Court held that, unlike the orders under other sub-sections, orders under sub-section (2) or (6) of Section 26 are final as they put an end to the proceedings initiated upon receiving the information. Such closure of proceedings, in the opinion of the Court, causes determination of rights and affects a party (the informant), and thus the said party must have a right to appeal against the closure of the case. This observation of the Supreme Court lends support to the view that the CCI’s decision to close matters, despite a finding of contravention by the DG, must be appealable. Such decisions, by putting an end to proceedings, determine rights and affect the informant(s) and thus there is no reason as to why they should not be appealable. Nevertheless, given that the right to appeal is a statutory right, the problem of maintainability arises as there is no statutory backing for appealing these decisions. Approach of the Appellate Tribunal The manner in which the Appellate Tribunal has dealt with the problem of maintainability has been confusing. On one hand, in some cases, the Appellate Tribunal has gone on to admit appeals by either ignoring or evading the problem altogether. For instance, in In Re: Deputy Chief Materials Manager, Rail Coach Factory, Kapurthala and M/s Faiveley Transport India Ltd and Anr, the DG submitted a report finding contravention. The CCI, however, passed an order closing the case on the ground that the DG’s findings were inadequate to confirm the contravention. The informant appealed to the Appellate Tribunal, which admitted the appeal without going into the question of maintainability.[i] Given that the CCI, in closing the matter, disagreed with the DG’s finding of contravention, it is apparent that the closure order does not fall within sub-sections (2) or (6) of Section 26. Thus, the Appellate Tribunal’s decision to admit the appeal, without providing any justification for the same, is problematic. Another instance is the Appellate Tribunal’s treatment of the appeal against the order in In Re: Sunil Bansal & Ors and M/s Jaiprakash Associates Ltd & Ors. In this case, the DG filed a report finding no contravention but the CCI disagreed and directed further investigation under Section 26(7). Pursuant to this direction, the DG filed a supplementary report finding contravention. The CCI, however, closed the case by discarding the findings recorded by the DG in the supplementary report and accepting the conclusions recorded in the initial report. The informant appealed against this decision of the CCI. The Appellate Tribunal admitted the appeal by noting that as the CCI accepted the DG’s initial finding of no contravention, its closure order fell within the ambit of Section 26(6).[ii] In doing so, however, the Appellate Tribunal conveniently ignored the fact that, in closing the matter, the CCI effectively disagreed with the DG’s finding of contravention in the supplementary report. On considering the CCI’s disagreement with the finding of contravention in the DG’s supplementary report, it becomes clear that the CCI’s closure order cannot be categorised as one falling within Section 26(6). On the other hand, in a few cases, the Appellate Tribunal has acknowledged the limitations in its appellate jurisdiction and dismissed appeals. For instance, in In Re: Saurabh Tripathy and Great Eastern Energy Corporation Ltd, the DG filed a report finding contravention but the CCI disagreed and passed an order to close the case. The informant appealed to the Appellate Tribunal. The Appellate Tribunal, however, dismissed the appeal noting that the present scheme of the Act did not empower it to admit appeals against such orders. [iii] Need for Legislative Action It is evident that legislative action is required to settle the problem of maintainability of appeals against closure orders passed subsequent to a finding of contravention by DG. Unfortunately, the recently proposed Draft Competition (Amendment) Bill, 2020 (‘Bill’) falls short of completely resolving the problem. The Bill seeks to incorporate Section 26(9) by virtue of which the CCI, upon completion of the investigation or inquiry under Sections 26(7)