Analyzing the Competition Amendment Bill vis-a-vis Regulation of Digital Market

[By Akrama Javed and Aditya Maheshwari]

The authors are students at the Gujarat National Law University.

Introduction

Recently, after a coon’s age of introduction of the Draft Competition (Amendment) Bill, 2020, the legislature introduced the Competition (Amendment) Bill, 2022 (hereinafter as “Bill”), wherein certain changes in the present legal regime have been incorporated. The Bill so proposed needs to be analyzed in the context of the digital market (hereinafter as “market”) owing to two major reasons. Firstly, the complexity in the regulation of the market owing to its complex and multifaceted nature due to the involvement of data, complex algorithms, and lack of technical tools for regulation. And secondly, the effect of the anti-competitive dominant policies of these Big-Tech on new entrants, as well as the existing competitors in the market.

Therefore, in this article, the authors have analyzed the upcoming legal regime pertaining to the rise of the digital market in India.

Competition Bill 2.0 – amendments pertaining to Market

Some of the indispensable changes in regard to regulating the market are:

Inclusion of Technology Experts in the Competition Commission of India 

Taking a leaf out of Indian security law wherein the special focus is being made on the expertise of the members with regard to the securities market, the legislature intending to add investigative muscle and professional expertise to intensify scrutiny of Big-Tech companies, introduced the inclusion of expression ‘technology’ under Section 8 of the Competition Act (hereinafter as “Act”) wherein it would be one of the factors for the selection of the chairperson and other members. Moreover, while complementing section 8, an amendment is also introduced in Section 9 of the Act to include ‘technology’ while forming the selection committee.

Material influence as part of the control

Through the amendment, the legislature intends to amend the definition of ‘control’ to include the lowest threshold of control i.e., material influence. The inclusion of this would keep the digital transactions under the Competition Commission of India’s (hereinafter, “CCI”) supervision as such transactions don’t come under the realm of quantitative criteria provided.

Hub and Spoke Cartel

Propelling from the traditional cartel i.e., horizontal and vertical cartel, the CCI introduced Hub and Spoke Cartel under Section 3 of the Act. Here, the CCI intends to include such transactions which are done through intermediaries. For instance, the use of price algorithms for anti-competitive activities by companies like Ola and Uber shall be scrutinized under this provision.

Demystifying the existing conundrum in the market in India

As mentioned earlier, the amendment is introduced keeping in mind various actions being taken by the CCI against Big-Tech and it is pertinent to discuss the same to understand the contemporary contextual issues existing within the domain.

The data induced jurisdictional tussle

The issue was ignited for the first time when suo-moto cognizance was taken by the CCI against WhatsApp’s Terms and Services relating to Privacy Policy which effectively asked users to accept the sharing of their data with Facebook and initiated an investigation. It should be noted that prior to this, CCI had generally avoided intervening in matters having data privacy undertones to them. However, herein, CCI had held that WhatsApp Inc., through this policy, was arbitrarily degrading the non-price parameters of competition i.e., data, to an extent that it violated Section 4(2)(a)(i) of the Act through the imposition of unfair terms and conditions.

In all of this, the idea of the CCI overstepping its jurisdiction to meddle in privacy issues is concerning when there is almost a legal vacuum in the area of data privacy due to the withdrawal of the Data Protection Bill, 2021.

The case of apprehensive App Store arrangements

The case of apprehensive app store arrangements is exacerbated by dominant tech firms i.e., Apple Inc. and Google, and action was taken against them. Recently, an investigation was launched against Apple Inc. on grounds including App Store Review Guidelines being violative of Section 4(2)(a)(i) of the Act due to its ‘take it or leave it’ nature, the mandatory use nature of the in-app payment system and the tie-in arrangement restricting other developers to develop iOS apps. Likewise, Google has also been found guilty of abusing its dominant position by denying market access, leveraging, and restricting technology to the prejudice of consumers.

The problematic allegory of the algorithms

The concept of Algorithmic collusion has been addressed by the CCI in two cases. Taking a narrow approach in the case of Samir Agrawal v. ANI Technologies Pvt. Ltd, CCI held that there did not exist hub and spoke agreement because there existed no agreement to set the prices or coordinate the prices between the parties. Secondly, in the case of Re: Alleged Cartelization in the Airlines Industry where the existence of hub and spoke agreement was investigated w.r.t common software algorithm software used by airlines to determine the ticket pricing. In this, the CCI found that the revenue management team of the airline modulated the algorithm, and the role of the algorithm was limited only to aiding the team in arriving at the price which would ensure optimal revenue. Here, the question would again arise in front of the CCI in case there is an employment of a self-learning algorithm.

Foreign Approaches

Countries around the world getting a move on from the traditional competition laws by reconsidering the present legal regime to include safeguards against modern anti-competitive activities such as tacit collusion. Some of the best safeguards being adopted by various countries are discussed below.

Digital Market Act – European Union

The European Union recently enacted the Digital Market Act as a means of limiting the ability of major digital firms to respond to and head off the competitive threats posed by their business models. It is enacted to impose a stringent regulatory regime on the gatekeepers. Moreover, investigation regarding the compliance of regulations is provided to give ex-ante effect to it. Moreover, the obligations are imposed on gatekeepers to explain their algorithms and the non-compliance of the same would invite severe penalties.

Open Market App Act – United States

The United States legislature introduced Open Market App Bill as a means to scrutinize the anti-competitive activities prevailing in the mobile app ecosystem. It restricts the relevant companies to impose ludicrous and vexatious terms on the developers such as preferencing their own applications, restricting sideloading, etc.

Digital Market Unit – United Kingdom

Currently, in regard to the scrutinization of anti-competitive activities such as app payments and advertising markets, the legislature has introduced Digital Market Unit which would work in consonance with the Competition and Markets Authority. Moreover, the legislature intends to introduce separate bill to include measures on competition in digital markets.

Analysis and Conclusion

The authors are of the opinion that the Bill falls short on numerous grounds when it comes to regulating the Big-Tech. The addition of tech-muscle is a move to be appreciated but there are several lost grounds. In this analysis, the authors suggest different approaches from foreign jurisdictions that can be adopted in India after appropriate customizations.

Firstly, though the scope of ‘control’ under Section 5 of the Act has been expanded to include ‘material influence’, there is a need to expand the quantitative criteria to include ‘core platform service’ that exceeds a certain number of users as is the case under Digital Market Act. Moreover, other criteria of ‘the amount of data collected and processed’ by the entities can also be added as the de facto control over the data can essentially lead to anti-competitive practices. This can be read within the scope of the ‘deal value threshold’ as introduced in the Bill. However, the Government while notifying new thresholds must comply with clear and objectively quantifiable standards so that only transactions with significant economic links are caught.

Secondly, with regards to the Digital Market Act, the aim is to shift to ex-ante rulemaking from the present position ex-post enforcement. The authors believe that this change of action trigger might lead to the conflict of the CCI with the relevant data protection regulator. The idea is that data protection law can essentially place a prior restraint on any possible issue before the intervention of the CCI. Hence, the existing approach of CCI on this is flawed wherein it assumes that if data is the price consumers pay, then it by default becomes a part of the competition law. The congruous elucidation to this conundrum would be to let the data regulator access the anomaly first without the CCI overstepping its jurisdiction. Therefore, the ex-ante rule-making should be adopted but the regulator should proceed with caution.

Thirdly, in regard to regulating the algorithm or tacit collusion, the CCI should foremostly conduct market investigation to identify the concept and industries getting impacted. Then, taking a leaf out of EU’s legislation, the CCI should include ex-ante merger control regime to regulate digital transactions. However, clear guidelines and role clarity among various regulators involved need to be incorporated. Lastly, stringent action in the form of ‘notice and take down’ can be introduced to take immediate actions similar to Rule 75 of the Copyright Rules, 2013.

Lastly, in regard to the regulation of the mobile app ecosystem is concerned, the restriction imposed by Big-Techs can be regulated by symbolizing to the regime prevailing in United States.

In this context, the authorities need to apply new tools and approaches to investigate anti-competitive behavior in digital markets. This can be done through framing rider legislation specific to the needs of the market based on the suggestions made above which can act in tandem with the Act. In this regard, the suggestion mentioned above including the use of clear and objectively quantifiable standards for determining threshold, and ensuring a comprehensive data regulatory framework that acts in ex-ante fashion without letting the CCI overstep its jurisdiction need to be stressed. In addition, there is a need for, conducting market investigations to counter anti-competitive practices that can arise owing to algorithmic or tacit collusion in the market. In this context, recently, CCI suggested the establishment of a Digital Market Unit. The same can play an important role in regulating the existing digital market in India.

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