Default Behaviour in Consumers – A Competitive Threat

[By Pragya Dixit]

The author is a student at ILS Law College, Pune.

 

The Competition Commission of India (CCI) in an Order dated 09.11.2020, directed an investigation against Google and its affiliates on information filed alleging violation of Section 4 of the Competition Act, 2002 (Act). The Commission ordered the aforementioned investigation in relation to three allegations leveled against Google. Amongst those three allegations, one allegation involved the issue of “pre-installation of Google Pay on Android resulting in a ‘status – quo bias’ in consumers”. This article aims to discuss how status quo bias, alternatively known as ‘default behavior in consumers’ is a problem in the competition arena and has a deeply negative impact on market competition and consumers’ interest.

The allegations made by the informant in the case against Google stated that by pre-installation of Google Pay as a default payment option in Android phones at the time of initial set – up results in a status – quo bias which is detrimental to the interest of other players in the market, as it places Google Pay in the users’ devices, making it a default option already available to them. The default nature in phones drives users to make use of google pay instead of going for other alternatives present in the payment markets. It results in denial of market access to various other competitors in the same market and ultimately gains Google a significant competitive advantage over the other players, which is a contravention of Section 4(2) of the Act.

Another issue similar to this had also arisen quite recently in a case before the CCI, wherein several allegations were raised in a complaint against WhatsApp and its parent company Facebook. The said complaint raised objections that WhatsApp is abusing its dominant market position in the “market of internet-based messaging apps through smartphones” by creating its own United Payments Interface (UPI) payments system i.e., ‘WhatsApp Pay’ within its messaging platform. It was visible in the WhatsApp case that by doing so, it facilitates the pre-installation of WhatsApp pay in mobile phones, which would ultimately make it more amenable to users than other options available. The CCI instead of dealing with it chose not to recognize it in the WhatsApp case. However, the same issue has arisen again in a much clearer manner before the Competition watchdog and by issuing an investigation this time CCI has taken a step in the right direction.

What is the problem of Status Quo Bias or Default behavior in consumers?

The default behavior in consumers was a very less discussed issue in the Competition arena until recently, wherein the Competition and Markets Authority (CMA) of the UK in its market study on Online Platforms and Digital Advertising tried to explain the issue and the associated threats.

The study explained that “the default behavior in consumers while using applications and information providing websites, is something which has been encouraged by the transformation in the ways of interacting and acquiring information.”

In today’s high-tech world we can all access almost every information available on a particular subject just with a single click. Online platforms are loaded with so much information that focusing on what information is relevant and what not has become a herculean task for a consumer. Adjacent to this, the availability of information in such an easy manner has made all of us impatient and has resultantly reduced our tolerance for delay. This behavioral change in the digital environment forms the backbone of the ever-increasing default behavior in the customers. To summarize it in a one-line we can say that “Default behavior on the part of consumers is a propensity to avoid wasting time by accepting the default option presented to them”.

Though it sounds like that it is the best option available for a consumer, because it looks like a way by which a consumer can select the options which are more favorable to him and can get rid of the unnecessary and extraneous information, resultantly saving his time and cost. However, CMA in its guidelines while analyzing this behavior rejected this belief. It stated that the default behavior of consumers plays an enormous role in shaping the competition in social and search media. A consumer’s choice in the selection of various applications such as ‘what search engine to use is highly influenced by default options available to him. A consumer is more likely to make use of applications that are easily accessible and directly available to him on his device.  However, when consumers start using these apps on a regular basis, the power of these platforms to influence consumer choices increase manifolds. As most of these apps in one way or another are engaged in collecting consumer data. This data helps them in providing better and personalized services which ultimately helps them in creating control over their users. This control exercised over users ultimately binds them to these applications which automatically creates hurdles for the other players in gaining users and increasing their market reach.

This is the sole reason why these big firms and platform owners pay extreme importance to devise ways of achieving the status of default in users’ devices. For example:- In 2019, Google paid 1.2 Billion Pounds to different parties in the UK alone, in order to appear as the default feature on their devices.

This exercise helps giant companies to increase their profits. The bone of contention lies in the fact that consumers are now habituated and are not willing to shift because they are provided with what seems to them the most economical, efficient, and easy way to fulfill their needs. However, they do not realize that this exercise on the contrary is blocking their ways towards other and perhaps better available alternatives. It not only acts as a detriment to the consumers but it also harms other players in the market as their user base is being blocked, leading them to enormous losses and ultimately wiping them off the market.

How does it violate the provisions of the Competition Act?

The pre-installation of apps leading towards status – quo bias is in blatant disregard of Sections 4(2)(a), (b), (c), and (e) of the Competition Act, 2002. It violates these provisions in the following manner.

  • Pre-installation of apps in devices is nothing but an imposition of an unfair and discriminatory condition in the purchase of goods and services which is in violation of Section 4(2)(a)(i) of the Act.
  • It demotivates and takes away avenues from other players in the market which ultimately limits and restricts a scientific or technical development to the prejudice of consumers and violates section 4(2)(b)(ii) of the Competition Act.
  • By ultimately excluding competing apps it denies them access to the market and contravenes section 4(2)(c) of the Competition Act.
  • Finally, using the position in a market where one app is dominant in order to sweep into the other market or to preserve the other relevant market for itself leads to violation of section 4(2)(e) of the Competition Act.

Conclusion

The issue involved in the impugned Google case is quite new in the Competition arena of India, however, such issues have been previously dealt with by other competition watchdogs of the world. For instance, in the year 2018, European Commission dealt with a similar issue in Google Android Case. In that matter, it was alleged before the EC that Google had tried to abuse its market position by pre-installation of Google Chrome and Google Search on devices running on Android which is Google’s very own mobile operating system. EC while recognizing these allegations stated that even though Google had not made it mandatory for the users to utilize these pre-installed apps, but by installing them in advance it has taken the advantage of the default behavior of the consumers, as now they are less likely to download any other competing apps. The action of google was therefore considered anti-competitive.

The investigation in the present case is currently in the hands of the DG. As concluded from the above analysis it is not difficult to understand that Google here is in blatant disregard of the provisions of the Competition Act. It is expected from the CCI to take recognition of the international precedents available and declare a decision against google to bring clarity in relation to a whole new issue in the Indian Competition Arena. This would not only impact Google’s dominance but it would also definitely put WhatsApp and other entities into the circle of heavy Competition scrutiny.

The CCI’s decision to analyze this issue in contrast to what it did in the WhatsApp case, seems to be in the right spirit and direction. As with the increase in abuse of dominance of Big Tech around the globe, it is high time for the Competition watchdogs to take up serious and complicated issues in advance and put a regulation on them, rather than waiting for the actual abuse to take place. As this would be the only way to reduce the monopolization in the market. Thus, a favorable decision in the Google case would be a landmark move of the CCI settling the issue of a serious Competitive threat in the Indian Market and at the same time serving as a big blow to the Big – Tech.

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