[By Tanya Maheshwari ]
The author is a student of University School of Law and Legal Studies, GGSIPU.
Introduction
The digital industry has outgrown itself tremendously worldwide, which has led to the expansion of the business sector due to its ease and availability. It’s rightly said that every boon comes with a bane. In this case, as the digitalization of the business sector grew, so did the frets about how the dominant companies or big players might use the user data they possess to increase their dominance and manipulate them by allowing millions of people and companies to engage and deal with one another on daily basis. Concealed practices such as horizontal cartel agreements, anti-competitive agreements, data privacy breaches, and abuse of market dominance are promoting the “winner gets it all” philosophy.
These concerns are also shared by countries like United States and European Union. President of Bundeskartellant, Andreas Mundt, also said that consumers are not misled about it, still Facebook showed its dominance worldwide after gathering user data and abused the market power. On the contrary, Facebook’s conduct of misleading the user data to have a control on market dominance was fined by the US federal trade commission of USD 5 Billion.
Concerns over privacy arise when companies use user data for their own purposes. This results in the denial of new players’ access to the market and the monopolization of existing dominant players, as the latter make the most of the user data they have acquired. It’s time for an emphasis on how existing players and consumers are impacted by the accumulating consumer data, privacy concerns, market power in the event of dominance, and user data. The firms block access to the “relevant market” for new players by accumulating a tonne of valuable user data with the help of AI or in exchange for permissions in order to establish market power and leverage their market dominance.
What is a relevant market?
While examining the effects on company and monopolistic data dominance, it is crucial to pinpoint the market in question. The denial of relevant market access to existing and new players is a critical concern that can hinder fair market competition and stifle innovation. The facts and circumstances of the case, however, determine the relevant market. The nature of the product, the target market, and the market dynamics all vary and go beyond purely physical barriers.
The concept of a “relevant market” in competition law refers to a market that offers a specific good or service with available alternatives. Defining the relevant market has a significant impact on competition scope and the market power of companies. Determining the relevant market involves considering the relevant product/services, geographical market, and mode of distribution, as illustrated in the Ashish Ahuja and Snapdeal case.
The lack of synergy between companies and the presence of overlapping products or services have a significant impact on the relevant market, affecting both new entrants and established players. For instance, in the Intel Corporation case, CCI rejected section 4 claims based on Intel’s distribution agreements because the distributors were not restricted from dealing with competitors’ products, and they were even found dealing in competing products. Hence, there was no foreclosure of the market for Intel’s competitors.
Regulatory authorities employ tests like SSNIP (Small but Significant Non-transitory Increase in Price) and HM (Hypothetical Monopolist) to determine the relevant market. However, these tests face challenges in digital markets and zero-pricing strategies. SSNIP struggles with its pricing-centric approach and the complexities of multi-sided platforms, making it an inadequate tool for market determination. The SSNDQ (Small but Significant Non-transitory Decrease in Quality) test serves as an alternative, but no definitive method exists due to the limitations of each approach.
By denying new entrants’ access to user data, competition is hindered, making it difficult for them to enter the market. Consequently, denying relevant data access for existing and new players paves the way for market dominance, which can be exploited to abuse market power. Defining the relevant market is crucial in terms of data access and sharing, as it directly influences competition levels and the potential for new competitors to enter the market through agreements.
Impact of Horizontal cartel and anti- competitive agreements on market access denial
Data exchanges between companies could lead to anticompetitive agreements that leads to anti-competitive practices and pave the way for market dominance through data manipulation. The CCI has consistently taken a strong stance against such practices, imposing heavy penalties on companies found guilty of engaging in anti-competitive behavior and is banned under the act.
As in the FHRAI vs. MMT case, MMT-Go utilized predatory pricing tactics, entering into concealed commercial agreements to favor OYO while denying market access to FabHotels and Treebo. This resulted in entry barriers for other industry players, limiting their market reach. Similar practices were observed in the case of HUL and Kingfisher Airlines, where market dominance and denial of market access were facilitated through agreements. Likewise, TISCO’s actions in the flat steel products market were found to deny market access. Such agreements enable data exchange, providing a competitive advantage and market dominance.
Incumbents who have established dominance in multiple markets and utilize economies of scope through tie-up agreements pose significant barriers for new entrants in the digital market. In the case of Excel crop care, the involved parties engaged in an anti-competitive agreement to determine prices for their goods, thus violating section 3 of the act. A similar verdict was reached in the All India Flat Tape Manufacturers Association case, where the association participated in a horizontal cartel to fix prices, divide markets, and restrict production, leading to the determination of anti-competitive conduct. Also, it’s not necessary that actual agreements have to be in place, rather circumstantial evidence can be used to support the same argument, as was in the case of Builders associations of India.
The denial of relevant market access through tie-up agreements and horizontal cartels can have far-reaching consequences for market competition and the accumulation of consumer data. The enforcement of laws has to be strengthened as to how much data should be collected, authorities should conduct rigorous investigations, liabilities should be imposed on the company involved, and penalties have to be enforced to deter such practices and agreements and protect market access for all players.
Impact of Accumulation of Data
The accumulation of personal data without consent and the improper use of AI and permissions raise concerns about data privacy and unfair market advantages, as noted by the OECD. The economics of data concentration and dominance favor a few dominant players, allowing them to exploit personal data unlawfully. Combining personal data with advanced AI algorithms enables deceptive practices such as targeted propaganda, disinformation campaigns, and psychological profiling, further exacerbating the unfair advantages held by these dominant players.
In order to address these concerns, the 2019 Personal Data Protection Bill was introduced, aiming to protect people’s right to privacy by establishing guidelines for data processing which also incorporated few elements of the EU’s GDPR, which is a regulation that entails businesses to protect personal data and privacy of EU citizens and both regulations emphasize obtaining explicit consent, providing notice to users, and ensuring data accuracy. The bill is also a significant concern for policymakers, as the Supreme Court of India declared the right to privacy a fundamental right in 2017. The CCI has acknowledged the consequences of substantial data collecting on network effects and the emergence of dominant players and is aggressively addressing data manipulation issues to prevent unfair advantages.
While accessing relevant databases is crucial for companies aiming for market dominance, it becomes unfair when owned exclusively by a single entity. The data collection and processing practices of companies can lead to excessive personalization of interfaces, resulting in higher switching costs. This attracts more consumers but restricts access to competitors’ data, thereby denying relevant market access to both existing and new players. To tackle this issue, data portability allows users to control their data and transfer it to other service providers, reducing these costs as exemplified in cases like BSNL and SAMHI Hotels.
Mergers involving companies with vast databases, such as the Microsoft-Yahoo merger, bring forth additional concerns. However, the CCI rejected mergers between Walmart and Flipkart, as well as Holcim and Lafarge, due to potential risks to data security and service quality. Under Section 31 of the Act, the CCI possesses the authority to approve, disapprove or modify any transaction that does not qualify as a “combination.” In 2019, the CLRC report also introduced green channel routes to enhance merger rules and regulations for the betterment of the industry.
Major digital platforms possess the capability to combine datasets of consumers from different markets who share similar characteristics. This, coupled with advanced AI, enables these platforms to increase their advertising revenue which helps them gain market domination and raises entry barriers for newcomers, creating unfair competition.
AI resulting in abuse of dominance through data
AI can be used to exploit competitors’ weaknesses, manipulate prices, and strengthen a company’s dominant market position. User interfaces that hinder preference expression or deceive users breach expectations. Unaware permissions by apps/websites invade privacy. In the case of Uber India, Uber’s agreements with drivers and local authorities to set prices using consumer data were deemed anticompetitive. Similar principles applied in cases like Microsoft/Skype, where access to APIs was required for third-party developers and was denied by the dominant companies.
Companies also engage in self-preferencing, manipulating user choices, and preferences through pre-selection, button manipulation, and persistent urging. Google’s violation of the Act in monopolizing the online search market exemplified this conduct. While Article 102 of TFEU doesn’t expressly prohibit self-preferencing, it becomes abusive when it leverages market power without a pro-competitive rationale. Google strengthened its dominant position by favoring its own services and blocking rivals’ access, placing them at a disadvantage. CCI found similar abuses in Samir Agrawal case. Regulators must evaluate excessive data collection, use, and sharing for potential anti-competitive implications in a data-driven ecosystem, warranting antitrust scrutiny.
Likewise, the CCI determined that the parties had entered into an anti-competitive agreement to manipulate the release of films, resulting in an abuse of dominance, in the case of FICCI Multiplex Association of India. Facebook was also banned from processing the data collected from WhatsApp users for its own benefits, as the updated policy was found abusive of its power under GDPR. Similarly, more such strict measures have to be taken in case of data breach and violation. Now, antitrust authorities are becoming more aware that the use of AI can have unexpected effects on enforcement worldwide.
The Way Forward
The possession of exclusive data by dominant firms can confer them a substantial competitive advantage, potentially leading to the abuse of market dominance. Hence, it is critical to carefully assess access to such data to evaluate its sustainability. Imposing restrictions on dominant companies becomes necessary to prevent market access denial, promote fair competition, and address data privacy breaches. The CCI plays a vital role in ensuring equitable markets and combating exploitative practices.
Establishing a relevant market and imposing limitations on data accumulation is necessary. This can be facilitated by enhancing market transparency through disclosure requirements and user consent mechanisms. To tackle these challenges effectively, enacting data protection laws in India and embracing market-based solutions or a regulatory framework are imperative. Additionally, the establishment of inter-corporation agencies is crucial to carefully examine the data, considering its indispensability and the legitimate interests of all parties involved, and to play a regulatory and monitoring role, overseeing tie-up agreements between companies to prevent the abuse of dominance.
These policies should determine the scope of mandatory data porting, exemptions, and volume thresholds, considering economic factors and cost structures. Regulators must actively monitor developments and hold companies accountable for any anticompetitive behavior by conducting rigorous antitrust investigations and assessments. This comprehensive approach aims to foster competition, address privacy concerns, ensure fair data accumulation, and prevent the abuse of dominance and denial of relevant market access.