[Parth Tyagi and Achyutam S. Bhatnagar]
The authors are third year students of the National Law Institute University, Bhopal and National Law University, Odisha respectively.
In the month of April, social media giant Facebook invested over 40,000 crores, for a 9.9% stake in Jio Platforms, a unit of Reliance Industries[i]. The transaction brewed up the concerns for the possible abuse of data at the hand of these behemoths. The transaction stirred up the debate upon the lack of authority of the Competition Commission of India (“CCI”) in tackling big data-driven mergers. The article aims at addressing the inefficiencies in the current Competition act, by first defining what big data is, and how can big data give a competitive edge, following up with a discussion on the lacunas in the current merger standards. The last part of the article will lay out the different ways in which the current regulatory standards can be improved so as to cover big data-driven mergers.
Big Data and its competitive advantage
Big data is generally defined as ‘high-volume, high-velocity and high-variety information assets that determine cost-effective, innovative forms of information processing for enhanced insight and decision-making’.[ii]
The potential misuse of data arises from such algorithmic use of datasets which the competitors in the market would not be able to duplicate. This leads to exclusivity of data, which is used to specifically target customers, who are more likely to use the company’s product/services. A perfect example of the possible abuse of the data obtained post-merger is the Google-Double Click[iii]merger.
Regulatory gaps regarding data-driven mergers
Section 5 and 6 of the Competition Act 2002 (“the Act”) read together, are the regulating provisions of combinations in the market. While Section 5 of the Act defines combinations, Section 6 of the Act provides for regulations of such combinations. However, Section 6 is applicable only to combinations in Section 5 of the Act, which means that CCI does not have the regulatory powers to review all kinds of combinations. Section 5 prescribes certain thresholds in terms of assets and turnovers to term certain mergers and acquisitions as combinations.
The primary disability comes to light when data-driven mergers are on the rise in India. This is because big data is not considered as an asset in India, and digital companies tend not to have high turnover due to the provision of free services[iv]thus the scrutiny by the regulator is bypassed. The turnover based exemption is also a threat to privacy[v]. The acquisition of WhatsApp by Facebook is a good example[vi], wherein despite having a worldwide customer base, the acquisition eluded the CCI, while the acquisition met jurisdictional requirements in other countries and was reviewed.[vii] The traditional tools of analysis while have worked out so far[viii], but the digital economy is dynamic and a company with a huge data backing can effectively prevent the entry of new entrants in the market.
- Considering data as an asset
Big Data in the present markets is undeniably an asset and one of the main reasons of investments, mergers and acquisitions. The future lies in data valuation programmes that can be performed which provide the framework for businesses to monetize, measure and manage information as an actual asset[ix] or through the application of infonomics.[x]
2. Introduction of alternate parameters
The idea of novel parameters such as the value of transaction or deal size, which is also under consideration by CCI.[xi] The same was a key observation in the report[xii] of the Competition Law Review Committee. Additionally, network effects and control over consumers’ data prima facie appear to be sensible parameters.[xiii] The concept of big data also involves deliberations over privacy concerns, and what the authors view as a whole other debate. Competition concerns are related to privacy, but at the same time, the regulation of both cannot be a concern for a single body. Privacy in the competitive assessment muddles the goal of competition enforcement.[xiv]
Adopting foreign competition regulations to tackle the Big Data-driven mergers
The issue of tackling big data-driven mergers has plagued numerous countries and in response, there have been certain regulatory changes made by some countries. This section discusses the new regulatory norms for curbing big data-driven mergers adopted/proposed in different countries, which can be used to change the current regulatory standards in India.
- Redefining the relevant market or lowering the notification threshold
The German federal cartel office, the national completion regulator of Germany, in taking a step towards combating the data-driven mergers,[xv] redefined the meaning of relevant market under section 18(2a) of the German Competition Act. The new provision tackles the free services offered by the digital platforms wherein it states that “the assumption of a market shall not be invalidated by the fact that a good or service is provided free of charge”.[xvi] The competition regulator also added a new lower threshold for notification of merger under section 35(1)(a) of the Act. This resulted in the competition regulator being notified about the takeover of small companies by large platforms.
- Shifting the burden of notifying the Competition Regulator on the parties
The competition act of Singapore under Section 55A(3), places the burden of notifying the competition regulator of a merger on the parties. The parties are to assess whether their merger has the potential of disrupting the competition in the future, and on the basis of this, they may or may not notify the competition regulator. If the parties do not notify the competition regulator of their merger, and subsequently the merger hampers the competition, then the competition regulator has the authority to take the appropriate action in order to restore market contestability. The provision invalidated the Grab-Uber[xvii] merger, wherein the merged entity had the potential of controlling 90% app-based taxi market.
- Applying the Public Interest Test
A report by the House of Lords communications select committee[xviii]in 2019, recommended the adoption of a public interest test for determining the validity of the data-driven mergers. The committee suggested that such a test should be included in the current competition regime as it will give the competition regulators a wide range of powers in tackling the data-driven mergers.
- Doing away with the turnover based threshold for small firms
The European parliament in 2015[xix], suggested that applying the turnover based threshold on small companies possessing huge datasets would be imprudent. It noted that “Given the importance of scale economies and network effects, a better metric would be the number of users together with an estimation of the size of the network effects”.[xx]
The nexus between the preclusion of Big Data from the scope of ‘asset’ under Section 5, and Section 6 not only provides companies holding Big Data a means to dodge the notification requirement under the Competition Act, but also debilitates the Competition Commission of India from inspecting big data-driven mergers. With big data-driven mergers on a rise, it is high time that the nation’s competition regulations are revisited, and the competition regulator in the country is equipped to tackle big data-driven mergers. Data, consumer interest, and competition regulations form a trilateral which is conjunct and overlapping, and only a panoramic authority, which has the potential of clubbing all three areas can survive in the age of Big data.
[i]₹43,574-crore ‘like’: Facebook picks 9.99 per cent in Jio Platforms, The Hindu Business Line (Mumbai) April 23, 2020.
[ii]David Lawsky, Google closes DoubleClick merger after EU approval, Reuters, March11, 2008.
[iii]Stephen Castle and David Jolly, Europe Approves Google’s Merger With DoubleClick, The New York Times, March 11, 2008.
[iv]Nisha Kaur Uberoi, How CCI should look at M&A deals in digital economy, Live Mint, April 12, 2018.
[v]Justice B.N. Srikrishna Committee, Report of the Committee on A Free and Fair Digital Economy Protecting Privacy, Empowering Indians, 148 (July 27, 2018).
[vi] Nisha Kaur Uberoi, How CCI should look at M&A deals in digital economy, Live Mint, April 12, 2018.
[vii] Mike Issac, Zuckerberg Plans to Integrate WhatsApp, Instagram and Facebook Messenger, New York Times, Jan 25, 2019.
[viii]Competition Commission of India chief seeks Mergers and Acquisitions rule changes in tech space, The Indian Express, May 12, 2018.
[ix]John Akred and Anjali Samani, Your Data Is Worth More Than You Think, January 18, 2018, Available at: https://sloanreview.mit.edu/article/your-data-is-worth-more-than-you-think/
[x]Gartner Inc.,Turn Your Big Data into a Valued Corporate Asset, Forbes, November 13, 2017.
[xi]Gireesh Chandra Prasad, CCI set to get more teeth to regulate tech giants’ M&As, Live Mint, January 12, 2020.
[xii]Injeti Srinivas Committee, Report of the committee on the Competition Law Review, July 26, 2019.
[xiii] CUTS-CIRC, Submissions to competition law review committee, Available at: https://cuts-ccier.org/pdf/CUTSCIRC_Submission_to_Competition_Law_Review_Committee.pdf
[xiv] Sokol, D. Daniel and Comerford, Roisin E., Does Antitrust Have a Role to Play in Regulating Big Data?Cambridge Handbook of Antitrust (January 27, 2016)
[xv] Silvio Cappellari and Stephanie Birmanns, Germany: Merger Control,12 July, 2019, Available at: https://globalcompetitionreview.com/insight/europe-middle-east-and-africa-antitrust-review-2020/1195110/germany-merger-control
[xvi] Report May Jens-Uwe Franck Martin Peitz, Available at: https://docplayer.net/136350792-Report-may-jens-uwe-franck-martin-peitz.html
[xvii]Competition and Consumer Commission (Singapore),Grab-Uber Merger, September 24, 2018. Available at: https://www.cccs.gov.sg/media-and-consultation/newsroom/media-releases/grab-uber-id-24-sept-18
[xviii]House of Lords,Regulating in a Digital World, March 9, 2019, pg. 4 Available at: https://publications.parliament.uk/pa/ld201719/ldselect/ldcomuni/299/299.pdf
[xix]European Parliament, Challenges for Competition Policy in a Digitalized Economy, July, 2015,pg 60, Available at: https://www.europarl.europa.eu/RegData/etudes/STUD/2015/542235/IPOL_STU(2015)542235_EN.pdf