Introduction
Accumulation of digital consumer data in colossal chunks is increasingly becoming a quandary for many mature jurisdictions like U.S. and U.K. In late July 2020, CEOs of major tech giants, Google, Amazon, Facebook, and Apple (GAFA) testified at the U.S. House of Representatives’ antitrust subcommittee[1], putting an end to the year-long proceeding that commenced back in June 2019. Major indictments against GAFA included a series of anti-competitive acts such as self-preferencing, price discrimination, search-bias, preferential promotion of their own offerings, and inequitable advertising policies. In particular, Facebook was accused of neutralizing its competing rivals[2] by acquiring them called killer acquisitions[3] in legal parlance; for example, Instagram was perceived as a threat to Facebook and later acquired by it. Apple was questioned for its unfair and arbitrary software distribution practices. Lastly, Google and Amazon were in the news for pilfering data from third-party apps to develop their products and preferential advertising policies.
To keep at par with the fast-pacing time, consumers resort to these digital platforms as they provide efficient services at just a click of a button. These tech giants provide innumerable services in the digital sphere ranging from online search (Google), online shopping (Amazon), social networking (Facebook), and mobile and technology (Apple and Google). Under the veil of ushering innovation, low prices, and better benefits to the consumer, the four big tech companies are click-baiting consumers into sharing their information with them, and they use this consumer information to exploit their potential competitors.
Finally, in October 2020, after completing the investigation, the subcommittee released a 449-page report[4] stating that these four big tech giants have become too powerful[5] and should be fragmented to serve the interests of consumers and their potential competitors in the relevant market. This blog piece discusses various antitrust issues posed by GAFA, its impact on the relevant market, and the current Indian competition regime’s approach regarding big tech giants’ mergers. Lastly, it provides a plausible course of action that can be sought to build a more reinforced jurisdiction surrounding present and potential tech giants.
Tryst of GAFA with Antitrust Issues
Recent development
The practices[6] adopted by these four big tech giants make them susceptible to antitrust proceedings time and again. In this regard, the recent development is the U.S. Department of Justice sued Google[7] over its monopolistic and anti-competitive practices, characterizing it as a system of ‘interlocking monopolies[8]. These tech giants are data-driven conglomerates. Data cannot be bifurcated into monetary terms, but it becomes quintessential to consider while regulating online platforms because they thrive on data. These tech giants may look benign to the economy at first sight, but they hamper the fair competition in the relevant market by leveraging their position gained by accumulating a massive amount of consumer-related data through various platforms. They use this information to assess consumers’ activity on their platforms and change their offerings as per their preferences, putting relatively newer entrants and rival competitors at a disadvantage.
Data pilferage to killer acquisitions
For instance, Facebook has successfully seasoned the practice of killer acquisitions till now, and it is evident after the acquisition of Instagram and WhatsApp. Even the CEO[9] of Facebook has claimed that both Instagram and WhatsApp were threats to its growth in its initial years. The practice of neutralizing competitive rivals acts as a barrier to the entry of new entrants in the relevant market. Google and Amazon have been infamous for pilfering data from third parties on their advertising platforms and developing their offerings.
Dual role of Amazon
Amazon’s case is curious as it plays a dual role of both the seller of its products and the host of the marketplace[10]. This duality in Amazon’s character gives an upper hand in accessing competitively sensitive information of the rival sellers, allowing Amazon to formulate pricing and selling strategies for its products. For instance, the sale of products in the name of Amazon Basics on its platform testifies to the same.
GAFA thrives on data collection as they collect data from consumers, analyze it, and generate revenue from it. Analysis of data allows tech giants to deliver targeted services to consumers. These four tech giants wield significant control over the relevant market and consumer data and provide very marginal space for other competitors to thrive. They are so big that they can afford to incur losses for growth at the cost of profit. The tremendous amount of data allows tech giants to assess their dominance in the relevant market and, likewise, adopt anti-competitive practices to strengthen their position. Till now, these tech giants have dodged the eyes of competition regulators, but recent developments suggest some conclusive action in the right direction.
Indian Legal Contour
The Indian Competition Regime’s approach to overcoming potential antitrust issues arising out of big tech giants is indistinguishable from the ex-ante merger review analysis of any other company. The term ex-ante aptly describes the Indian merger regime as it requires the parties to the combination to notify the Commission after meeting a certain threshold set out under Sections 5[11] and 6[12] of the Competition Act, 2002[13] (‘Act’). Fulfilling these thresholds guarantees the combination to be approved to an extent. If the combination looks to cause an Appreciable Adverse Effect on Competition (‘AAEC’),the Competition Commission of India (‘Commission’) conducts an investigation into the matter under Section 20(4)[14] of the Act.
The existing legal framework is not appropriate for the regulation of big tech giants and potential tech mergers as they are framed on the lines of conventional business models and are not suited to govern big tech giants. It is evident from the absence of an explicit parameter regarding data dominance and its abuse under Section 20(4)[15] of the Act, which assesses whether a proposed combination has or is likely to cause an AAEC in India. The parameters do not take into account the peculiarities of anti-competitive effects arising out of big tech mergers. The Competition (Amendment) Bill 2020[16] also did not mention provisions governing big tech mergers. The absence of explicit regulations governing big tech mergers would allow data conglomerates to abuse their position and domineer their terms in the digital market.
The present Indian competition regime and merger review analysis only go through the face value of data dominance. It is evident from the Commission’s ruling dating back to 2017 where Bharti Airtel alleged that Reliance Jio is adopting predatory pricing as it is offering many of its services for free. There, the Commission held that providing free services by itself does not raise competitive concerns[17]. It said that it was merely tempting the consumers by providing extra offers and benefits. The dominant approach in competition law policy-making is based on Consumer-Welfare Standard. Data dominance may not cause economic effects, but it can hamper the overall welfare of market participants as well as consumers in the long run. Albeit a data protection law has been proposed, but the Commission still has to ensure that consumer data collected by tech giants’ does not lead to anti-competitive effects in the relevant market.
The Competition Law Review Committee (‘CLRC’), in its report[18], noted that the definition of price provided under Section 2(o)[19] of the Act is inclusive and encapsulates consumer data’s notional value and factors affecting the consumers’ preferences. It also pointed out that Section 19(4) of the Act is broad enough to encompass the network effects wielded by dominant firms in the relevant market, and there is no need to mention explicitly ‘control over data.’ Hence, cognizance of the value of data and its probable misuses can be considered a right step, but a lot has to be done to regulate big tech firms.
The Way Forward
The Commission recently approved Facebook’s proposed investment[20], one of the biggest tech giants globally, in Reliance Jio, valuing to $5.7 billion to purchase 9.99% stakes in Reliance Jio. Strengthening Reliance Jio’s ascendance further, the Commission also approved Google’s proposed investment[21] in Reliance Jio, valuing $4.5 billion to purchase 7.7% stakes. These two tech giants’ investments in Reliance Jio are worrisome for the consumers and its rival competitors. It will make Reliance a behemoth in the Indian market, enabling it to leverage its position by restricting consumer data available to it, causing an unfair disadvantage to its rivals.
The deal will enable Reliance to share the personal data of 400 million users of Facebook-owned WhatsApp[22], giving it an edge on data over the other rival competitors. Having partnered with the likes of Google and Facebook will equip Reliance with around 500-600 million user data[23] , which in itself attracts scrutiny of the antitrust watchdog. For instance, Facebook’s investment in Jio’s minority stake is a stepping stone to the e-commerce sector[24]. Having two giants in the e-commerce sector with a massive amount of consumer data will indeed counter their rivals like Amazon and Flipkart and belittle relatively smaller businesses because they do not have an edge on data. Albeit the Commission has left the scope of potential abuse of dominance of data[25] and the digital business in the future, acting post facto on a particular abuse of dominance may be arduous. The Commission should consider it a forewarning and act at the earliest to curb it. There is an imperative need for lawmakers and the Commission to reconsider its approach towards regulating big tech mergers.
According to sources, between 2011 and 2018, the Commission approved 97.4%[26] of the notified combinations. This overall acceptance rate of notified combinations shows the Commission’s general proclivity towards approving the notified combinations. It is interesting that the Commission did not pass any rejection order and approved combinations with some modifications. The Commission tends to overlook future anti-competitive implications arising out of these tech mergers. There is a need for a paradigm shift in the Commission’s approach towards big-valued mergers, including tech mergers from consumer welfare yardstick to measures such as crystal ball gazing, i.e., presuming future antitrust implications and acting upon it. CLRC also suggested penalizing a mere attempt to monopolize a market where a particular good is sold.
The time is perfect for the Indian antitrust watchdog to examine these prominent tech mergers’ peculiarities and curb anti-competitive effects caused by them. The Indian competition regime should keep up with the fast-paced time and devise reinforced parameters that should regulate these sizably voluminous tech mergers in the future. GAFA entered the market with the promise of innovation and consumer benefits, but with an increase in their dominance, they became repetitive and adopted anti-competitive practices to proliferate. India’s antitrust watchdog, while maintaining the consumer welfare standard, should formulate a more holistic approach to take care of the interests of consumers as well as market rivals.
This article has been authored by Kunal Singh, Second year student, Vivekananda Institute of Professional Studies, GGSIPU
[1] Roger McNamee, A historic antitrust hearing in Congress has put big tech on notice, July 31, 2020, available at https://www.theguardian.com/commentisfree/2020/jul/31/big-tech-house-historic-antitrust-hearing-times-have-changed (Last visited on December 17, 2020).
[2] Mint, Facebook bought Instagram to quash competitor, documents show, July 30, 2020, available at https://www.livemint.com/companies/news/facebook-bought-instagram-to-quash-competitor-documents-show-11596068397572.html (Last visited on December 17, 2020).
[3] Competition Policy International, Antitrust Chronicle-Killer Acqusitions, May 26, 2020, available at https://www.competitionpolicyinternational.com/antitrust-chronicle-killer-acquisitions/ (Last visited on December 17, 2020).
[4] subcommitee on antitrust, commercial and administrative law of the committee on the judiciary, Investigation of Competition in Digital Market (October, 2020).
[5] Mint, US tech giants too powerful, antitrust panel chair warns, July 29, 2020, available at https://www.livemint.com/companies/news/us-tech-giants-too-powerful-antitrust-panel-chair-warns-11596046864337.html (Last visited on December 17, 2020).
[6] United Nations Conference on Trade and Development [UNCTAD], Trade and Development Commission, Competition Issues in the Digital Economy, TD/B/C.I/CLP/54 (May 1, 2019).
[7] Search Engine Land, DOJ antitrust suit: Google uses contracts, market power to neutralize rivals, October 21, 2020, available at https://searchengineland.com/google-search-doj-antitrust-suit-filed-342394 (Last visited on December 17, 2020).
[8] Greg Sterling, Congressional report blasts Google, Apple, Amazon and Facebook as monopolistic ‘gatekeepers’ of the digital economy, October 7, 2020, available at https://searchengineland.com/congressional-report-blasts-google-apple-amazon-and-facebook-as-monopolistic-gatekeepers-of-the-digital-economy-341628#:~:text=Google%20is%20a%20system%20of%20’interlocking%20monopolies’&text=The%20report%20finds%20Google%20has,others%20dependent%20on%20its%20ecosystem (Last visited on December 17, 2020).
[9] Mint, supra note 2.
[10] Politico, EU antitrust probe targets Amazon’s ‘dual role’, July 17, 2019, available at https://www.politico.eu/article/eu-antitrust-probe-targets-amazons-dual-role/ (Last visited on December 17, 2020).
[11] The Competition Act, 2002, §5.
[12] The Competition Act, 2002, §6.
[13] The Competition Act, 2002.
[14] The Competition Act, 2002, §20(4).
[15] Id.
[16] Shivam Tripathi, Introduction of Competition (Amendment) Bill, 2020: A step towards revamping Indian market, May 6, 2020, available at https://www.scconline.com/blog/post/2020/05/06/introduction-of-competition-amendment-bill-2020-a-step-towards-revamping-indian-market/ (Last visited on December 17, 2020).
[17] Competition Commission of India, Bharti Airtel Limited v. Reliance Industries Limited, Reliance Jio Infocomm Limited, Case No.03/2017, ¶22.
[18] Injeti Srinivas, Report of the Competition Law Review Committee, (July 26, 2020).
[19] The Competition Act, 2002, §2(o).
[20] Business Today, CCI approves Facebook’s 9.99% stake acquisition in Jio platforms, June 24, 2020, available at https://www.businesstoday.in/current/corporate/competition-commission-of-india-approves-facebook-9-99-percent-stake-acquisition-in-jio-platforms/story/407926.html (Last visited on December 17, 2020).
[21] Tech Crunch, Google invests $4.5 billion in India’s Reliance Jio platforms, July 15, 2020, available at https://techcrunch.com/2020/07/15/google-invests-4-5-billion-in-indias-reliance-jio-platforms/ (Last Visited on December 17, 2020).
[22] The Wire, India Will Not Be Able To Ignore the Threat of Tech and Data Oligopolies for Long, Ocotber 9, 2020, available at https://thewire.in/tech/india-will-not-be-able-to-ignore-the-threat-of-tech-and-data-oligopolies-for-long (Last Visited on December 17, 2020).
[23] Id.
[24] Business Standard, Why Facebook, Reliance Jio Deal is a wake-up call for Amazon, Flipkart, April 22, 2020, available at https://www.business-standard.com/article/companies/why-facebook-reliance-jio-deal-is-a-wake-up-call-for-amazon-flipkart-120042201398_1.html (Last visited on December 17, 2020).
[25] Business Today, Facebook-RIL deal: CCI raises concerns over data-sharing pact; FB assures it’s ‘limited’, October 7, 2020, available at https://nujssitc.wordpress.com/2020/12/13/making-a-case-against-amazon-anti-competitive-charges-by-the-european-union/#_ftn4 (Last visited on December 17, 2020).
[26] Bar and Bench, Competition Act and Insolvency & Bankruptcy Code: Applying the Failing Firm Defence for Green Channel Approval of Cases, February 23, 2020, available at https://www.barandbench.com/columns/competition-act-and-insolvency-bankruptcy-code-applying-the-failing-firm-defence-for-green-channel-approval-of-cases (Last Visited on December 17, 2020).
Picture Source- Asian Age
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