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  • Industry Experts Back Ex-Ante Legislation to Tackle Anti-Competitive Conduct in Digital Markets

    Published on July 6, 2022

    • The discussion focussed on how Big Tech companies in “gatekeeper” positions can exercise significant control over end-users and other businesses reliant on their services – a matter of concern for players in India and globally.
    • Panellists discussed instances of ‘anti-competitive’ behaviour employed by Big Tech companies through steep commissions, mandatory use of proprietary payment systems, self-preferencing, sherlocking etc.
    • Various antitrust cases were discussed to highlight the difficulty in reining in these giants, where in some instances – such as the Netherlands ACM case – it was observed that companies are willing to pay penalties rather than comply.
    • Panellists discussed the challenges of lengthy and cumbersome legal remedies and procedures, deliberated over the inadequacies of existing competition law frameworks, and highlighted the need for ‘ex-ante’ legislation.

    Hyderabad   :  The Alliance of Digital India Foundation (ADIF) hosted a virtual panel discussion with industry experts on how to equip India’s competition law framework for the challenges posed by gatekeepers in the digital markets.

    The panellists included Dr. Amar Patnaik ( MP, Rajya Sabha (Odisha), Member – Parliamentary Standing Committee on Finance), Dr. Damien Geradin (Founding Partner, Geradin Partners), Saumya Singh Rathore (co-founder, Winzo), Rajneesh Jaswal (General Counsel, Legal & Policy, Koo) and Sijo Kuruvilla George (Executive Director, ADIF), who deliberated on how to strengthen the regulatory regime for big tech in India. The discussion was moderated by Amanat Khullar (Editorial and Content Manager, ADIF) and Manjushree RM (Senior Resident Fellow, Law and Technology, Vidhi Centre for Legal Policy).

    The discussion navigated the on-ground challenges, loopholes, and the way forward to build holistic policies for a transparent and participatory environment for the industry.

    Big Tech companies have grown to be amongst the most powerful in the world in terms of size and influence. They maintain their dominance through the ‘network effects’ they enjoy and through practices that result in ‘high barriers to entry’, precluding competition in the digital economy. Market players, both in India and globally, have expressed concerns about Big Tech’s dominance. However, the world over, antitrust regulators seem to be finding existing competition law frameworks inadequate in assessing such dominance.

    In this regard, opening the session, Dr. Amar Patnaik highlighted that the competition law must seek to foster a frictionless flow of information between players. Given the pace at which technology moves, he also stated that this was a timely discussion –  emphasising that “Competition Law in India, which was promulgated in 2002, has outlived its context, and requires some amendments or a newer form of law.” He further added that to cater to India’s 800 million internet users, and to truly level the playing field and benefit consumers in the digital economy, the Competition Act and Consumer Protection Act must seamlessly integrate into each other. Further, he stated that competition laws across the world must shift from a ‘reactive’ to a ‘preventive’ approach through ex-ante regulation.

    For a competitive economy, digital markets need to be open and fair. However, Big Tech companies – through their “gatekeeping position” – are resorting to various tactics that are distorting the market. Sijo Kuruvilla George, Executive Director, ADIF, said that smaller ecosystem players in India are being adversely affected by various practices in the digital market: enforcement of a steep app store commission, mandatory use of proprietary payments systems, bundling of services, inclusion of anti-steering provisions, and de-platforming of apps. Moreover, he also observed that, “Competition authorities are either not equipped to rein in Big Tech’s practices or are not proceeding at a fast enough pace that is suited to digital markets.”

    Given the global reach of these companies, countries across the world are facing similar issues. Dr. Damien Geradin, the founding partner at Geradin Partners, emphasised that this problem is “not unique to India or Europe – competition authorities and legislative bodies in various other jurisdictions, including the United Kingdom, Australia, United States are aware of these issues, and are taking appropriate steps to tackle them”. However, in some instances even when competition authorities step in, companies are willing to pay the fine rather than comply. Referring to Apple’s case in the Netherlands, Dr. Geradin added, “Apple preferred to pay the fine for 10 weeks, before they started to take steps towards compliance,” thus implying that for companies with such large turnovers, sometimes financial penalties don’t have the intended impact.

    Moreover, as a result of such protracted legal battles, by the time a Competition Authority has made a decision, the market has moved on – resulting in “irreparable harm” to the economy.

    In this regard, Dr. Geradin stated “ex-ante legislation becomes relevant here, as it will help circumvent the limitations of competition law.” However, given the pace at which digital markets move, it is also important that competition laws are strengthened through the streamlining of processes by setting statutory deadlines and instituting ‘restorative remedies’ that seek to return the market to the status quo.  Moreover, Dr. Geradin emphasised that a “regulation is only as good as its enforcement,” highlighting the need to build human resource capacity for enforcement and consequently strengthening of the competition law.

    The anti-competitive practices of BigTech often have a magnified impact on the business operations of start-ups and smaller businesses. Speaking on the anti-competitive practices within the app store ecosystem, Saumya Singh Rathore, co-founder of Winzo, added that the cost of operating on the PlayStore – where they are required to pay “5X more for every extra user acquired” – is unsustainable for small developers. She added that operating within such a “boxed ecosystem” not only comes at an exponential cost to companies but also threatens early ideas and innovation in the economy.

    Rajneesh Jaswal of Koo mentioned that from a legal perspective, it might be prudent to follow a ‘digital utility’ approach going forward. He stated: “We need to start looking at some of these players as digital utilities who are important for the digital ecosystem to survive.”

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