Anti-Competitive Practices by Big Tech Companies

• 06 May 2023

For Prelims: IAMAI, Parliamentary Standing Committee, Systemically Important Digital Intermediaries, Fintech, Competition Amendment Bill, 2022, CCI.

For Mains: Anti-Competitive Practices by Big Tech Companies.

Why in News?

Some start-ups have accused the IAMAI (Internet and Mobile Association of India) of favoring Big Tech companies over smaller ones, which highlights the Issue of Anti-Competitive Practices by Big Tech Companies.

• IAMAI is a not-for-profit industry body registered under the Societies Act, 1896. Its mandate is to expand and enhance the online and mobile value-added services sector.

What is Big Tech?

• The term ‘Big Tech’ is used to refer to a handful of large, globally significant technology companies, such as Google, Facebook, Amazon, Apple and Microsoft.
• Big Tech is better understood as a concept, rather than a static set of companies. New companies may enter this category just as existing ones may drop out of it.

What is the Background?

• The Parliamentary Standing Committee on Finance proposed new regulations to prevent anti-competitive practices by big tech companies.
  • These included ex-ante regulations that require companies to follow certain standards of behavior before engaging in certain practices and designating big tech companies as Systemically Important Digital Intermediaries (SIDIs).
  • The SIDIs would be the leading entities with the potential to negatively impact competition in the digital ecosystem based on their revenue, market capitalization, and number of active users.
• However, the IAMAI argued that these regulations could stifle innovation and competition.
  • Other big tech companies like Meta, Apple, Amazon, Twitter, and Google among its members, submitted similar comments.
• This move has drawn criticism from some Indian startups, who accuse IAMAI of promoting views that favor foreign big tech companies and influencing the Competitive Conduct in the Digital Ecosystem.

What is the Role of Big Techs India’s Digital Space?

• Revenue Source: They play a prominent role in the fintech market, an attractive revenue source particularly because of low per user ad revenues in India.
• Overcoming Literacy Barriers: Voice-based and regional language interfaces are offered by Big Tech companies to reach new users and overcome literacy barriers.
• Bridging Infrastructural and Employment Gaps: New business verticals that bridge existing infrastructural and employment gaps by providing warehousing, delivery facilities and job opportunities are helping India to serve Indian markets better.
• Social and Political Progress: Most Indian internet users rely on one or more Big Tech platforms to access information, communicate, and participate in political and social life.
  • This is also democratising the exercise of the constitutional right of free speech.

How does Big techs Influence the Competitive Conduct in the Digital Ecosystem?

• Acquisitions and Mergers:
  • Large firms buying highly valued start-ups without being subject to merge control rules is a problem in digital markets.
  • The Committee noted that CCI (Competition Commission of India) is not able to capture certain mergers and acquisitions because they do not meet the thresholds of assets and turnover required for combinations.
• Self-Preferencing:
  • Self-preferencing happens when a company promotes its own services or those of its subsidiaries on its platform, while also competing with other service providers on the same platform.
    • For example, a company may give priority in rankings to its own applications in an app store. This lack of neutrality can harm other businesses and reduce their profits.
• Data Usage:
  • Digital companies collect a lot of customer data which can give them an advantage and make it hard for new companies to compete.
  • This data can also be misused to track and profile customers.
• Restricting Third-Party Applications:
  • Some companies restrict the use of third-party applications on their platforms, which can limit user choice.
    • For instance, an operating system may prevent users from utilizing services of an application other than its own, such as Apple not allowing any third-party applications to be installed on the I-phone.
• Adjacency:
  • Digital firms sometimes force customers to buy additional services linked to their main product, which reduces competition and creates pricing asymmetry.
• Anti-Steering:
  • Anti-steering provisions are used by entities to prevent business users from using other alternatives, thereby reducing competition.
    • For example, application stores mandating the use of their own payment systems. These practices result in anti-competitive exclusionary practices.

What is India's Current Approach to Regulate Big Tech?

• Competition Act, 2002: In India, antitrust issues are governed by the Competition Act, 2002, and the CCI checks upon monopolistic practices.
  • In 2022, the CCI imposed a penalty of Rs 1,337.76 crore on Google for abusing its dominant position in multiple markets for 'anti-competitive practices'.
• Competition Amendment Bill, 2022: The government has proposed amendments to the competition law in the Competition Amendment Bill, 2022. The Bill receives Presidential Assent in April 2023.
  • The CCI shall frame regulations to prescribe the requirements for assessing whether an enterprise has substantial business operations in India.
  • It will strengthen the Commission’s review mechanism, particularly in the digital and infrastructure space, a majority of which were not reported earlier, as the asset or turnover values did not meet the jurisdictional thresholds.

Way Forward

• To address the unique characteristics of digital markets that do not have a turnover, the Parliamentary Standing Committee on Finance proposes a system based on the value of deals.
• They also recommend that any concentration involving entities that provide digital services or collect data should be reported to the CCI before implementation, regardless of whether it meets the notification threshold.
• The government needs to take adequate steps to promote internet awareness, such as checking the authenticity of websites before any transactions are made, and not granting access to unauthorized applications.

Source: TH