Synopsis of the Standing Committee on Finance on ‘anti-competitive practices by bigtech companies
India is expected to have 907 million internet users by 2023. India's consumer digital economy is expected to become a US$ 1 trillion market by 2030, growing from US$ 537.5 billion in 2020.
Bigtech’s have increasing returns to scale, while traditional markets have decreasing returns to scale. Thus, Bigtech often tip quickly (within 3 to 5 years) to winner-take-all monopolistic outcomes. Thus, while traditional markets tend to be fair and contestable, digital markets quickly result in limited fair competition.
Industry representatives submitted that the large online intermediation services like marketplaces, app stores and other online intermediation services in various sectors including mobility, travel, food, content sharing etc, act as a critical platform service that connects end users and business users. Given the size and critical nature of these platforms, it becomes imperative to define what makes a platform a 'critical service' before proceeding to other provisions regulating the digital market.
Committee recommended that competitive behaviour needs to be evaluated ex ante before markets end up monopolized instead of the ex-post evaluation being carried out at present.
The Committee opine that, India must identify the small number of leading players or market winners that can negatively influence competitive conduct in the digital ecosystem, as 'Systemically Important Digital Intermediaries (SIDls)' based on their revenues, market capitalization, and number of active business and end users.
The Committee, recommended that stakeholders, working with the Competition Commission of India (CCI) and the Central Government, must collaborate to arrive at a reasonable definition of SIDls.
Further, the SIDI must annually submit a report to the Commission describing in a detailed and transparent manner the measures it has implemented to comply with its mandatory obligations.
The Committee feel that India needs to enhance its competition law to address the unique needs of digital markets. The Committee therefore recommended that the government should consider and introduce a Digital Competition Act to ensure a fair, transparent and contestable digital ecosystem
The Committee would thus suggest that a specialised Digital Markets unit be established within the Commission, staffed with skilled experts, academics and attorneys, enabling the Commission to closely monitor S101s and emerging SIDls, provide recommendations to the Central Government on designating SIDls, review SIDI compliance and adjudicate on digital market cases and conduct for efficient and effective monitoring of digital markets per se.
The different anticompetitive practices that can arise are:
1. Anti-steering provisions
Description:
Prominently associated with 'App stores', anti-steering provisions prevent their business users, for instance app publishers, from moving out of the platform and using other alternatives for payments e.g Google’s Play Store and Apple's App Store.
Discussions at the Standing Committee:
Stakeholders criticized anti-steering policies, terming them anti-competitive and guilty of stifling consumer choice. Industry Representatives submitted that forced anti-steering results in anti-competitive exclusionary practice and therefore needs to be specifically declared anti-competitive.
Committee Recommendations:
The Committee recommended that an SIDI should not condition access to the platform or preferred status or placement on the platform on the purchase or use of other products or services offered by the platform that are not part of or intrinsic to the platform.
2. Self-preferencing
Description:
If the platform engages in self-preferencing, it leads to a negative effect on downstream markets, as their profits may go down and, at the same time, gives an unfair advantage to the leading player-the platform itself. Eg. Google unfairly privileges 'Google Pay' by prominent placement on the Play Store, Android OS and Android based smartphone
Discussions at the Standing Committee:
CCI shared that there should be a faster mechanism to deal with this issue, than the long drawn one and a half years investigation process.
Committee Recommendations:
The Committee strongly recommended that a SIDI must not favour its own offers over the offers of its competitors when mediating access to supply and sales markets, in particular, when presenting its own offers in a more favourable manner; and when exclusively pre-installing its own offers on devices or integrating them in any other way in offers provided by the platform.
3. Bundling/Tying
Description:
E.g., mandatory pre-installation of entire GMS suite under MADA (Mobile Application Distribution Agreement) amounts to imposition of unfair condition on the device manufacturers.
Discussions at the Standing Committee:
Industry representatives submitted that bundling the services into take it or leave it package, app stores make it difficult for developers to establish the fair fee for each service, while also reducing their ability to pursue other alternatives. The size and ubiquity of the dominant app stores, which benefit immensely from being pre-installed on their own operating systems, makes it almost impossible to negotiate the quantum or threshold for commissions
Committee Recommendations:
The Committee shared that an SIDI should not force business users or end users to subscribe to, or register with, any further services as a condition for being able to use, access, sign up for or registering with any of that platform's core platform service.
4. Use of non-public data
Description:
A key issue with digital platforms is that of the monopolistic usage of this data. Also, the data so collected hampers user privacy.
Discussions at the Standing Committee:
Industry Representatives submitted that, Big Tech impose unfair and discriminatory conditions/initiatives including prominent placement results in driving more downloads/ traffic/ transactions on their Payments App. It allows the Big Tech to generate more user data which in turn empower them to innovate and offer better features than their competitors. This creates a vicious cycle and gives The Big Tech companies insurmountable scale advantages, thereby (and at the same time} creating barriers to the entry and expansion of smaller and newer innovative companies.
Committee Recommendations:
In the interest of fairplay and to ensure a level playing field, the Committee recommend that an SIDI should not
· process, for the purpose of providing online advertising services, personal data of end users using services of third parties that make use of core services of the platform
· combine personal data from the. relevant core service of the platform with personal data from any further core services or from any other services provided by the platform or with personal data from thirdparty services
· cross-use personal data from the relevant core service in other services provided separately by the platform, including other core services of the platform, and vice-versa
5. Acquisitions & Mergers
Description:
In the choice between 'Build versus Buy', the larger platforms tend to pick the latter, thereby disallowing the smaller firms to grow beyond a certain limit, in the digital markets.
Discussions at the Standing Committee:
The CRLC recommendations, in regard to bringing a deal value under M&As within the ambit of CCI is welcome because these digital markets are asset light and they do not have a turnover.
Committee Recommendations:The Committee recommended that an SIDI should inform the Competition Commission of India prior to its implementation and following the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest.
6. Pricing /Deep discounting
Description:
Platforms practice tactics like 'dynamic pricing' and bogus sales and markdowns (inflating price and then offering a 'sale' or 'discount'). Such practices and discounts lead to service providers losing control over the final price, as the authority to decide on discount rates rests with the platform.
Discussions at the Standing Committee:
Industry representatives submitted that Big Tech app hosting platforms charge as high as up to a 30% fee for in-app purchases and subscription fees, which results in an unsustainable business model for apps for small Indian entrepreneurs. Further, the Big Tech Companies have become gatekeeper firms with tactics undermining the natural forces of competition.
Committee Recommendations:
The committee recommended that an SIDI should not prevent business users from offering the same products or services to end users through third-party online intermediation services or through their own direct online sales channel at prices or conditions that are different from those offered through the online intermediation services of the platform.
7. Exclusive Tie-ups
Description:
This not only hampers with the business of other ecommerce platform but may also lead to losses for brick-and-mortar sellers.
Discussions at the Standing Committee:
CCI submitted that Exclusive tie-ups by major digital platforms can also foreclose markets and constrict competition in certain circumstances.
Committee Recommendations:
The Committee recommended that an SIDI should not prevent business users from offering the same products or services to end users through third-party online intermediation services or through their own direct online sales channel at prices or conditions that are different from those offered through the online intermediation services of the platform, so that fair market conditions prevail.
8. Search & Ranking preferencing
Description:
Competition on the platforms may get influenced in favour of the exclusive brands and sellers, through higher discounts and preferential listing.
Discussions at the Standing Committee: Industry Representatives submitted that, Bidding on company brand keywords on search engine platforms is currently allowed, which we believe is a copyright violation. As a result, brands and products which are IPR registered and licensed are forced to shell out extra money to safeguard their own company name, when the brand name is being used as a keyword in the search. Further, allowing bidding on keywords that may be registered trademarks of brands allows fraudsters to use this to target innocent customers by bidding on BFSI companies' trademarks. The misleading search results with the search query for Banking, financial services and insurance (BFSI) companies appear on leading Digital Advertisement Platforms, search engine platform, and Social Media platforms. Further, these search results appear as advertisement.
Committee Recommendations:
Committee recommended that an SIDI must provide to any third-party undertaking providing online search engines, at their request, with access to fair, reasonable and non-discriminatory terms to ranking, query, click and view data in relation to free and paid search generated by end users on its online search engines. Further, any such query, click and view data that constitutes personal data should be anonymised and an SIDI, particularly those providing search and ranking functionality should not treat the products, services, or lines of business of the platform more favourably relative to those of another business user and in a manner that is inconsistent with the neutral, fair, and non-discriminatory treatment of all business users.
9. Restricting Third-party Apps
Description:
Gatekeepers have been found to restrict the installation or operation of thirdparty applications. An example of this is the anti-steering.
Discussions at the Standing Committee:
Industry representatives submitted that, Google puts out alert while installing third party Apps saying that it is a risky application, while Apple does not even allow any third-party apps to be installed on the i-phone.
Committee Recommendations:
The Committee opine that an SIDI should allow and technically enable the installation and effective use of third-party software applications or software application stores using, or interoperating with, its operating system and allow those software applications or software application stores fo be accessed by means other than the relevant core services of that platform.
Furthermore, an SIDI should, where applicable, not prevent the downloaded third-party software applications or software application stores from prompting end users to decide whether they want to set that downloaded software application or software application store as their default. It should technically enable end users who must themselves decide to set that downloaded software application or software application store as their default to carry out that change easily to ensure transparency.
10. Advertising Policies
Description:
There rises the issue of self-preferencing, as well as conflict of interest, when platforms operate at all levels of ad-tech supply chain.
Discussions at the Standing Committee:
As of 2021, the revenue generated by digital advertising across India was valued at around 246 billion Indian rupees. The digital ad market will rapidly overtake print as well as television revenues by fiscal year 2024.
Industry representatives submitted that a particular Big Tech company is the dominant player in Search advertising. All websites would have The Big Tech company crawlers ( a program used by search engines to collect data from the internet) placed on its website so that they get traffic through The Big Tech company search results. By requiring advertisers to place crawlers in their websites, The Big Tech company has been able to not just perform the best in terms of Search Advertising but also amass copious amounts of consumer/user activity and data.
Committee Recommendations:
The Committee thus recommend that an SIDI should not process, for the purpose of providing online advertising services, personal data of end users using services of third parties that make use of core services of the platform. It should provide advertisers, information on a daily basis, regarding price paid by the advertiser and the remuneration received by the publisher. It should provide advertisers and publishers with access to the performance measuring tools of the gatekeeper and the data necessary for advertisers and publishers to carry out their own independent verification of the advertisements inventory, including aggregated and non-aggregated data