The Data Monopoly Challenge for Indian Competition Law

- Prannv Dhawan

The Indian economy is undergoing a unique transformation with the advent of the fourth industrial revolution. The role of digital technology and information-tools is considered paramount even as data is being portrayed as the new oil. It is imperative for an emerging economy to ensure that the overall processes of business transformation do not adversely impact the fundamentals of a market economy- free competition. It is considered one of the most significant indicator of a well-functioning market as characterized by Adam Smith. This essential feature of a vibrant market economy is under new-age challenges due to the limitations of anti-trust regimes to regulate data monopolies.[1] This had led to a global debate on rethinking and strengthening anti-trust regimes in order to safeguard the cardinal principles of a laissez faire economy. This article would contextualize the broader anti-trust challenges relating to data-driven economy and consequently, analyse the Indian scenario in light of recent legal and policy developments.

The principles of free competition wherein new businesses can enter the market without barriers are under serious challenge as internet and technology based corporations like Google, Facebook, Microsoft, Amazon and Apple have emerged as predominant economic entities.[2]The scholarly literature and policy discourse in the western world is undergoing an intense debate on the efficaciousness of the anti-trust regimes.[3] Scholars like Lina Khan have argued that the existing competition law regimes are unequipped to understand and regulate the form and substance of market power in modern economy due to its myopic characterization of consumer welfare explained in terms of short-term price effects.[4] Khan has also pointed out how the limited approach of  current regime fails to cognize affects of dominance by corporations like Amazon whose impact on the level playing field cannot be understood in terms of price and output.

Tim Wu, in his celebrated book The Curse of Bigness has analysed the evolution of legal and regulatory frameworks that have enabled these corporations to emerge into predominant economic entities.[5]  Both Wu and Khan advocate for the traditional understanding of anti-trust as proposed by Louis Brandeis in the Roosevolt era in the United States. This approach was centred on the belief that government should limit concentration of economic power and “punish those who used abusive, oppressive, or unconscionable business methods to succeed”. This approach let to the breaking-up of many large infrastructure-sector behemoths like Standard Oil. The Brandeisian idea highlighted the importance of real freedom in the market so that new entrepreneurs can emerge without any structural and existential risks. This ‘suppression of industrial liberty’ was seen as fundamental affront to the very premise of a liberal economy from giant corporations.

These scholars advocate that national and global anti-trust regimes should move beyond Chicago School consensus on emphasizing consumer welfare as central to  anti-trust philosophy. This dominant school does not recognize oligopolistic corporate hegemony as a challenge as long as consumer welfare is not violated. Even as antitrust become technocratic and weak, proponents of this ‘modern’ approach like Peter Thiel, author of Competition Is for Losers, consider the competitive economy to be a “relic of history” and a “trap”. Thiel even proclaimed that “only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.”[6]The limitations of this approach become even more significant because of the prevalence of huge data-driven corporations which provide unmatched customer satisfaction and price economy like Amazon or Facebook .Hence, this school of thought[7]fails to consider the larger implications of monopoly profits beyond the short-term positive impact on consumers.

In the specific context of these data-driven businesses, these concerns are even more important for two reasons. Firstly, the existing investor behaviour that privileges growth over profits has incentivised technology companies to practice predatory pricing.[8]Secondly, these online platforms control the basic infrastructure on which their competitors rely, because of the fact that they are critical intermediaries.[9] This impact is even more pronounced in cases wherein these platforms have been found to prefer certain search results over other.[10] This dual role equips their platform to exploit data collected on business competitors using its services.[11]

In other words Policy expert Alok Prasanna Kumar has highlighted the huge relative advantage these internet platform companies exploit to undercut or crowd out their existing or potential competitors. Kumar writes, “Even when a competitor comes along with a better product, their accumulated capital allows competitors to be acquired swiftly, with little regulatory disapproval. Even if a competitor were to arise, they would be unable to compete on one key feature: data. Internet platforms probably know their customers better than they themselves do. The vast ecosystem of apps and devices which go along with the internet plat- forms means that incumbents will be virtually unassailable by entrants in the kind of service that they can provide their consumers.”[12]

This can be analysed from  the Reliance Jio case[13] wherein Jio started providing 4G LTE services for free for a year using the funds of Reliance Industries Limited.[14] This led to a complaint of predatory pricing[15]filed by Airtel. The issue pertained to whether the subsidiary’s (Infocomm renamed as Jio) use of financial resources of the parent corporation (Reliance Industries Limited). Airtel alleged that because the subsidiary had sufficient capital, it was able to manipulate and predate the prices having adverse effect on the competition.  The merger was not found to be anti-competitive because there was no express agreement to the same effect and the facts in the information filed by Reliance were not clear. Nevertheless, it shows the limitations of the cost of production parameter to adjudge predatory pricing that is used in India.

Moreover, it is also important to emphasize the economic incentives behind abuse of data and how they translate into absolute market power.[16] The costing structure of the numerous stages of data processing makes it extremely difficult for firms entering a market to extract commercial value on par with an dominant market player.[17]

In this context, it is important to understand the recent developments in data privacy law in India.[18]Apart from it, sections 43A and 72A of the Information Technology Act, 2000 provide for the compensation in cases of non-implementation and non-maintenance of reasonable standards of security in dealing with sensitive personal data of individuals and about the punishment in cases of disclosure of personal information as a breach of contract or without consent. However, these sections do not impose sufficient liability and does not employ adequate penal measures so as to prevent abuse of big data and thereby hampering of the competition in market. The role of Indian Competition Law statute is very critical in this regard. The Section 4 of the Competition Act, 2002 needs to be constructively interpreted to analyse the abuse of dominant position by the internet platform corporations. The undercutting of competitors for chasing higher growth and equity investment should be interpreted as ‘predatory pricing’ through the purposive interpretation of the terms in Section 4 which signify that the pricing decisions that aim to reduce competition or eliminate the competition are regulated.[19] This would require considerable reform in the regulatory approach on predatory pricing that focusses solely on the cost of production. This is very important because these emerging businesses rely on factors like their huge financial resources to provide additional rebates and discounts.

In the analysis of dominant position being enjoyed by these corporations, the social obligations and social costs clause in the Section 19(4) of the Competition Act, 2002 should be constructively interpreted to prevent the negative social implications of monopolistic dominance and undercutting of new enterprises.[20] Moreover, as signified in the Jio case, it is important to emphasize the deep pocket i.e. financial and economic power of these corporations and reorient the regulation towards constraining this power. Existing provisions in the Competition Act, 2002 like Section 4(e) that constrain leveraging of dominant position in one market to enter another by using subsidiary. This has come into question even as concerns were raised about Walmart-Flipmart acquisition deal.[21] The recent draft E-Commerce Policy also highlights few of these concerns.[22]Hence, a return to the interpretation of economic power of the enterprise is required to strengthen the anti-trust framework so that the corporations that enjoy commercial advantages over competitors are effectively deterred.[23]

Conclusion: Towards an Effective Anti-Trust Approach The concentration of economic power in context of new age data-driven business is a cause of concern for global and national regulators. In  this context, a serious rethinking of the anti-trust framework is required to ensure that level playing field in a truly free market economy can be ensured. In this context, it is important to reform and transform the existing regulatory approaches to make them more robust towards contemporary challenges in context of emerging business models.

A possible resolve can be to take measures to alter how dominance is determined. Such measures may include, first, using rate of increase in the market share as a metric. Amazon posts a market share growth rate of around 5% for e-retail and 2% for overall retail market.[24] This manifestation of monopoly power needs to be analysed in specific context of investment-chasing corporations. Secondly, dominance in a given part of an industry should be enough to bring the firm’s presence in other parts of the industry under scanner. This is important because of the great scope of leveraging that a dominant market can undertake to gain further economic power in other markets. Hence, the possibility of the abuse of dominance need to be checked. Like, Google uses its dominance in search engine and operating systems to help its maps business and app development business respectively.[25]Lastly, attempts to establish an international antitrust regime must be undertaken. Today’s firms are not limited to any one country and use their incomes in one country to fund loss-making expansions and acquisitions elsewhere. As such anti-trust activities in one nation have consequences elsewhere. For instance, while Flipkart has been acquired by Walmart in Singapore, there would be consequences in many parts of the world.

Additionally, it is expected that once robust data privacy regulations like Data Protection Bill, 2018 are swiftly implemented, the scope of unconsented use of user data to create market advantage would significantly reduce. This would happen because principles like data minimization within the data protection framework would limit the ability of corporation to gain addition economic leverage by using it across various sectors that a corporation can be a part of. This would, however, not be the ultimate accomplishment for advocates for free competition. The competition regulators like CCI need to upscale and update their regulatory processes, human resources, investigative abilities and technical expertise in line with the changes that are happening in the larger economic context. It needs to be recognized by the Indian regulatory authorities that any data protection law targeted at foreign data companies including social media giants or cloud service providers, should provide for sound framework for anti-trust regulation. Indian consumers and upstart competitors must be safeguarded with guaranteed rights protecting their data, which they can efficaciously enforce in India.[26] Hence, while the existing regulators need to step up their capabilities and new regulators like a potential Data Protection Authority need to assume autonomy, there is need to redefine the institutional interaction. There is a need of a co-regulatory approach which entails active participation of the government, industry and academia in the drafting and enforcement of a robust anti-trust and data protection law.[27]

* Dhawan is a II Year B.A. LL.B (Hons.) student at National Law School of India University, Bangalore. [1]Lina Khan, 'Amazon's Antitrust Paradox' (2019) 126 Yale Law Journal; David Streitfeld, 'Amazon’S Antitrust Antagonist Has A Breakthrough Idea' (Nytimes.com, 2019) <https://www.nytimes.com/2018/09/07/technology/monopoly-antitrust-lina-khan-amazon.html> accessed 24 March 2019.

[2]Terry Gross, 'NPR Choice Page' (Npr.org, 2019) <https://www.npr.org/2017/10/26/560136311/how-5-tech-giants-have-become-more-like-governments-than-companies> accessed 24 March 2019.

[3]Elizabeth Warren (2019): ‘Here’s How We Can Break Up Big Tech’ (Medium, 8 March), <https://medium.com/@team- warren/heres-how-we-can-break-up-big-tech- 9ad9e0da324c> accessed on 19 March 2019; Makena Kelly, ‘Facebook Proves Elizabeth Warren’s Point by Deleting Her Ads about Breaking Up Facebook,’ (Verge, 11 March 2019) <https://www.theverge.com/ 2019/3/11/18260857/facebook-senator-elizabe- th-warren-campaign-ads-removal-tech-break- up-regulation> accessed on 19 March 2019.

[4]Lina Khan (n 1).

[5]Tim Wu and others, 'How Google And Amazon Got So Big Without Being Regulated' (WIRED, 2019) <https://www.wired.com/story/book-excerpt-curse-of-bigness/> accessed 21 March 2019.

[6]RanaForoohar, 'The Curse Of Bigness By Timothy Wu — Why Size Matters | Financial Times' (Ft.com, 2019) <https://www.ft.com/content/3c99583e-e27b-11e8-a6e5-792428919cee> accessed 21 March 2019.

[7] Robert Bork, The Antitrust Paradox (Free Press 1978).

[8]Alok Kumar, 'Breaking Up Tech Giants Data Monopolies And Antitrust Laws' (2019) 56 Economic and Political Weekly.

[9]Nirmal John ‘CCI Leaves Google Search- ing for Answers,’ (Economic Times, 12 February 2018),  <https://economic- times.indiatimes.com/articleshow/62903105. cms?utm_source=contentofinterest&utm_me- dium=text&utm_campaign=cppst> accessed on 19 March 2019.

[10]'Explained: Why CCI Found Google Guilty Of Search Bias' (The Quint, 2019) <https://www.thequint.com/news/business/explained-why-cci-found-google-guilty-of-search-bias> accessed 3 April 2019.

[11]AlokPrasanna Kumar, ‘Taming the Giants—A Call to Arms for Policymakers and Regulators,’ (Factor Daily, 12 February 2019) <https://factordaily.com/ tim-wu-the-curse-of-bigness-taming-of-the- giants-a-call-to-arms-for-policymakers-and- regulators/> accessed on 19 March 2019.

[12]Badri Narayanan and GunmeherJuneja ‘New FDI Policy on e-Commerce: Key Factors Amazon, Flipkart, Others Must Consider in Future Strategy’  (Business Today, 19 February 2019),<https://www. businesstoday.in/top-story/new-fdi-policy-on- e-commerce-key-factors-amazon-flipkart-oth- ers-must-consider-in-future-strategy/story/32- 0153.html> accessed on 19 March 2019.

[13]In Re: Bharti Airtel Limited v. Reliance Industries Limited and Reliance JioIncomm Limited, Case No. 03 of 2017, https://www.cci.gov.in/sites/default/files/3%20of%202017.pdf.

[14]'Jio Is Going To Pinch MukeshAmbani's Deep Pocket Really Hard' (The Economic Times, 2019) <https://economictimes.indiatimes.com/industry/telecom/telecom-news/jio-is-going-to-pinch-mukesh-ambanis-deep-pocket-really-hard/articleshow/68165869.cms> accessed 3 April 2019.

[15] Predatory Pricing means pricing so low that competitors quit rather than compete, permitting the predator to raise prices in the long run; http://www.oecd.org/competition/abuse/2375661.pdf.

[16]PrannvDhawan and Shubham Kumar, ‘The Privacy Challenge for Fair Competition in Emerging Digital Economy’ in Decoding Corporate and Commercial Laws in 21st Century (EBC Publication, 2018).

[17]VirajAnanth, 'Thinking BIG: Reimagining The Indian Antitrust Landscape For Digital Economy Markets' (The Boardroom Lawyer, 2019) <https://theboardroomlawyer.com/2018/10/07/thinking-big-reimagining-the-indian-antitrust-landscape-for-digital-economy-markets/> accessed 24 March 2019.

[18] The Supreme Court’s Justice K. S. Puttaswamy v. Union of Indiajudgement had made it clear that right to privacy is a fundamentally protected right under Article 21 of the Indian Constitution. The right to privacy encapsulates informational privacy, that is, extent of access to personal information which can be decided by the data subject because the information belongs to him. Like other rights which form part of the fundamental freedoms protected by Part III, including the right to life and personal liberty under Article 21, privacy is not an absolute right. In the context of Article 21 an invasion of privacy must be justified on the basis of a law which stipulates a procedure which is fair, just and reasonable. The Union Government had set-up the Justice BN Srikrishna Committee to formulate a Data Protection Framework for India and in 2018, the committee proposed a draft Data Protection Act to the government.

[19] Section 4, Competition Act, 2002.

[20] Section 19 (4) (k), Competition Act, 2002.

[21]'Walmart's Acquisition Of Flipkart: The Elephant In The Room - Anti-Trust/Competition Law - India' (Mondaq.com, 2019)  <http://www.mondaq.com/india/x/729670/Antitrust+Competition/Walmarts+Acquisition+Of+Flipkart+The+Elephant+In+The+Room> accessed 3 April 2019.

[22]'Draft National E-Commerce Policy For Stakeholder Comments | Department For Promotion Of Industry And Internal Trade | Moci | Goi' (Dipp.gov.in, 2019) <https://dipp.gov.in/whats-new/draft-national-e-commerce-policy-stakeholder-comments> accessed 3 April 2019.

[23] Section 19 (4) (d), Competition Act, 2002.

[24]Lina Khan (n 1).

[25]Tim Wu (n 5).

[26]Prashant Reddy, 'Does India Need Only One Data Protection Law And Regulator To Rule Them All?' (The Wire, 2019) <https://thewire.in/tech/data-protection-law-regulator-india> accessed 23 March 2019.

[27]Amber Sinha, 'India's Data Protection Regime Must Be Built Through An Inclusive And Truly Co-Regulatory Approach' (The Wire, 2019) <https://thewire.in/business/inclusive-co-regulatory-approach-possible-building-indias-data-protection-regime> accessed 23 March 2019.