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  • Apple to Face Competition Law Scrutiny in India – Towards a New Platform Pricing Paradigm?

    “Welcome to the garden, we’ve got fun and games We got everything you want …, we know the names We are the people that can find whatever you may need… If you want it you’re gonna bleed but it’s the price to pay… You can taste the bright lights but you won’t get there for free…” (An adapted and abbreviated version of the 1987 hit song – “Welcome to the Jungle” by Guns n Roses, 1987)1 I. The Background – Snowballing Scrutiny, Everyone Wants a Bit(e) of the A(pple)ction In a recent complaint to the Competition Commission of India (CCI), Apple Inc has been accused of abusing its dominance by forcing app developers, who have their apps hosted on the iOS platform, to use its own ‘in- app purchase’ mechanism (IAP) and pay an ‘excessive’ 30% transaction fee. This is not an isolated complaint against Apple as it faces a series of similar suits across the globe, particularly aggravated by Apple’s ‘closed’ iOS ecosystem. Apple’s high degree of vertical integration has led to the description of this ecosystem as ‘walled garden’2– a garden to which it alone determines which app/software can be used (gatekeeper) and by virtue of dependence, possibly tends to keep its users locked-in. Unlike Google’s licensed Android OS, the iOS is not available in the market for other smartphone manufacturers. The current case is that, unlike the earlier investigations which were concerned with exclusionary abuses, including predatory pricing, or merger related issues, concerns potential ‘excessive pricing’ which involves far more complexities of allocating common costs to different segments. I.I Different Agencies, Different Strokes – Time for Coordinated Action? Among the competition agencies currently investigating Apple’s App Store policies include the EU Commission (EUC), which is investigating a complaint related to IAP fees and ‘anti- steering’ contractual rules, specifically related to music-streaming and ebook/audiobook apps3 and, the UK Competition and Markets Authority (UK-CMA) which is examining a civil suit on similar grounds4. The Australian Competition and Consumer Commission (ACCC) has initiated a broad-based inquiry into digital platform services, and has found both, Apple and Google, dominant on their respective mobile operating systems (OS), thereby, giving them ‘significant market power’ in the marketplace for app distribution5. It has recommended transparency with respect to alternate payment mechanisms for IAP’s, but, has refused to be drawn into the debate concerning the excessiveness of IAP fees6. In a very recent settlement with the Federal Trade Commission (Japan), Apple agreed to modify certain restrictive App Store guidelines and allow for in-app links to outside payments portals for ‘reader’ apps.7 To some extent this amounts to a concession in a category of apps where Apple is facing resistance from important competing apps. Netflix and Spotify (a complainant in the EUC case), both reader apps and competitors to Apple’s own digital services8 i.e., Apple TV+ and Apple Music respectively, pulled out from the iOS IAP payment option, in retaliation against Apple’s fees9. Netflix was the single largest IAP fee grosser for iOS, with about $256 million (2018)10 and, Spotify contributed a handsome $156 million (2015-18)11. It remains to be seen if Apple’s intention to apply the settlement globally12 will mollify the EUC. Nevertheless, it still excludes a large number of apps and, the cases in UK and India are not specific to any particular category of apps. Apart from ex-post antitrust scrutiny, Apple faces a host of state regulatory action. The South Korean government, besides looking askance at unilateral deletion of apps or undue delay in their approval, has banned the imposition of their own IAP by Apple and Google13. While Google has responded by saying that IAP revenue allows it to provide the Android OS for free14, trying to draw attention to the economic model of platforms, Apple appears more intransigent by refusing to reverse its deletion of a popular South Korean gaming app ‘Fortnite’, owned by Epic, which had sought to bypass Apple’s IAP by introducing an alternate payment mechanism.15 Acceding to Epic, it may have large revenue consequences for Apple, given that gaming apps are the largest source of app revenue at $47 billion (2020).16 But, in another very recent development, in Epic Games Inc v Apple Inc, a US District Court ruled that Apple should allow app developers to provide links to external websites for payments.17 While there appears unanimity among the agencies/courts that have completed their reviews/investigations or reached a settlement, that Apple needs to change its App Store terms to allow for alternate payment options, there is still divergence with respect to how exactly this needs to be done. While some want this to be applied to all apps, others are concerned only with reader apps. Further, there are differences in both defining the relevant product market and findings related to whether Apple is ‘dominant’ or possesses ‘substantial market power’. In Epic Games v Apple Inc., the judge did not find Apple to have monopoly power (‘substantial market power’) in the market for digital mobile gaming but only found its anti-steering provisions to be creating information asymmetry and hence potential, lock-in effects and exploitation of consumers.18 The ruling appears more like an ex-ante regulatory finding rather than a response to antitrust violation with the judge validating Apple’s business model and the need for earning returns to intellectual property. The ACCC, on the other hand, found both Apple and Google to be dominant, having ‘significant market power’ in a differently defined market i.e., the marketplace for distributing apps.19 In a comparable case, Google Android, the EUC found ‘Android app stores’ to be a relevant product market, as it did not find Apple iOS to be a constraint on licensed Android OS.20 This could be an indication of where the EUC may be headed, although, there may be some divergence given the ‘closed’ nature of iOS. Given the significant global homogeneity in policies adopted by Apple, and other tech companies, it may perhaps be time for major competition authorities to arrive at a coordinated investigation and a standardized approach with, perhaps, some geographically differentiated aspects, to the regulation of these firms. This would save transaction costs of each agency having to investigate separately, the confusion of differential approaches by each country and besides saving on time overruns in investigations. But the Neo Brandeisians may have a different idea. I.II The Neo -Brandeisian assault In the US, the House Judiciary Committee, of the House of Representatives, led a sweeping investigation into potential anticompetitive behavior in digital markets, focused on Apple, Google, Facebook and Amazon, and found them to be abusing their market power arising out of their position as ‘gatekeepers’ to different important digital distribution channels.21 The Committee found both Apple and Google to be dominant in their respective app stores22 and called for regulations that would eliminate ‘self-preferencing’ and other abuses that affected competition.23 But of significance are a series of recommendations, that are based on the conclusion that the current Antitrust laws are both inadequate and improperly enforced, by way of excessive focus on ‘consumer welfare’ as the guiding principle.24 The Committee suggests both institutional and substantial law reforms including: rebasing enforcement on the ‘antimonopoly’ intent of legislations; emphasis on ‘overenforcement’ rather than ‘underenforcement’; protection of the ‘competitive process’, start-up’s, potential and, nascent firms; a more hawkish view of their acquisitions/mergers by/with the large tech firms and; removing the requirement of proving ‘recoupment’ in predatory pricing cases in digital markets.25 We are yet to see any enforceable action based on these recommendations, which have a heavy tilt towards the, so-called, Neo-Brandesian School (NBS) of thought, which inherently suspects bigness and the use of consumer welfare standard (CWS).26 But, the appointment of two prominent proponents of this school of thought, Lina Khan, as the Chairperson of the Federal Trade Commission (FTC) and, Tim Wu, to the National Economic Council, by the US government signals a strong intent in this direction.27 However, the primary arguments of this school have met with strong criticism.28 Some have termed it as ‘hipster’ antitrust or ‘populist antitrust’ which, unwisely, seeks to solve a range of social, economic and political issues through the instrument of antitrust regulation.29 To sum up some of these responses: the NBS approach does not adequately acknowledge the influence of modern Industrial organization theory (including, game theory) and empirical studies which departs substantially from the Chicago School by establishing how anticompetitive strategies are both possible and profitable particularly under conditions of information asymmetry; CWS is an end objective of ‘competitive process’ and not independent of it and besides it provides a more transparent economic objective as compared to political decision making which is open to ‘capture’; departing from conduct based analysis and relying only on size (no-fault antitrust) opens up decisions to false positives which may have larger consequences particularly with respect to platforms; the empirical literature used to show that the US faces increasing industrial concentration and resulting higher profit margins, due to slack antitrust enforcement, are faulty in methodology and data and, in certain circumstances even wrongly inferred and; it is not even a correct reflection of Judge Brandeis’s ideas who, although in favour of small business, preferred economic methods and was less interventionist himself. At the same time there has been recognition of certain weaknesses in the current enforcement approach. Hovenkamp (2019), while supporting the CWS, points out that current enforcement, among others, needs to reexamine the ‘recoupment test’ in predatory pricing cases.30 Werden (2018), while disagreeing with the need for multiple objectives based antitrust, agrees that excessive focus on effects can at times lead to the neglect of competitive process itself.31 These debates and decisions are bound to have significant ramifications for future pricing strategies and other practices of both Apple and Google (Android OS) specifically and, other two-sided or multi-sided platforms, generally. Platforms, in their urge to expand their market size and increase their market power, or tip markets in their favour, by virtue of network effects, often adopt ‘zero’, below marginal cost or even negative pricing32 for users on one side. By charging the other side(s), based on their own-price elasticity and intensity of demand side externalities, theoretically, they have a rational profit maximizing strategy.33 Addressing pricing issues on only one side of the platform can lead to incomplete analysis and possible false positives. In other words, defining the appropriate relevant market for two(multi) sided platforms is important, but at the same tome tricky, particularly as the somewhat settled ‘transaction’ and ‘non-transaction’ platform differentiation approach adopted by agencies, so far, faces new theoretical challenges. The CCI is no stranger to complaints related to platforms and of particular interest would be its decision in the Android OS case, which could provide insights into its definition of relevant markets for apps/app stores and competitive constraints imposed by the iOS – although we need not expect symmetricity in relevant market definition in the Apple case.34 Nevertheless, the significance of this sector cannot be underestimated with app downloads, in India, growing at a scorching pace of 190%, accounting for 14% of the 218 billion apps downloaded globally (2020)35 and a total app-based revenue of approximately $1.4 billion (2021)36. About the Author: Dr. T S Somshekar is Professor of Economics and Director for the Centre for Competition and Regulation, National Law School of India University, Bengaluru. This is the first of the three-part series by Dr. T S Somashekar. This article was originally posted at The NLS Blog. The link for the same is Endnotes: The song’s lyrics has an uncanny (literal) resemblance to the nature of the complaint against Apple Inc. Its actual reference was supposedly the attraction of New York city for those aspiring to make it big and the cost involved. Joanna Stern, “iPhone? AirPods? MacBook? You Live in Apple’s World. Here’s What You Are Missing”, WSJ, June 4, 2021; The US court refers to the same term in its decision in Epic Games, Inc. v. Apple Inc., Case No. 4:20-cv-05640-YGR (N.D. Cal. Sept. 12, 2021) p.3 “Antitrust: Commission opens investigations into Apple’s App Store rules” EUROPEAN COMMISSION (June 16, 2020). “Apple accused of breaking UK competition law by overcharging for apps” THE GUARDIAN (May 11, 2021). “Digital platform services inquiry, Interim report No. 2 – App marketplaces”, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, (March 2021) p.4. Ibid p. 13. According to Apple, reader apps are “previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video”; “Closing the Investigation on the Suspected Violation of the Antimonopoly Act by Apple Inc.” Japan Fair Trade Commission (September 2, 2021) (accessed on September 20, 2021); “Japan Fair Trade Commission closes App Store investigation” APPLE NEWSROOM (September 1, 2021). David Curry, “Apple Music Revenue and Usage Statistics (2021)” (Updated: June 2, 2021). Sarah Perez, “Netflix stops paying the ‘Apple Tax’ on its $853 in annual iOS Revenue” TECHCRUNCH (January 1, 2019). Supra n. 8 (David). Shona Ghosh, “This chart shows why Spotify is desperate for every dollar it can get back from Apple,” BUSINESS INSIDER (March 14, 2019). Supra n. 7 (Japan Fair Trade Commission) Jiyoung Sohn, “Google, Apple Hit by First Law Threatening Dominance Over App-Store Payments” WALL STREET JOURNAL (August 31, 2021). Available at hit-in-south-korea-by-worlds-first-law-ending-their-dominance-over-app-store-payments- 11630403335 (accessed on September 22, 2021) Supra n. 8 (David). Siladitya Ray, “Epic Wants Fortnite Back on South Korean App Store After New Legislation, Apple Says No” FORBES (September 10, 2021). Mansoor Iqbal, “App Revenue Data (2021)” BUSINESS OF APPS (Updated: August 4, 2021). Case No. 4:20-cv-05640-YGR (N.D. Cal. Sept. 12, 2021). Ibid pp. 158-160. Gregory J. Werden and Luke M. Froeb, “Antitrust and Tech: Europe and the United States Differ, and It Matters” (August 26, 2019). AT.40099 – Google Android, EU Commission (18/07/2018). “Investigation of Competition in Digital Markets” Majority Staff Report and Recommendations, Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary (2020) p. 11- 16. The Committee found each of them acting as ‘gatekeepers’ or enjoying ‘dominance’ in different segments: Facebook in social media; Google in internet search and online advertising; Amazon in online retailing and Apple in the iOS operating system which gave it ‘monopoly’ market power in the app store market. Ibid at pp. 97 – 99. Ibid at p. 20. Ibid at p. 20 – 21. Ibid at p. 390 – 397. See, Mr. Justice Brandeis, “Competition and Smallness: A Dilemma Re-Examined” 66 YALE L.J. (1956): The school, apparently, looks to go back to the actual objective of antitrust laws which they believe are well reflected in the late Justice Louis D. Brandeis’s views who believed that concentration of industrial power among large corporations could threaten democratic the process and that the answer to that was more small firms Two important works that have propounded the ideas of Judge Brandeis, in recent times, attracting the name ‘New/Neo Brandeis School’, include: Tim WU, “The curse of bigness: antitrust in the new Gilded Age” COLUMBIA GLOBAL REPORTS (2018); and Lina M. Khan, “Amazon’s Antitrust Paradox” 126 YALE L.J. (2016): Lina Khan, attempts to explain and clarify their position in: Lina Khan, “The New Brandeis Movement: America’s Antimonopoly Debate” 9(3) JOURNAL OF EUROPEAN COMPETITION LAW &; PRACTICE (March 2018) pp. 131–132; See also, Daniel Michaels and Brent Kendall, “U.S. Competition Policy Is Aligning With Europe, and Deeper Cooperation Could Follow” THE WALL STREET JOURNAL (July 15, 2021). Seth B. Sacher and John M. Yun, “Twelve Fallacies of the ‘Neo-Antitrust’ Movement” 26(5) GEORGE MASON LAW REVIEW George Mason Law & Economics Research Paper No. 19-12 (2019); Herbert J. Hovenkamp, “Is Antitrust’s Consumer Welfare Principle Imperiled?” 45 J. CORP. LAW 101 (2019); A.D. Melamed, and N. Petit,“The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets” 54 REV. IND. ORGAN. 741 (2019) Joshua D. Wright, Elyse Dorsey, Jan Rybnicek and Jonathan Klick, “Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust” 51(1) ARIZONA STATE LAW JOURNAL 293 (Spring 2019) Supra n. 28 (Hovenkamp) Gregory J. Werden, “Back to School: What the Chicago School and New Brandeis School Get Right” (September 4, 2018). Rewards offered by Google Pay, Paytm for using their e-wallets can be cited as an example. Of course, it can also be argued that users pay by means of providing transaction and other personal data For an understanding of the elasticity rules for pricing different sides of the platform, the pioneering work of Rochet and Tirole offer us guidance. See, J C Rochet and J Tirole “Platform Competition in Two-Sided Markets,” 1 JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION 990 (2003). J.C. Rochet and J. Tirole, “Two-Sided Markets: A Progress Report” 37 RAND JOURNAL OF ECONOMICS 645 (2006) Kshitiz Arya and another v. Google LLC and others, Case No. 19/2020 (CCI) [Order Dated 22/06/2021] Umar Javeed & Others v. Google LLC & Other., Case No. 39/2018 (CCI) [Order Dated 16/04/2019] “India accounted for about 14% of 218 billion global app installs in 2020”, ECONOMIC TIMES (January 19, 2021). Digital Market: Apps (India), Statista.

  • Data-Related abuse of Dominance in Digital Economy: A Template for Future Regulation in India

    It is now trite to say that data has become the new oil of the digital economy. Most corporations, across industries, seek to collect as much data as possible and seek to employ it in as varied applications as they can. Not surprisingly, the growing importance of data has resulted in several new challenges to competition, which necessarily require competition enforcement authorities to be on guard. The present paper is an examination of the legal landscape regulating data-related abusive behaviour in digital markets. It maps the recognition of data-related competitive concerns in the European Union where this issue has received considerable attention, with Germany particularly leading the way through its investigation and proceedings against Facebook. Subsequently, the paper examines the position in India by focussing on the Competition Commission of India’s decision in Google v. Matrimony. It finds that the Indian approach to data-related abuses leaves much to be desired, with the CCI failing to effectively engage with such issues. The paper calls for a rationalisation of the legal regime, so that increasing focus is laid on data protection and privacy related issues during substantive competition law assessments. Read full article here Article has been written by Kashish Makkar and Saarthak Jain, 5th Year students at National Law School of India University, Bangalore.

  • Leniency Without Criminalisation: An Effective Enforcement Tool?

    Cartelization hurts competition in various ways, and may be problematic from the perspective of a consumer at an atomistic level, and the entire economy from a more generalist perspective. While it is widely recognized as an antitrust offence, detecting cartels is challenging, especially since the agreement if often a tacit understanding. Deterrence is nevertheless imperative. Leniency programmes contribute to the deterrence objective by offering the means to help identify cartels by adopting a voluntary disclosure process based on an incentive system. Primarily inspired from the success of the US regime, there have been arguments in favour of criminalization of cartel conduct with a justification that leniency programmes cannot be as effective without the former. The paper refutes this claim. This is supported by a discussion on the circumstances specific to the Indian regime, especially the Indian take on the leniency framework. The paper also explores how to strengthen the leniency regime in India, especially from a standpoint which focusses on deterrence and cartel prevention. Read entire article here Article has been written by Saurabh Gupta, 4th Year student at National Law School of India University.

  • Revisiting Bharti Airtel Ltd. v. Reliance Industries Ltd. & Anr

    Over the years, predatory pricing has become an important subset of abuse of dominant position under Indian Competition Law. Predatory pricing, especially in the telecommunications sector, has been a persistent global problem for a while now. It has acquired even greater significance in India with the entry of Reliance Jio into the market, and the subsequent onslaught of allegations regarding anti-competitive behaviour. Here, we present a critique of the Competition Commission of India’s judgment in Bharti Airtel Ltd. v. Reliance Industries Ltd. & Anr. The objective of this paper is to show that CCI’s analysis in the case was flawed on three counts- first, what would be the relevant market in the case; second, the ascertainment of Reliance Jio’s dominance in the relevant marker; and third, whether or not Reliance Jio abused its dominant position by indulging in predatory pricing. Article has been written by Ananya HS and Arti Gupta, 4th Year students at National Law School of India University.

  • The Future of Mobile Ecosystems: Enabling a Choice for Market Players & Consumers in India

    The Future of Mobile Ecosystems: Enabling a Choice for Market Players & Consumers in India The issue of “Choice” as an indicator of consumer welfare and effective competition has gained traction as the Digital Economy and its special dynamics increasingly touch on more and more aspects of our daily lives. The powerful effects of economies of scale, low or negligible costs and the momentum of network effects has led to what many perceive as excessive concentration in digital ecosystems, with Mobile technologies being among the most salient and impactful. Our panel of experts will look at the particular case of India, perhaps the largest market yet to fully embrace mobile technology, with the aim of understanding the country’s particular situation, challenges, and opportunities in this area. Antitrust Experts: T.S. Somashekar Professor of Economics, National Law School of India University Rahul Singh Associate Professor of Law, NLSIU Bangalore Geeta Gouri Former Commissioner, CCI Vinod Dhall Senior Adviser, Touchstone Partners and former Head, Competition Commission of India Moderator: Aditya Bhattacharjea Professor of Economics, Delhi School of Economics, University of Delhi

  • The Convergence of Telecommunications and Media : Issues and Solutions

    - C. Yamuna Menon and Radhika Goyal All over the world we are seeing an attempt to consolidate Telecommunication and Media. In the US both AT&T and Comcast have entered the media space.[1] AT&T recently merged with Time Warner. Telecom players in the EU including BT, Altice, Verizon and Telefonica have made big bets for content.[2] In India too, in the year 2014, Reliance India Limited (RIL) announced that it was taking over Network 18 and its smorgasbord of interests including ventures in News Broadcasting, Magazines, Film, E-Commerce etc. While there were many concerns raised about a big corporation owning big media, what did not receive enough attention were the reasons Reliance was incidentally justifying the takeover- that of the synergies it hoped to achieve by owning sometime in the future both, a telecommunication giant and a news and media empire. It was forgotten that RIL also intended to play a “major role in the fourth-generation (4G) high-speed data transfer business.”[3] About five years later when Reliance Jio has ended up as the second largest telecom firm in terms of revenue,[4] it is time to look at how markets are impacted in such convergence of telecommunications and media. Mergers in the light of tech convergence and end-user behavior attract significance especially since the way we are consuming media has tremendously changed with the accessibility of content on non-conventional platforms like smartphones, tablets etc. In the US an average person spends up to 300 minutes per day on their phone, while in India the number is 200 minutes per day.[5] A part of the credit goes to Reliance Jio itself, which lured over 100 million subscribers by offering one GB of free 4G a day.[6] Thus telecom is increasingly challenging the traditional distributors such as Cable TV/ DTH operators as the new ‘pipes’ for content delivery. In view of this change, industry experts have long advocated for this convergence between telecom and media stating “operators have relationships with their subscribers and content providers have a treasure trove of compelling assets (music, games, video, etc.), but have no direct relationship to the customer”.[7] For instance telecom companies could enter into agreements for “preferential access to the programming and digital content of all the broadcasting channels”[8] to reduce costs and benefit out of economies of scale and scope. However, the vertical integration and the factors that can aggravate negative competition effects surrounding such convergence cannot go unnoticed. According to scholars, vertical integration can have pro-competitive result by one, elimination of double marginalization and thus leading to lower final prices and two, reduction of variety which might be welfare improving if there is elimination of excess variety.[9] However, examples in the market have displayed contrary results or outcomes. Distributors that control popular programming “have the incentive and ability to use (and indeed have used whenever and wherever they can) that control as a weapon to hinder competition”.[10] This has already resulted in antitrust action in other jurisdictions. For instance, according to the complaint against the combination of AT&T/DirecTV and Time Warner,[11] owning Time Warner’s popular and valuable TV network and studio including CNN, HBO, and Warner Bro will allow the merged company to charge its distributor competitors a higher rate for popular content. Where earlier if Time Warner charged arbitrary or high prices it would risk a black out by distributors, it can now rely on AT&T distribution networks and backing to ensure access to a customer base. This could mean the merged Time Warner/AT&T will have greater bargaining power with distributors allowing them to charge higher rents for content. Having exclusive distribution rights over popular content could even result in customers switching from their networks to AT&T. Similarly, Network 18, a player in the content market, could with Jio’s backing, charge higher prices from other distributors. This could increase entry barriers for Jio’s competitors, further increase costs for their consumers, and could additionally increase Jio’s market share. This vertical integration by causing restrictions on the availability of Network 18’s content on other distribution networks can adversely affect this plurality of content for many consumers. The effect on competition on account of convergence between telecommunications and media can be looked upon in the following manner: There are already alarming signs. Reliance Jio “generates far more data traffic on its network than all of the other large telecom players combined”[12] and further that its share in the wireless broadband segment has reached an all time high of 51.6%.[13] This vertical integration could allow for Reliance to create an ecosystem where content from sources it chooses could be made more accessible without violating net neutrality.[14] If for instance Jio decides to provide a news aggregator app (with information from Network 18 owned organizations) as a default app on its networks,[15] it is possible for Jio users to could become wholly reliant on that app as a news source solely out of convenience, which can impact plurality of information for a Jio user,[16] also leading to higher market shares for Network 18, and thus negatively affecting competition in the media sphere. Moreover preferential access to such content could in turn increase market shares for Jio with anti-competitive effects in the telecom markets. This is one of the ways in which convergence of telecommunication and media creates a loop of increased market share for both players that speeds up the road to market dominance. It is in the context of this issue that we also encounter a major regulatory gap. Statutory body concerned with the regulation of broadcast content is Telecom Regulatory Authority of India (TRAI). Under TRAI’s jurisdiction, distributors are only defined in terms of traditional distribution network operators, with no express recognition of telecom networks operators as distributors. This is despite recognizing that “the telecom networks can provide access to internet and broadcast content in addition to telecommunication services,”[17] and “the convergence taking place between broadcasting and telecommunication.”[18]Consequently, while TRAI recommends a variety of tools to prevent convergence of traditional distributors and content providers, when it comes to Telecom and Media, TRAI did not recommend any cross ownership restrictions at the time.[19] Almost six years since, no attempt has been made to introduce the same. At the same time no regulations exist which prescribe non-discrimination between Telecom network providers or expand the scope of distribution network operators to include Telecom network providers to ensure fair use. Furthermore, the Competition Act is not a sufficient safeguard against the harms of vertical integration. In 2012, when RIL bought majority shares in Network 18, the CCI had the chance to consider the harms of vertical integration. Infotel (a precursor of Jio), which was set to enter the broadband services using 4G technologies, had entered into a non-exclusive preferential access agreement for Network 18’s digital content. The commission felt that this did not cause any “appreciable adverse effect on competition.” This was centered around the “the intrinsic open access characteristic of an ISP and the fact that players on other platforms will not lag behind”.[20]Which meant that there exist, “other content providers, either existing or potential, who in time will be able to provide content through other ISPs”.[21] Here, CCI failed to appreciate the harms that come with reduction in the plurality of content, even if there is no long-term economic harm befitting the appreciable adverse effect standard. For instance, according to the order, it would not be a competition law issue as long as consumers are getting some content through some distributor, without necessarily ensuring all consumers should get access to all information regardless of the distributor. The same issue may arise even under Sec. 3(4),[22] which prohibits companies from entering into an “exclusive distribution agreement” only provided that it results in an AAEC. While this standard may work in other markets, given the inherent public interest aspect of accessing media, including films, news and other such content, competition law may not be adequately equipped to address these issues. [23] Thus there is a clear need for regulation to control the consolidation of Telecom and Broadcasting of media. Can TRAI deal with the competition law matters that arise in such convergence? Or should such matters be dealt with entirely under the domain of CCI?  Or should TRAI and CCI address them together? Primarily, we need to recognize that the harms arising out of the consolidation of Telecom and Media are akin to those arising out of vertical integration between traditional distributors and content providers and act accordingly. We must keep in mind that multiplicity of governing agencies may impact the efficiency of dealing with the matter and reaching an informed decision. Instead a better solution may be to allow sector specific regulators like TRAI to adopt regulations that specifically empowers it to regulate competition law matters arising out of the convergence of telecommunication and media. Having a sector specific regulator like TRAI to govern the competition law matters in its respective sector is crucial to ensure welfare of consumers. For instance, Jio priced its services at low rates distorting the consumer base of other competitors. From the perspective of CCI, Jio will not have the requisite market dominance to impose liability. However, when the same matter is before TRAI, the low pricing can be considered as unfair and therefore will be anti-competitive in nature.[24] Further, TRAI could simultaneously deal with public interest aspects issues as well as consult CCI on relevant competition aspects for expert opinion. However, this would require regulations governing the competition aspects of the telecom industry, with guidelines for assessment and decision-making in the case of anti-competitive practices that go beyond the overarching Competition Act, 2002. Such regulations would have to take into account sector specific standards for harms arising out of vertical integration, that not only includes long-term economic harm but also ensures plurality and access to content based on public interest standards. This would mean a lower tolerance for any negative effect on prices and choices than is currently accepted under competition law. This would also mean removing the requirement of market dominance to penalize anti-competitive behaviour. ​ Armed with such sector specific regulations, TRAI will be able to use its specialized knowledge about the sector to provide a more effective remedy to any competition law issues that arise in the telecom sector. This will also ensure that there is certainty and clarity in the law that will govern the players in the market leading to better choices, efficiency and consumer welfare based on standards and considerations that are suited to this sector. * Goyal is a V Year B.A. LL.B (Hons.) student and Menon is a IV Year B.A. LL.B (Hons.) student at National Law School of India University, Bangalore. [1] R. Molla and P. Kafka, ‘Here’s Who Owns Everything in Big Media Today’ (Recode, 26 April 2018) accessed 21 March 2019. [2] Lee and Kang, ‘U.S. Loses Appeal Seeking to Block AT&T-Time Warner Merger’ The New York Times (26 February 2019) <> accessed 3 May 2019; N. Filds, ‘Big Bet by Telecom Companies on Exclusive Content Comes at a Cost’ Financial Times (10 January 2018) accessed 21 March 2019. [3] P.G. Thakurta, ‘What Future for the Media in India’ (2014) 49(24) EPW accessed 21 March 2019. [4] M. Philipose, ‘Reliance Jio Continues to Get an Outsized Share of Data’ Live Mint (27 March 2018) accessed 21 March 2019; ‘Reliance Jio beats Airtel to become India's 2nd largest telecom company’ Business Today (25 April 2019) <> accessed 3 May 2019. [5]Omidyar Network, Innovating for the Next Half Billion (2017) accessed 21 March 2019. [6] A. Bhattacharya, ‘Internet Use in India Proves Desktops are Only for Westerners’ (Quartz, 29 March 2017) accessed 21 March 2019. [7] EMC Corporation, ‘Content Services in Telecommunications’ (2005) accessed 22 March 2019. [8] RIL Group/Network 18 Media and Investments Ltd., C-2012/03/47 (Competition Commission of India). [9] Massimo Motta, Competition Policy: Theory and Practice (2003) 433. [10] United States of America v AT&T Inc. &Ors., Case 1:17-cv-02511 (USDC District of Columbia). [11] United States of America v AT&T Inc. &Ors., Case 1:17-cv-02511 (USDC District of Columbia). [12]Philipose(n 4). [13] ‘Reliance Jio amasses over 51% market share in broadband services’ Business Standard (25 October 2018) accessed 3 May 2019. [14] Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016. [15]Jio users are already encouraged to download applications like Jio Newspaper (Your digital newsstand). [16] This analysis will be further complicated by issues of platform neutrality. [17] Telecom Regulatory Authority of India, ‘Consultation Paper on Issues Relating to Media Ownership’ (2013) accessed 22 March 2019. [18] Administrative Staff College of India, ‘Study on Cross Media Ownership in India’ (2009) accessed 22 March 2019. [19] TRAI (n 17); This was subject to review in two years. [20]RIL Group/Network 18 Media and Investments Ltd., C-2012/03/47 (Competition Commission of India). [21]RIL Group/Network 18 Media and Investments Ltd., C-2012/03/47 (Competition Commission of India). [22]The Competition Act 2002, s 3(4). [23] S. Kumar, ‘Big Media has become Bigger: Media Diversity and Reliance’s Takeover of Network 18’ (Alternative Law Forum) accessed 22 March 2019. [24]Vikas Kathuria, ‘TRAI and CCI: no turf wars, please’ Live Mint (3 August 2017) accessed 22 March 2019.

  • Google Search Bias Case: The Difficulty is Proving or Disproving Bias

    - Madhavi Singh and Ganesh Khemka In Google’s “search bias” cases[1] involving allegations of abuse of dominant position the first question which arises (assuming Google’s dominance) is whether there can exist an objective definition of “relevance” or are ranking algorithms merely one of the many ways to rank results- a reflection of the uniqueness of various search algorithms and a legitimate and necessary mechanism of differentiating competitors.[2] If there were a single definition of “relevance”[3] or one correct way of ranking results according to their relevance then the subsequent question would be whether it is possible to assess if Google’s results have been ranked according to such relevance. This issue is analysed here and the essay looks at the difficulty in establishing either that results have not been ranked on the basis of relevance (by antitrust regulators) or vice versa, that results have been ranked on the basis of relevance (by Google).In other words, this essay attempts to analyse the difficulty of both proving and disproving bias. The difficulty in proving bias in Google’s ranking arises due to the confidential nature of its algorithm. Google claims that it does not purposefully elevate its own vertical search engines and the reason why its own verticals frequently appear at the top of the results page is because they meet the objective criteria of “relevance” and are in fact, more relevant than the other results.[4] This is a problem of evidence where demotion of supposedly more relevant content cannot be proven[5] using any objectively verifiable evidence. The evidence often relied upon to prove bias is through comparison to other search engine results pages[6] which do not display Google’s own verticals as one of the top results. Such deviation from other search engines however, could be attributed to the difference in search algorithms employed by these engines to distinguish themselves from their competitors,[7]that is it could be a consequence of either a different understanding of “relevance”[8] by competing search engines or just a different way to assess the same relevance depending on the data they possess and the criteria they adopt.Therefore, for antitrust regulators to prove bias in Google’s ranking is extremely difficult. Notwithstanding the arguments made above if competition authorities were to consider evidence from other search engines in ascertaining whether Google ranks results on the basis of relevance then for Google to rebut these arguments by proving the relevance of its results is an equally uphill task.[9] While the overwhelming number of times Google’s own verticals appear at the top of the results might indicate some bias,[10] such evidence is definitely not conclusive.[11] Given the confidential and complex nature of Google’s algorithm which renders it difficult for it to establish non-biased functioning, the only substantive argument made by Google to prove relevance of its search results is the argument that it would not rank its content on any basis other than relevance lest it lose consumers.[12]This is a tautological argument whose essential import is: if Google were to degrade its results then it wouldn’t be able to retain customers and remain dominant and therefore, the fact of its dominance shows that its results are relevant.[13] This assertion is based on three assumptions: (i) users would be able to assess relevance; (ii) switching costs between search engines are zero or lesser than the harm suffered due to irrelevant results; and (iii) there are other search engines which users can switch to without appreciable depreciation in quality. These three assumptions are disproved in turn. Assumption 1: Users of search engines would be able to assess whether the results are relevant. According to Google relevance of results in both the absolute and relative sense can be assessed. In the absolute sense consumers would become aware if they feel dissatisfied with the results and in the relative sense if there exist better search verticals, consumers would know about them through advertisements.[14] Therefore, Google has constant pressure to provide relevant results to prevent users from shifting to competitors.[15] Such arguments seem to be ignorant of the nature of Google’s search functionality. The inability of users to assess relevance is because of two reasons: (i) difficulty in objectively measuring relevance;[16] and (ii) branding effect. If a search engine shows completely irrelevant results or in response to direct factual questions gives wrong answers then it would be possible to notice the degradation in quality.[17] However, in other cases the degradation in quality would not be noticeable.[18] The quality of the search results are dependent on: time, quantity of results available on a topic etc.[19] Therefore, it is mostly not possible to measure relevance objectively in absolute terms.[20] Even in relative terms often times it is not possible to inform consumers about the existence of alternative search engines due to high information costs[21] and status quo bias.[22] Further, Google through years of successful branding has ensured that consumers trust it[23] making it even more difficult to detect irrelevance of results shown on Google. Assumption 2: Switching costs for consumers are zero or lesser than the cost incurred due to use of irrelevant results.Google has argued that since all search engines are freeswitching costs are zero.[24]Such a simplistic understanding of switching costs does not take into account the rarity of multi-homing[25](that is, studies show that not many consumers tend to switch from one search engine to another even when search engine services are free) and network effects[26] (a phenomenon discussed later in the article) which are both relevant to the calculation of switching costs. Assumption 3: There exist alternatives to Google which can be switched to without appreciable depreciation in quality. This assumption is fallacious because of high entry barriers in the form of network effects and positive feedback loops. Network effects exist where the utility of a service increases when more people subscribe to it.[27] Google being dominant attracts many users and collects their data. Such data collection allows it to improve its services through data localisation and customised results.[28] Thus, Google’s dominance perpetuates itself. Another manifestation of network effects is positive feedback loop which refers to the phenomenon in multi-sided markets where success on one side of the market also promotes success on the other side.[29]An increase in consumer base makes Google more attractive for advertisers who are now guaranteed both a wider audience and more targeted marketing using the large amounts of data collected from the customer base.[30] The additional revenue which such positive feedback loops generate increase funds for Google, allowing it to offer more free services, attract more consumers and collect more data.[31] Therefore, the existence of high entry barriers means that there aren’t alternatives which users can switch to. Since, all the three assumptions above are false the tautological argument of Google’s dominance indicating its relevance cannot be accepted. Hence, both proving as well as disproving the statement that Google ranks its results on the basis of relevance is fraught with practical difficulties. Given this difficulty of proof, perhaps the best way forward to evaluate existence of bias is the approach adopted by the European Commission of referring to specific search parameters within search algorithms. Reference may be made to the EC’s evaluation of “Panda” (Google’s search algorithm). It was shown that having “original content” (and demoting websites with copied content) as a primary parameter for Panda’s functioning meant that most competitor comparison shopping services would not be considered relevant.[32] In light of this, using Product Universal for Google Comparison Shopping would in effect exempt Google’s own vertical from the operation of Panda and the requirement of “original content” thereby biasing the search.[33] Given the problems associated with leading evidence to prove or disprove bias, competition authorities across the world while determining this question should look at the specific search parameters which an algorithm adopts to see whether their adoption and the weightage given to them in itself is indicative of bias. * Singh and Khemka are V Year B.A. LL.B (Hons.) students at National Law School of India University, Bangalore. [1]In re: v. Google 2018 SCC OnLine CCI 1; Case at. 39740, Google Search (Shopping) [There are similar cases in other jurisdictions but these two are of particular relevance here]. [2] Joshua D. Wright, Defining and Measuring Search Bias: Some Preliminary Evidence, 3 (2011). [3]Adam Raff, Search, But You May Not Find, N.Y. Times, (27 December 2009), accessed 24 May 2019. [4] In re: v. Google 2018 SCC OnLine CCI 1, ¶ 178. [5] Wright (n 2) 10-11. [6] Benjamin Edelman & Benjamin Lockwood, Measuring Bias in “Organic” Web Search (19 Jan. 2011) accessed 24 May 2019. [7] Lisa Mays, The Consequences of Search Bias: How Application of the Essential Facilities Doctrine Remedies Google’s Unrestricted Monopoly on Search in the United States and Europe, 83 Geo. Wash. L. Rev. 721, 738-740 (2015). [8] Wright (n 2) 3. [9] This assessment is notwithstanding arguments on burden of proof, that is, whether the burden of proving bias initially is on the party alleging bias or Google (being the sole party in possession of information relating to its own algorithm that other parties do not have access to and hence, being in the unique position to disprove such bias). Further, even if the burden of proving bias is initially on the party alleging bias then at what stage does the burden shift to Google to rebut such allegations by actively producing evidence to prove relevance. [10] Benjamin Edelman (n 6). [11] Chris Sherman,Study: Bing More Biased than Google; Google not Behaving Anti-Competitively, Search Engine Land (3 November 2011) accessed 24 May 2019. [12] Robert H. Bork & J. Gregory Sidak, What does Chicago School teach about Internet Search and the Antitrust Treatment of Google? 8(4) J. Comp. L. &Ec 663, 664 (2012). [13] Maurice E. Stucke & Ariel Ezrachi, When Competition Fails to Optimize Quality: A Look at Search Engines, 18 Yale J.L. & Tech. 70, 98-99 (2016). [14] James D. Ratliff & Daniel L Rubinfield, Is there a Market for Organic Search Engine Results and can their Manipulation give rise to Antitrust Liability?, 10(3) J. Comp. L. & Econ. 517, 522-524 (2014). [15]Geoffrey A. Manne& Joshua D. Wright, Google and the Limits of Antitrust: The Case against the Case against Google, 34 Harv. J. L. & Pub. Pol'y 171, 244 (2011). [16] Mark R. Patterson, Google and Search-Engine Market Power, Harv. J. L. & Tech. Occasional Paper Series, 12-13 (July, 2013). [17]Stucke (n 13) 98-99 (2016). [18] Patterson (n 16) 12-13. [19]Stucke (n 13) 98. [20]Stucke (n 13) 98. [21] Patterson (n 16)  24. [22]Stucke (n 13) 104. [23] Amy Gesenhues, Study: Top Reason a User Would Block a Site From a Search? Too Many Ads, Search Engine Land (April 15, 2013) accessed 24 May 2019. [24] Aaron S. Edlin; Robert G. Harris, The Role of Switching Costs in Antitrust Analysis: A Comparison of Microsoft and Google, 15 Yale J.L. & Tech. 169, 212 (2012). [25] Case at. 39740, Google Search (Shopping) ¶ 221. [26] In re: v. Google 2018 SCC OnLine CCI 1, ¶ 199. [27] Stan J. Liebowitz& Stephen E. Margolis, Network Externality: An Uncommon Tragedy, 8 J. Econ. Persp. 133, 135 (1994). [28]Andrew Langford, gMonopoly: Does Search Bias Warrant Antitrust or Regulatory Intervention, 88 Ind. L.J. 1559, 1574 (2013). [29] Kristine Laudadio Devine, Preserving Competition in Multi-Sided Innovative Markets: How Do You Solve a Problem Like Google, 10 N.C. J.L. & Tech. 59, 63 (2008). [30]ibid. [31]Devine (n 29). [32] Case at. 39740, Google Search (Shopping) ¶ 358- 359. [33] Case at. 39740, Google Search (Shopping) ¶ 408.

  • The Google Android Case: Are the Sanctions Really Effective?

    - Harjas Singh and Saurabh Gupta Android is the most popular mobile operating system in the world. For developers, android is a part open-source, part propriety core software that provides a reliable framework for them ­­to use and develop their apps. For regular consumers, it is a convenient operating system, offering the best of apps – Maps, Gmail, Youtube, etc. These free-for-all apps are at the core of the Google Android Antitrust dispute, which shall be discussed in the paper. But first, this paper shall aim to summarise the Google Android[1]case, and then proceed to critically analyse the penalties awarded in the case for their effectiveness, before suggesting alternative sanctions that may be more effective in such cases. The Google Android Case – A Summary In April 2015, the European Competition Commission initiated a formal investigation to examine whether Google had entered into anti-competitive agreements or abused its dominance by tying its apps to the Android software.[2] The investigation sought to identify whether Google had illegally hindered the development and market access of rival mobile applications or services. The Commission identified two markets – the upstream market for the licensing of Android to device manufacturers and the downstream market for end users. It then discussed that there were high barriers to entry in the licensable operating systems market. This was mainly due to network effects in the sense that the more users use a smart mobile operating system, the more developers write apps for that system. This in turn attracts more users. Further, competition in the downstream market did not sufficiently constrain Google’s position in the upstream market. It considered factors like high switching costs between Apple iOS and Google Android, higher price for Apple products, and consumers’ preference for Google services (like Google search) even after switching to Apple iOS to come to this conclusion. The Commission, through its market research, also concluded that Google, which had a market share of more than 95%, held a dominant position in the worldwide market (excluding China) for licensable smart mobile operating systems.[3] Further, it was also held that Google had a dominant position in the search engine market as well, with a market share of around 90%. This market too faced high barriers to entry. The Commission also looked at the market for app stores for Android mobile operating system. It discussed that this market was also characterised by high barriers to entry and lack of competition, and held that Google held a dominant position in the worldwide market (excluding China) for app stores for the Android mobile operating system.Having identified the markets, the Commission now examined three aspects of Google’s conduct that may amount to abuse of dominance: (i)Illegal tying of Google’s own applications or services Google bundled its apps and services with Android software, which made it mandatory for the manufacturers to pre-install all its apps. Since pre-installation creates a status quo bias, the Commission held that this practice reduced the incentives of manufacturers to pre-install competing search and browser apps, as well as the incentives of users to download such apps. This bundling arrangement, therefore, reduced the ability of rivals to compete effectively with Google. This was similar to a situation seen in case of Microsoft’s antitrust violations. Microsoft had abused monopoly power by bundling its web browser (Internet Explorer) as well as the Windows Media Player along with the Windows Operating System. It was held that such bundling restricted the market for the competing web browsers, and was violative of competition law principles. (ii)Illegal payments conditional on exclusive pre-installation of Google Search Google granted significant financial incentives to some of the largest device manufacturers as well as mobile network operators on condition that they exclusively pre-installed Google Search across their entire portfolio of Android devices. While this practice was discontinued in 2014, the Commission still held this to be anti-competitive since Google’s competitors in the search engine business could not possibly compensate the device manufacturer across all devices for loss of revenue share from Google. (iii)Illegal obstruction of development and distribution of competing Android operating systems Google, in order to be able to pre-install on their devices Google's proprietary apps, manufacturers had to commit not to develop or sell even a single device running on an any alternative version of Android that was not approved by Google (commonly referred to as ‘Android fork’). This, as per the Commission, reduced the opportunity for devices running on Android forks to be developed and sold. Therefore, the Commission held that Google denied the users access to further innovation and smart mobile devices based on Android Fork. This also gave Google the power to determine which operating systems could prosper. This was held to be anti-competitive. Taking all this into account, Commissioner Margrethe Vestager, in charge of competition policy, concluded: “…[Google’s] practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”[4]The Commission thus imposed a fine of €4,342,865,000 on Google, which is around 5% of the average turnover of the last three years of Google’s parent company, Alphabet. Further, it threatened to impose a penalty of up to 5% of average worldwide turnover of Alphabet for non-compliance with this decision. Problems with the Sanctions Imposed While the fine imposed by the Commission is the largest it has ever imposed on a company, this section will discuss whether this fine is the appropriate remedy or not in light of the goal of enforcement mechanisms.[5] (i)Google Already Derived Substantial Benefits from Android The Commission looked at Google’s dominance for the past seven years. This meant that the Google had been allowed to derive illegal benefits from its dominant position in the market for seven years. Indeed, Google earned a revenue of €5.25 billion from the Android Play Store in 2017 alone. In comparison, the fine of €4.3 billion is hence, too little too late. The Commission must be proactive to ensure that enterprises are not allowed to derive huge profits by abusing their dominance for years. As things stand, a simple cost-benefit analysis would show that an enterprise stands to benefit from abusing its dominance, even if it is penalised for it later, in the long run. The kind of dominance that Google enjoys in the markets identified initially in the paper, are characteristic of the network effects that have already impacted the markets permanently. The penalty imposed may not lead to a reversal of the damage already done.[6] In 2004, a similar situation of bundling had arisen in the Microsoft Case. EC then had forced Microsoft to release a version of Windows without Windows Media Player and later offer a browser choice screen, which allowed users to select a web browser other than the previously default Internet Explorer. However, it was later discovered that the this version of the Windows had no buyers.[7] Microsoft had already reaped the benefits of the network effects of their antitrust activities. In this case as well, consumers are unlikely to buy a version of Android without Google’s services. Thus, it can be argued that the EU decision has come 5-8 years too late. While the fine and the instruction for discontinuation of antitrust activity may lead to better competition in the long run, Original Equipment Manufacturers (OEMs) will have to offer Google services in the short run in order to satisfy the consumer demand and to be competitive. Moreover, the consumer demand has been manipulated to a level where even if OEMs do not provide Google Services as part of the handset, consumers are likely to download these from the app stores in order to satisfy their needs.[8] All of this adds toward the gravity of the infringement committed, which is a relevant factor in deciding the amount of fine under the European Union policy.[9] (ii)The fine is miniscule compared to Google’s economic power Alphabet generated a turnover of €96.3 billion in 2017.[10] It also earned a net profit of €10.5 billion, despite incurring a fine of €2.42 billion in the Google Shopping case.[11] Before 2017, it had witnessed a rise of €2-3 billion a year in its profits.[12] This year, Google generated a profit of over €8 billion each in the third quarter alone.[13]Thus, Google will continue to be among the top 10 companies of the world in terms of profit, despite the fine.[14] Economic theorists and Behavioural analysts suggest that businesses today are becoming more and more risk averse.[15] This is due to increased professionalism, increased scale of operations, social factors like education and other means of social conditioning as a part of the modernized word today. Research suggests that the fines can be a great deterring factor for such risk averse management.[16] However, the way fines are calculated needs assessment. Under the European Union policy, there is first a calculation of a basic amount of fine, which may be adjusted depending on various mitigating or aggravating factors.[17] The calculation of the basic fine is based entirely on the value of sales, with consideration given to the gravity and duration of the infringement. Thus, as stated earlier, the fine calculated in the Google Android Case too, is one that is based on Google’s sales. It is important to note that while the amount of fine is unprecedented and may look massive prima facie, but for a company as big as Google, whether such a fine entails deterrence needs to be asked. There can be different ways of computing fines. One way can be to levy a fine on the basis of the company’s turnover, as done in this case. However, for a company like Google, where the profit margin is high,[18] such a fine may not be an effective deterrent.[19] An alternative to this approach can be seen in the form of a fine which is calculated on the basis of profits. Such a fine is better placed to be a deterrent as it can provide a constant impact which a sales or assets approach cannot.[20]More importantly, attacking the profits of a firm is a better measure especially for firms having a multidivisional structure, one like Google. While only one division may have committed the antitrust violation, a fine that attacks the profits generated cumulatively by all the divisions builds pressure on the company to restrict any such violation in the future.[21] ​(iii)Aggravating Factor This antitrust violation is the second offence by Google, after the Google Shopping Case. According to the EU policy, a basic fine may be adjusted according to various aggravating and mitigating factors. Repeat offence is an aggravating factor according to the policy,[22] and thus the fine should have been set taking this into consideration. (iv)Specific Increase for deterrence The European Union policy on setting of fines also provides for situations where the fine may be increased in order to increase deterrence.[23] In such instances, the fine imposed on undertakings which have a particularly large turnover may be enhanced in order to ensure greater deterrence. Moreover, the Commission shall also take into account the need to increase the fine in order to exceed the amount of gains improperly made as a result of the infringement. In the instant case, the network effects which have massively impacted the consumer behaviour and preferences need to be considered as improper gains accruing to Google due to its violations. This should lead to an increase in the amount of fine, which would result in the deterrence required. (v)Historic Perspective Microsoft Case[24] Twenty years ago, Microsoft lost the antitrust case against the government of the United States. The case revolved around the monopolization of the internet browser market by Microsoft, which was the world leader in the operating system market. Microsoft was selling its operating system and internet browser as a bundle, and this meant there was little to no opportunity for any other internet browser to have an impact on the market. At that time, the argument furthered by Bill Gates and a few others was that such antitrust regulations impede technological development. Little did they know, the regulations in fact proved to be a boon for innovation. Had this monopolization been allowed, competition would’ve been restricted in not only the browser market, but surely other markets as well. Who knows maybe Google as we know it today would’ve been a company not half as big as Bing, while today it surely leads the search engine market and is making antitrust headlines of its own. Google’s case is indeed similar to the Microsoft antitrust case as mentioned above, especially in relation to bundling. Some believe that the two cases are very different, however that debate is for another time. The point of contention here is whether the fine is an effective remedy in itself to limit behaviour that impeded competition. The two cases illustrate different remedies. In the Microsoft Case, the European Commission made sure that other options of browsers are provided to the consumers, thus making sure that the desired objective of more competition was realised. So, a direct instruction was given with regard to the steps needed for ensuring better competition in the market. In the Google Android Case however, such steps have not been taken and a mere instruction for discontinuation of the violative conduct has been made. This alone cannot be an effective deterrent. Google Shopping Case[25] In this case, there was an allegation that google misused its dominant position in the general search engine market to gain competitive advantage by placing its own comparison shopping service more prominently. Google was thus fined €2.42 billion by the European Commission. The fine however, has not been as effective as it was thought to be. The end has not been achieved as effectively as it was hoped, which was to allow greater competition in the comparison shopping market and to protect the interest of smaller competitors. This is significant from the fact that still, only 6% of the slots available on the European version of Google’s search engine are taken by the rivals to Google’s comparison shopping service. A remedy that could’ve solved the problem here was to create a clear distinction in the comparison shopping services, by dividing the visible space into two parts – one showing Google’s shopping service and the other showing the alternatives. However, this was rejected. Due to no particular prescription of a remedy, Google now auctions the space for these shopping service providers to appear alongside the merchant websites, which leads to more and more revenue for Google. The rejected seems to be the fairest of all here. However, all of this leads to the conclusion that a fine alone may not be an effective deterrent, and there is a need for an equitable remedy to be prescribed in clear terms. Conclusion The culmination of all this analysis is that there has to be something which disincentivizes Google from undertaking any such activities in the future where competition is hampered, and thus acts as a deterrent. The European Commission could do this in a number of ways. A few things that have been suggested in this regard can be - compelling Google to allow competing app stores to distribute its apps, which would make it easier for other firms to launch competing app stores. Another option would be to give consumers a choice, when they first boot up their phone, over which apps they want to use in default. All of this, along with an assessment of fines based on aforementioned recommendations, can go a long way in ensuring better competition in the market. *Singh is a IV Year B.A. LL.B (Hons.) student and Gupta is a II Year B.A. LL.B (Hons.) student at National Law School of India University, Bangalore. [1]Case AT.40099 – Google Android. [2] Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal investigation on Android  (2015) accessed 24 May 2019. [3] Commission fines Google €4.34 billion for illegal practices regarding Android mobile devices to strengthen dominance of Google's search engine (2018) accessed 24 May 2019. [4]ibid. [5]George Stigler, ‘The Optimum Enforcement of Laws’, Essays in Economics of Crime and Punishment 56 (William H Lande& Gary S. Becker (Ed. UMI,1974) . [6]Google’s Android fine is not enough to change its behaviour The Economist (19 July 2018) accessed 24 May 2019. [7]The EU fining Google over Android is too little, too late, say experts The Guardian (18 July 2018) accessed 24 May 2019. [8]ibid. [9]Guidelines on the method of setting fines imposed pursuant to Article 23(3)(a) of Regulation No. 1/2003 (2006) . [10]Google posts its first $100 billion year CNN Business (1 February 2018) accessed 24 May 2019. [11]ibid. [12] CNN Business (n 10). [13]Google’s Parent, Alphabet, Misses on Q3 Revenue But Rakes in $9.2 Billion Net Profit (25 October 2018) accessed 24 May 2019. [14] The Fortune 500's 10 Most Profitable Companies The Fortune (7 June 2017) accessed 24 May 2019. [15]William Breit and Kenneth G. Elizinga, ‘Antitrust Penalties and Attitudes towards Risk: An Economic Analysis’ 86 Harvard law Review (1973) 693, 704. [16]ibid 706. [17]Guidelines on the method of setting fines imposed pursuant to Article 23(3)(a) of Regulation No. 1/2003 (2006) <>. [18]Alphabet Net Income 2006-2019 | GOOG ; Google's 5 Key Financial Ratios (GOOG) ; Earnings Estimates accessed 24 May 2019. [19]Kenneth G. Elzinga& William Breit, The Antitrust Penalties: A Study in Law and Economics 134 (Yale University Press, London, 1977). [20]ibid 134. [21]Breit and Elzinga (n 15) 712. [22]Guidelines on the method of setting fines imposed pursuant to Article 23(3)(a) of Regulation No. 1/2003 (2006) . [23]Guidelines on the method of setting fines imposed pursuant to Article 23(3)(a) of Regulation No. 1/2003 (2006) . [24]Microsoft Corp v Commission (2007) T-201/04. [25]CASE AT.39740 Google Search (Shopping) .

  • 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' (, 2019) accessed 24 March 2019. [2]Terry Gross, 'NPR Choice Page' (, 2019) accessed 24 March 2019. [3]Elizabeth Warren (2019): ‘Here’s How We Can Break Up Big Tech’ (Medium, 8 March), 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) 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) accessed 21 March 2019. [6]RanaForoohar, 'The Curse Of Bigness By Timothy Wu — Why Size Matters | Financial Times' (, 2019) 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),  accessed on 19 March 2019. [10]'Explained: Why CCI Found Google Guilty Of Search Bias' (The Quint, 2019) accessed 3 April 2019. [11]AlokPrasanna Kumar, ‘Taming the Giants—A Call to Arms for Policymakers and Regulators,’ (Factor Daily, 12 February 2019) 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), accessed on 19 March 2019. [13]In Re: Bharti Airtel Limited v. Reliance Industries Limited and Reliance JioIncomm Limited, Case No. 03 of 2017, [14]'Jio Is Going To Pinch MukeshAmbani's Deep Pocket Really Hard' (The Economic Times, 2019) 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; [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) 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' (, 2019)  accessed 3 April 2019. [22]'Draft National E-Commerce Policy For Stakeholder Comments | Department For Promotion Of Industry And Internal Trade | Moci | Goi' (, 2019) 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) 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) accessed 23 March 2019.

  • CCI’s Self-Devised Disability in Investigation of Buyer's Anti-Competitive Agreement

    - Kashish Makkar Competition Law must promote Consumer Welfare & not Consumer Protection. The Competition Act of 2002 was enacted as a policy measure to promote efficiency in the market. The Raghavan Committee Report, which served as the roadmap for the Act, envisaged it as an instrument to achieve efficient allocation of resources, technical progress, consumer welfare and regulation of concentration of economic power. However, it prescribed ‘consumer welfare’ as the ultimate motive for ensuring effective competition. Therefore, the stated aim of the law was to ensure market efficiency in order to ensure consumer welfare. However, the Competition Commission of India (CCI) in its operations has assumed an altogether different prescription of Consumer Welfare. The CCI has conflated the notion of consumer protection with consumer welfare in its approach towards investigating anti-competitive conduct. While, ensuring consumer welfare entails prevention of concentration of market power, maintaining allocative efficiency in the conduct of all the stakeholders when they operate in the market;[1] consumer protection is a movement to impose the burden of the efficient conduct of the market on the supply side.[2] Simply, consumer welfare is a long term approach where the market forces (both demand & supply) are regulated in a manner that leads to maximisation of welfare for the consumers. While, consumer protection involves granting immunity to consumer’s conduct in order preserve their interests. In this blogpost, I will discuss how the CCI has assumed to itself a mandate of Consumer Protection. I will analyse how in the assumption of this mandate, the CCI has refused to take cognisance of buying arrangements that clearly amount to cartelisation. In my analysis, I will highlight how the assumption of such a mandate is not envisaged under the Act, and in fact runs contrary to the mandate of Consumer Welfare. As a result, in conclusion, I will recommend a course-correction for the CCI in order both fulfil its legislative mandate and its policy mandate of promoting market efficiency which together lead to the achievement of consumer welfare. Withdrawal of Presumption of AAEC from Buyer’s Agreements A statute is an edict of the Legislature and in construing a statute, it is necessary to seek the intention of its maker.[3] The primary source for inferring this legislative intent rests in the bare text of the statute, as the Supreme Court has quite categorically held in M/S. Hiralal Ratanlal v. State of UP: “In construing a statutory provision, the first and foremost rule of interpretation is the literal construction. All that the court has to see at the very outset is what does the provision say. If the provision is unambiguous and if from the provision legislative intent is clear, the court need not call into aid the other rules of construction of statutes.”[4] Section 3(3)(a) of the Act prescribes that an agreement entered between persons which directly or indirectly determines purchase or sale prices shall be presumed to cause an Appreciable Adverse Effects on Competition (AAEC) in the market.[5] It is quite clear from the text that the legislature intended to include anti-competitive agreements which could be entered into by the buyers. There cannot be an argument on the contrary as, had this not been the case, there would have been no reason to include specific term ‘purchase’ price in section 3(3)(a). The above argument is also supported by section 3(3)(d) of the Act, which provides that in cases of collusive bidding, AAEC is presumed.[6] It is writ large that a bidding process would manifestly involve buyers participating in a competition to purchase commodities. The legislature clearly wanted to promote healthy competition among the buyers, and as a result outlawed any agreement which the buyers might enter to impair the bidding process. The mischief rule of interpretation of statutes, which was laid down in Heydon, lays down that the true interpretation of statute is the one that complies with the mischief that the act aimed to prevent.[7] The same has been upheld in India in RMDC v. Union of India.[8] Section 3(3)(d) of the 2002 Act clearly reflects that an existence of buyer’s cartels is one of the mischiefs that the Act wanted to prevent. Therefore, both by virtue of literal rule of interpretation and the mischief rule of interpretation it is clear that the Act sought to prevent cartelisation among the buyers. However, CCI’s jurisprudence with respect to the same indicates otherwise. For instance, in Pandrol Rahee Technologies v. M/s. DMRC Ltd,[9] where the informant alleged that the DMRC ltd. as a consultant to Kolkata Metro and Bengaluru Metro had been colluding to get their preferred supplier for a proprietary product. The CCI in this case observed: “Section 3(3) concerns agreements between persons etc. ‘engaged in identical or similar trade.’ The word ‘trade’ has been defined in section 2(x) as “any trade, business industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes provision of any services.” The word ‘acquisition’ mentioned in definition of an ‘enterprise’ in section 2 (h) is not included here. As can be seen, purchasing activity of a consumer does not qualify as ‘trade’. Therefore, section 3 (3) is not applicable to a consumer.” The CCI by such an observation ruled out the applicability of S. 3(3), which presumes the AAEC on the consumers. The CCI came to this conclusion by referring to the part of the provision which restricts its application only to entities who are engaged in trade. Thereafter, by reading the definition of trade as not inclusive of acquisition, they ruled that the section is not applicable to the consumers. However, such an interpretation is clearly not sustainable. The definition of trade in S. 2(x) includes trade in relation to the production of goods or provision of services.[10]The primary meaning of the word “trade”, as defined by the Supreme Court in the five-judge bench judgment ofKhoday Distilleries Ltd. v. State of Karnataka,[11]  is the exchange of goods for goods or goods for money. Applying the above definition of trade to the definition given in s. 2(x) would lead to a construction in the following terms: “exchange of goods for money in relation to production of goods” or “exchange of goods for money in relation to provision of services”. An exchange of goods for money in relation to production of goods or provision of services have to necessarily be in the form of acquisition of raw materials. As a result, the reasoning employed by the CCI in Pandrol Rahee stands fragile in light of the above analysis.[12] Yet, as it stands, Pandrol Rahee is the law of the land and as a result the applicability of S. 3(3) has been ruled out over the consumers/buyers. Therefore, even if the buyers’ enter into an anti-competitive agreement, prescribed under one of the 4 conditions of S.3(3), they will be held to not have AAEC presumptively. As a result, if buyer’s are to be held accountable for their anti-competitive agreements, they need to prove AAEC separately as is prescribed under S. 3(1) of the Competition Act. However, in the next section we will analyse how such a route to hold consumer’s accountable has also been foreclosed by the CCI by self-presuming a consumer welfare mandate. Foreclosure of Consumer’s Potential to cause AAEC Under the scheme of the Competition Act, 2002 an agreement between parties is termed anti-competitive if and only if it causes or is likely to cause AAEC. While, the agreements prescribed under S.3(3) have a presumption of AAEC, therefore, the regulator need not prove it; all other agreements must prove AAEC or the likelihood of it. As explained in the previous section, the CCI has ruled out the applicability of the presumption by exempting consumers or buyers from S. 3(3). However, there was still a scope to regulate anti-competitive agreements and sanction the buyers under S.3(1) of the competition Act. It entailed a two-fold process, first, proving the existence of the agreement, and second, proving AAEC. To determine if an agreement under S.3 causes AAEC, the CCI has to rely on factors prescribed in S. 19(3) of the Act.[13] Only if the two requirements would be fulfilled the CCI would sanction such conduct. However, in the same decision in Pandrol Rahee the CCI observed that: “It is noteworthy that for determining appreciable adverse effect on competition for the purpose parameters given in section 19(3) all indicate harm to competitors. It is not envisaged that a consumer can cause appreciable adverse effects on competition.”[14] As a result, the CCI foreclosed any inquiry on buyers/consumers once again by taking the second limb of the two-fold process of the inquiry out of the scope of application to consumers. Under S. 3(1) of the 2002 Act, the term “agreements in respect of acquisition” has been clearly provided, as a result, the CCI couldn’t have foreclosed this limb of the process. Therefore, it attacked the second requirement. However, there are two principled inconsistencies with such an approach. First, if S. 19(3) was not to be applicable on the consumers, why in the first place the term ‘acquisition’ has been prescribed in S.3(1) as one of the forms of agreement that is likely to cause AAEC. If s. 19(3) is to be interpreted in the way the CCI has interpreted it, it obliterates the purpose of the term ‘acquisition’ under S. 3(1). Such interpretation goes against the established rule of statutory interpretation, i.e., Construction to avoid invalidity. This principle holds that, “an interpretation which would defeat the purpose of the statutory provision and, in effect obliterate it from the statute book should be eschewed.”[15] Therefore, such an interpretation of S. 19(3) stands against the principles of statutory interpretation recognised by the Supreme Court.[16] Second, S.19(3) doesn’t warrant an interpretation that the CCI has provided to it. Clearly, the factors under S. 19(3) prescribe harm to the competitors, however, nowhere is it indicated that the consumers/buyers cannot be competitors. The CCI’s interpretation makes the two categories of buyers/consumers and competitors to be mutually exclusive. However,  given that it is prescribed that an agreement can be formed for acquisition of goods,[17] clearly there has to be competition in such an acquisition, thus, incentivising parties to form agreements. As a result, the above interpretation is inherently contradictory and inconsistent. However, despite these inconsistencies, the foreclosure of an enquiry into a consumer/buyer’s anti-competitive agreements is the law of the land. Conclusion Both by withdrawing the presumption of AAEC and foreclosing the applicability of the factors that determine AAEC from the consumers, the CCI has systematically disabled itself from any inquiry into consumer’s anti-competitive agreements. However, as pointed out above such an approach is both jurisprudentially flawed and inherently inconsistent. It is simply the assumption of a consumer protection mandate on part of the CCI that explains the law it has laid down in the recent past. This assumption of mandate is now no longer limited to enquiries on cartelisation, but it has started impacting inquiries under S.4 relating to Abuse of Dominant Position as well. In the well-documented and discussed cases of K.N. Chaudhary v. DMRC Limited and Suntec Energy v. National Dairy Development Board, the CCI refused a S. 4 inquiry in order to ‘protect’ free exercise of consumer’s choice. Such an assumption of the consumer protection mandate not only leads to the reduction in the net welfare of the upstream market by disabling them from receiving the most efficient prices for their output. But, it also causes loss in welfare for the downstream market by disabling the most efficient producer to enter the market and offer a choice to the consumer. As a result, ensuring the allocative efficiency, which ensures consumer welfare gets lost in the assumption of this mandate. The aim of the Anti-Trust Law is not to ensure consumer protection but to preserve the structure and integrity of the market, which in longer run ensures consumer welfare. However, this goal of Anti-Trust Law seems to have been forgotten by regulators across the world. Anti-competitive agreements facilitate Monopolistic and oligopolistic market structures. These in turn enable dominant actors to coordinate with greater ease and subtlety, facilitating conduct like price-fixing, market division, and tacit collusion; and also block new entrants. ​ Therefore, it is clear that preservation of market structures is a value that must be preserved by regulators. It ensures efficiency, effectiveness, choice and in turn ensures the largest welfare for firms, consumers, and economy in the long run. In light of the analysis presented in this article, it is clear that the CCI needs a course-correction, both to comply with its original mandate and the correct position of law; and to ensure market efficiency in the longer run. This course correction shall necessarily involve restoring the mandate of consumer protection to consumer courts, and following the policy of consumer welfare in both letter & spirit. *Makkar is a III Year B.A. LL.B (Hons.) student at National Law School of India University, Bangalore. [1]Raghavan Committee Report, ¶2.1.1. [2] Planning Commission, ‘Consumer Protection & Competition Policy’, Chapter 11, 11th Five Year Plan (2007-12). [3]Suganthi Suresh Kumar v. Jagdeeshan, (2002) 2 SCC 420, ¶12 (SC). [4]M/s. HiralalRatanlal v. State of UP, 1973 AIR 1034. [5]The Competition Act §3(3)(a), No. 12, Acts of Parliament, 2003 (India). [6]The Competition Act §3(3)(d), No. 12, Acts of Parliament, 2003 (India). [7]Heydon’s case, (1584) 76 ER 637, Pasch 26 Eliz, (England). [8] RMDC v. Union of India, 1957 AIR 628. [9]PandrolRahee Technologies v. M/s. DMRC Ltd., Case no. 3 of 2010, Dt.7 October, 2011. [10]The Competition Act §2(x), No. 12, Acts of Parliament, 2003 (India). [11]Khoday Distilleries Ltd. v. State of Karnataka, (1995) 1 SCC 574. [12]  Arguably, it may be said that such foreign interpretations of the word ‘trade’ must not be employed, however, it must be pointed out that the definition of trade under s. 2(x) of the Competition Act defines trade to include trade. As a result, a widely accepted &recognised definition maybe used to define the term. [13]The Competition Act §19(3), No. 12, Acts of Parliament, 2003 (India). [14]PandrolRahee Technologies v. M/s. DMRC Ltd., Case no. 3 of 2010, Dt.7 October, 2011. [15] Justice A.K. Shrivastava, Interpretation of Statutes, Judicial Training & Research Institute’s Journal, July-September, 1995. [16] State of Punjab v. PremSukhdas, AIR 1977 SC 1640. [17]The Competition Act §3(1), No. 12, Acts of Parliament, 2003 (India).

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