Anti-Competitive Practices By Big Tech: Parliamentary Panel Submits Report
The Parliamentary panel is in favour of the Digital Competition Act and a Digital Markets Unit within CCI to regulate big tech.
The winner-take-all markets of the digital economy prompt 'winners' to resort to certain actions that discourage competition, the Standing Committee on Finance, chaired by Jayant Sinha, said in its report tabled in the Lok Sabha on Thursday.
The committee interacted with Indian representatives of foreign big tech companies like Amazon, Apple, Facebook, Google, Netflix, Twitter, and Uber, as well as representatives of domestic companies like PayTM, MakeMyTrip, Zomato, Ola, Swiggy, Flipkart, etc., to identify competition concerns.
It has identified 10 areas of anti-competitive practices that need to be addressed to improve market efficiency, namely: anti-steering practices; platform neutrality; bundling and tying; data usage; mergers and acquisitions; deep discounting; exclusive tie-ups; search and ranking; restricting third-party applications; and advertising policies.
It has proposed a Digital Competition Act to ensure a fair, transparent, and contestable ecosystem. It has been suggested that the Competition Commission of India be strengthened to deal with anti-competitive behaviour by setting up a separate Digital Markets Unit within it.
The committee has made some key suggestions to regulate conduct in the digital market.
Regulate Ex-Ante, Not Ex Post
Digital markets work differently than traditional physical markets. Digital companies have increasing returns to size, driven mostly by network effects and learning, the committee report points out.
Winners emerge within three to five years after the market starts to develop, and by the time the law catches up and anti-competitive behaviour can be penalised, the damage is already done.
Thus, competition behaviour needs to be evaluated before markets end up being monopolised and not after they have occurred, as is being done currently, according to the committee.
Identify Digital Gatekeepers
India should identify systemically important digital intermediaries—SIDIs—or digital gatekeepers.
As has been suggested, the key players capable of wielding influence can be identified based on revenue, market capitalisation, and the number of active businesses and end users.
These digital gatekeepers must not be allowed to:
Give preference to their own services or subsidiaries when mediating supply and sales market access. It highlighted the 2020 case against Alphabet Inc., where the regulator alleged that Google unfairly privileges Google Pay on the Play Store.
Force users to sign up for other services as a prerequisite to use their platform. For instance, food delivery apps mandating restaurants to use their delivery services.
Personal data for advertising purposes and cross-use of data. More importantly, the parliamentary panel has endorsed the CCI's view by saying that data needs to be seen as a zero-price or non-price factor that can hamper privacy.
A competitive digital business environment must not only ensure an equal relationship between the leading platforms, or big tech companies, and its business users, but also ensure data privacy.Standing Committee on Finance
Conduct Check
Food delivery apps, hotel booking sites, etc., are all offering huge discounts, the basis of which is unclear. Practices like bogus sales, dynamic pricing, and markdowns mean that service providers lose control over their final price. Below-cost pricing hurts the offline players, the report said.
So, the parliamentary panel has suggested that SIDIs must not be allowed to limit business users from differentiating commercial conditions like price, commissions, delisting, etc. These intermediaries should also not bar businesses from using third-party intermediation services, selling directly through their own channels, etc.
It has also suggested barring SIDIs from entering into exclusive tie-ups; providing to any third-party online engine access to ranking, querying, clicking, and viewing data generated on its online search engine on fair, reasonable, and non-discriminatory terms; and not restricting third-party applications, etc.
Finally, the parliamentary panel has noted that big tech's advertising business is a monopolist threat. It has been suggested that advertisers and publishers must be provided with data to carry out their independent verification.
SIDIs should provide advertisers information on a daily basis regarding the price paid by the advertiser and remuneration received by the publisher.Standing Committee on Finance
The Standing Committee on Finance has proposed that there should be regulatory provisions that enable news publishers, who primarily earn revenue through SIDIs, to enter into fair, transparent contracts with big tech platforms.