Big Tech and the need in India for ex-ante regulation

Source– The post is based on the article “Big Tech and the need in India for ex-ante regulation” published in The Hindu on 13th December 2022.

Syllabus: GS3- Indian economy

Relevance– Issue related to market distortions

News– The article explains the issue of market dominance by big tech companies in the digital space in context of the Competition (Amendment) Bill.

The Competition Commission of India recently imposed a penalty of 1,337.76 crore rupees on Google for abusing its dominant position in the android mobile device ecosystem.

What is the Competition Commission of India?

It was set up under the Indian Competition Act 2002. The objective was to protect and promote competition in markets, and prevent practices that hinder competition.

What are market dominance practices by big tech companies that need to be delta by regulators?

In any free economy, market dominance is natural. But it becomes problematic when it is abused to prevent competition. The intent of Google’s business was to make users on its platforms abide by its revenue-earning service. The network effects, along with a status quo bias, created significant entry barriers for competitors to enter or operate in the markets concerned. Competition laws are too slow to respond in complex technical sectors.

Predatory pricing is another issue. It is the lowering of prices that forces other firms to be out competed. Amazon and Flipkart were accused of deep discounting. It is essential to establish an ex-ante framework to ensure a level playing field for local sellers.

There are concerns related to bundling of services especially with pre-installed apps. The manufacturers eliminate competition without the consumer’s consent. Apple is facing heat in the U.S. and Europe over pre-installed apps. So, Indian competition laws need to be vigilant.

The regulation has not dealt effectively with the evolving data economy. There is sensitive data stored on these platforms. Big corporations have asserted ownership of the right to use or transfer this data without restriction. The storage and collection of women’s and children’s data need to be dealt with more cautiously to build a safe digital place.

Finally, market distortion can also lead to poorer quality of services, data monopoly, and stifle innovation.

What is the way forward for the new bill?

There is a need to establish harmony of the Competition law with the new Consumer Protection Act 2020 and e-commerce rules. The new law should include a mechanism to ensure fair compensation for consumers who face the brunt of the anti-competitive practices of the Big Techs.

India is now on the cusp of a digital transformation. The Competition Act of 2000, was largely constituted to deal with the physical marketplace. There is an urgent need to contextualize the law to the digital marketplace and devise new provisions with adequate ex-ante legislation.

It is equally important to contextualize India’s reality. Kirana stores competing with e-retailers such as Big Basket is an example of unfair competition between legacy businesses and their digital counterparts.

In such a setting, pushing for an EU-based approach to competition might not be the best way for Indian marketplace interests in protecting the local digital economy.

India needs a new ex-ante-based framework that promotes competition by ensuring a level-playing field for the big, the small, the old and the new.