Regulating Big Techs In India- Explained Pointwise

The issue of regulating Big Techs in India has gained prominence with the recent report of the Committee on Digital Competition Law recommending a separate legislation to regulate the market power of Big Tech firms such as Google and Meta.

Big Tech companies wield significant power and influence in various sectors due to their massive market capitalization, innovative products and services, and widespread user base. However, big tech firms have been found to be indulgent in various malpractices such as breach of data privacy, antitrust laws and predatory practices. It is in this context, the issue of regulating big techs in India has gained widespread traction.

What are Big Techs? What is their Significance?

Big Techs- Big Tech refers to the largest and most influential global tech enterprises with assets spanning multiple countries.

Significance of Big Techs-

1. Market Capitalization and Widespread User Base- Big techs exert considerable influence over industry trends, consumer behaviour, and public policy.
a. Amazon- Amazon through its Amazon.com platform and Amazon Web Services (AWS) dominates the E-commerce and cloud computing market.
b. Google (Alphabet)- Google (Alphabet) through its search engine and subsidiary companies like YouTube and Google Ads controls the majority of online search traffic and digital advertising revenue.
c. Facebook (Meta)- Facebook (Meta) through its social media platforms such as Facebook, Instagram, and WhatsApp dominates the social media landscape.

2. Provide Innovative technological products and services- Big Techs have been pioneering advancements in various fields such as artificial intelligence, cloud computing, and digital entertainment.
a. Microsoft- Microsoft through its products like the Windows operating system, Office suite, Xbox gaming consoles and Azure cloud platform, innovates in various technologies such as software, hardware and cloud services.
b. Apple- Apple through its products such as the iPhone, iPad, and MacBook has been innovating in groundbreaking communication products.
c. Tesla- Tesla has been involved in disruption of the automotive industry with electric vehicles, renewable energy solutions, and autonomous driving technology.

3. Generates steady and profitable career possibilities- It attracts top people with attractive compensation and enticing employee incentives. For ex- Amazon web service (AWS) region in India employs nearly 48,000 full-time employees yearly.

4. Push to startups- Big techs provide the necessary push to the startups in India, with many utilising their Web services and cutting edge software technologies. For ex- Deal between the Startup Hub of the Ministry of Electronics and IT with the social network company META September 2022 to create an accelerator programme that would award incentives to businesses developing services for the metaverse.

5. Innovation in providing social sector services like Health and Education- Big Techs have been pioneering innovations in the fields of health and education through their innovative delivery mechanisms. For ex- Microsoft and Apollo partnership to develop an API model for accurate healthcare diagnostics.

What are the issues which necessitate regulating Big Techs in India?

1. Abuse of Dominant market position- Big techs have been fraught with the issue of abusing their dominant market position. For ex- Google abusing its dominant position in the Android and Play Store ecosystem by pressurising app developers to use Google’s proprietary billing system or face a fee if they opt for a competitor’s service.

2. Self-preferencing and platform bias- It refers to the practice of a company promoting its services or subsidiaries on its platform while also operating as a competitor on the same platform. For ex- Amazon’s e-commerce service has been under scrutiny in India due to its dual role of being a marketplace operator, as well as retailer on its own platform.

3. Restrictions on Third-Party Applications- There are instances where entities have restricted the installation or operation of third-party applications. For ex- Apple’s restriction on installing third-party applications on the iPhone.

4. Bundling and Tying- Big Tech Firms compel consumers to purchase related services by linking their main products or services to other complementary offerings. For ex- Operating system providers like Microsoft, bundling the use of its search engine and products like Office, which generates pricing asymmetry and results in the elimination of competition from the market.

5. Anti-Steering- Anti-steering provisions are employed by big tech entities to hinder business users from migrating away from the platform and utilizing alternative options. This results in restriction of customer choices. For ex- Apple’s anti-steering practices prevents users from truly exercising their choice of services with the Apple ecosystem.

6. Arbitrary Pricing- The big techs demonstrate ‘network effects’, which enable rapid growth of their user base and fix arbitrary prices, which create challenges for new competitors to overcome. For ex- Meta’s subscription model offering people in EU, European Economic Area (EEA) and Switzerland the choice to use Facebook and Instagram without any ads.

7. Concerns Over Data Privacy- Big Tech companies gather vast amounts of user data through their platforms and services. This has raised concerns about privacy, digital surveillance, and data security. For ex- CCI’s probe into WhatsApp’s privacy policy, on allegations that the messaging platform shares user data with its parent Facebook.

8. Killer Acquisitions and Mergers- Killer acquisitions, where big techs purchase valuable start-ups without being subject to merger control rules based on turnover, create an unfair playing field in the digital market. For ex- Facebook’s killer acquisition of Instagram and WhatsApp, led to the monopolisation of social media communication domain.

9. Social and Political Impacts- The big techs are the foremost medium of fake news, hate speech, election manipulation. For ex- Facebook’s Cambridge Analytica controversy regarding electoral choice’s by voter profiling.

What steps are being taken worldwide and in India for regulating Big Techs?

1. US’s Changed Stance- The US has changed its stance towards antitrust enforcement. The US Department of Justice, and 16 states have recently sued Apple alleging that it monopolized and abused the smartphone market.
The antitrust enforcement agencies in India and US, can now proceed in case of violations by these big tech firms without geopolitical repercussions because the protective shield of the home country (USA) for these firms has been lifted.

2. EU’s Initiatives- EU enacted the Digital Markets Act (DMA), 2022 to ensure contestable and fair markets in the digital sector. The European Commission in March 2024 initiated ‘non-compliance investigations’ against the Big Techs like Apple, Meta and Google’s parent Alphabet. 

3. India-
a. Competition Act 2002 amended in 2007– This amended act provides the powers to the Competition Commission of India (CCI) to regulate anticompetitive practices adopted by the big techs in India. In 2022, the CCI imposed a penalty of Rs 1,337.76 crore on Google for abusing its dominant position in multiple markets for ‘anti-competitive practices’.

b. The Information and Technology Act, 2000– Intermediaries like providers of network service, telecom service, Internet service and web hosting are required to preserve and retain specified information. They also have to obey the directions issued by the government from time to time.

What should be the way Forward to regulate big tech in India?

Implementing the recommendations of the Committee on Digital Competition Law-

1. Enactment of Digital Competition Act- The Committee on Digital Competition Law has recommended the enactment of a Digital Competition Act aimed specifically at big techs, complementing the Competition Act.

2. Systemically Significant Digital Enterprises (SSDEs) Classification- The tech companies with a ‘significant presence‘ in ‘Core Digital Service‘ market must self designate themselves as SSDEs. Specific rules for SSDEs must be determined after public consultations.

Implementing the recommendations of the Parliamentary Standing Committee on Finance for new digital competition regulations-

3. Regulating anti-competitive practices- The committee has pointed regulating 10 anti-competitive practices employed by the big techs like anti-steering, deep discounting, bundling and tying together of services, targeted advertising etc.

4. Identification of Digital Gatekeepers as SIDIs- India should identify key players in digital markets that could harm competition and classify them as Systemically Important Digital Intermediaries (SIDIs) based on factors like revenue, market capitalization, and user base. SIDIs should then submit yearly reports to the Competition Commission of India (CCI) outlining their efforts to meet mandatory requirements.

5. Platform Neutrality- Significant Digital Intermediaries (SIDIs) should not show preferential treatment towards their services over those of their competitors.

6. Protection of Data Privacy- SIDIs should not process personal data of end users who use third-party services are dependent on the SIDI’s core services.

7. Allowing Third-Party Applications- SIDIs should allow and technically enable the installation and use of third-party software applications.

8. Revamping CCI- The committee has recommended the revamp of CCI by creating specialised digital markets unit in CCI. This unit would: (a) monitor established and emerging SIDIs, (b) give recommendations to the central government on designating SIDIs, and (c) adjudicate on cases related to digital markets.