Why antitrust lawsuits are being filed repeatedly against tech giants like Facebook?

The issue of anti-competitive practices by Tech giants has come into the light again as recently, an antitrust lawsuit was filed by the Federal Trade Commission (FTC) and governments of 48 US states against the tech giant Facebook, accusing it of crushing smaller competitors by abusing its dominant market position. Specific instances of acquisitions of WhatsApp and Instagram by it have been cited. 

In October 2020,  an antitrust lawsuit was filed against Google for misusing its dominant position as a search engine for favouring its own content in search results and entering into agreements with other companies like Apple, to make it the default search engine on devices. 

What are the anti-competitive activities of tech giants?

A report from top Democratic congressional lawmakers about the dominance of the four biggest tech giants-Amazon, Apple, Facebook, and Google- talks about antitrust activities by them.

Tech giants are involved in the wrong means (Like the acquisition or suppression of competition)  in order to make additional profits by gaining too much power over similar businesses resulting in an unequal playing field for other business entities.

For example, Facebook recently tried to take a competitive edge over Twitter by shutting down its API access for Twitter’s short video app, Vine, and restricting its ability to grow. Tech giants resort to antitrust activities like depriving access to their platform, discriminatory advertisement policies, breaching privacy, and unlawful acquisitions.

What are the impacts of anti-competitive activities by tech Giants?

Antitrust activities are in a way anti-competitive practices that have widespread negative impacts not only on competitors but also on the users:

• For users, antitrust activities may result in the availability of fewer options and weaker privacy controls. 
  • After gaining a dominant position in the market, WhatsApp and Facebook eroded privacy protection by changing the terms of service. It may result in the collection of all the private data and its hoarding that is becoming the biggest source of revenues and profits. Cambridge Analytica case is one such example in which Facebook data of Indian users was ‘stolen’ to allegedly influence the elections.
  • It also results in fewer choices left with the consumers for services. 
• Anti-competitive practices discourage innovation in the market as it incurs additional costs in surpassing the level of giants and competing with them. 
• It discourages ethical means by other tech firms as those who are sidelining it are having a competitive edge over them, in absence of proper regulations.
• A dominant position in the market may create a monopoly, leading to higher prices and low-quality services in the absence of a challenge from any other firm. 

Do Anti-competitive practices exist in India?

The antitrust lawsuits filed against Tech giants are very relevant for India as well, which is the base of 400 million users of WhatsApp and the largest single market for Facebook. Amazon has around one-third of the share of online retail in India. Most smartphones in India are Android-based, dominated by Google.

India as a country with a rising industrial base is not untouched by Anti-competitive practices which got amplified after the liberalization of the Indian economy in 1991. It resulted in the formation of the Competition Commission of India in 2003. Since its inception, till 31 March 2019, the CCI has noted 1008 instances of ‘antitrust’ matters. It has imposed penalties amounting to ₹13,381 crores Over the past 10 years.

Reports suggest that anti-competitive activities have resulted in unhealthy monopolies in the Indian economy. An analysis of 2035 listed companies across 298 industry groups shows that in 33% of all industry groups, there is one single company that controls over 50% of the net sales in the sector. For example; 

• Bajaj Auto dominates the scooters and three-wheeler industry. 
• Tata Motors has the most significant presence in light and heavy commercial vehicles. 
• Oil and Natural Gas Corp. is the country’s largest firm engaged in oil exploration.
• Facebook and Google together mop up 68%of India’s digital ad market revenues, while Amazon and Flipkart serviced 90% of all e-commerce orders during the 2019 festive season. 

Conclusion:

Thus, business activities plagued by anti-trust activities not only in developed countries like the U.S but also in developing countries like India. Ensuring fair balance, data regulation, and fair digital taxation are ways forwards for the regulating agencies to deal with these activities.

In India there is a need to give more power and capacity to the largely ineffective Competition Commission of India by enacting the Draft Competition (Amendment) Bill, 2020, to deal with such activities in Indian industries.

International Trade News