BIG DATA AND COMPETITION LAW: EVOLVING REGULATORY TRENDS AND WAY FORWARD
Updated: Jul 13, 2021
[Aaryana Anand is a fourth-year student at Gujarat National Law University, Gandhinagar]
In ‘The Hitchhiker’s Guide to the Galaxy’, a supercomputer was invented to estimate the answers to the “Ultimate Question of Life”, the Universe, and Everything. The computer was called Deep Thought, which took approximately 7.5 million years to answer the question, to which the answer ‘42’ was held to be highly unsatisfactory. There are two very important lessons to be learnt here. First, technological advances do not follow predictable progress curves. Second, it is not practical to always approach unfamiliar challenges with a nut/sledgehammer approach. More acceptable would be to carefully consider what questions need to be answered and in which way. Digital Markets have sundry concerns. However, the ‘Ultimate Question’ would comprise those challenges that are sprung before development in the antitrust regulations and whether the currently available and presentable tools sufficiently tackle all such concerns raised.
Big Data, its continuous rise in our world and its effects from numerous platforms and networks complicate conventional market dynamics. Albeit without an exact definition, Big Data has been frequently described by the three V’s- the Volume of information handling, the Velocity at which information can be handled, and the Variety of information that has expanded with new endeavors currently storing data.
If more Data could mean better services and arrangements, smaller organizations with access to less information would pull in fewer users. Differential levels of access to data, likewise, fortifies the market power of industry giants, which further guarantees the concentration of higher incomes, valuations and more ventures for further growth for Big Data. For example, the usage of IPR licensing prevents entry of new players into an industry. This is particular of markets such as agriculture, where seed genome licenses by multinational seed manufacturing corporations (like Monsanto) create barriers to entry. This is to be perceived in light of the immense research and development costs that prevent the development of alternative products at competitive prices. Years of data advantage go a long way in mitigating data acquisition costs.
Another significant data barrier is the inter-operability of information. The absence of interoperability between contenders prompts market monopolization and hampers the appropriation of digital platforms and various other like services. In 2004, the European Commission found that Microsoft was at risk for abusing its dominant position in the Operating System market by virtue of its denial to supply interoperability data to its rivals. Thus, Microsoft was ordered make several datasets accessible to permit competitors to interoperate on the Windows platform. The Economies of Scale imply that initial expenses or the costs of entering the market are high, while marginal costs are, for all intents and purposes, non-existent once the framework is up and running. This double barrier to data implies that in markets that utilize data as a key resource, wherein the search engines or matching platforms are regularly concentrated between a couple of key players, competitors must continuously engage with this upper hand that Big Data possesses. It thus becomes imperative to attempt to analyze the implications of these issues in anti-trust law.
Foreign Trends in Anti-Trust: Addressing the rising impact of big data on market elements
The UK Competition and Markets Authority (‘CMA’) is also examining whether Facebook’s use of data has given it “an unfair advantage over competitors in providing services for online classified ads and online dating”. The CMA is investigating whether Facebook has unfairly used the data gained from its advertising to benefit its own services, particularly Facebook Marketplace and Facebook Dating. Such advantages make it more difficult for competing firms, particularly smaller businesses, which could reduce customer choice in the long term. This is the third investigation that has been instituted by the CMA in the last two years concerning a suspected breach of competition law. Investigations are also open against Apple and Google.
Big Data and Indian Antitrust Law
In Facebook’s acquisition of WhatsApp, as opposed to the decision of European Commission, the Competition Commission of India (‘CCI’) gave a clean chit to WhatsApp for not having abused its predominant position. As per the CCI decision, “the market for instant messaging services using consumer communication apps through smart phones” had only one category of players, and none of the players in this category levied any subscription fee or charge.
In the above-mentioned situation, Facebook could, in truth, misuse the dominant position that WhatsApp enjoys in the Indian market, by moving the traffic of information to its advantage. In the online data market, a merger between a predominant business and a smaller player would bring about the new entrant accessing a combination of datasets. If the smaller player worked predominantly in a different market prior to the merger, the consolidated datasets could make it untenable for competitors to access the new market.
Under the Competition Act, 2002, unfair or discriminatory pricing structures, and predatory pricing constitute abuse of dominant position. As a general rule, cases related to abuse of dominant position are always connected with predatory pricing. For instance, in June, 2011, CCI found that National Stock Exchange (NSE) was abusing its dominant position vide predatory pricing in the derivative segment of the currency markets, and ordered for the modification of “…its zero price policy in the relevant market and ensure that the appropriate transaction costs are levied.” The estimation of the value generated from the data gathered from the clients of such services satisfies, and on occasion, surpasses the ‘transactional cost’. While dismissing claims of abuse of dominance by Ola Cabs in Bengaluru, the CCI repeated this position, while emphasizing the effect of data agglomeration in high technology markets, and held that in the early years of introduction of a new technology in such hi-tech markets, it is difficult to ascertain the degree of data advantage.
In Mega Cabs Private Limited and ANI Technologies, the CCI decided that “inability of the traditional players to compete with the efficiency of the new entrant (innovator) did not equate to creation of entry barriers within the meaning of the Act”. Consequently, recognizing that the target of competition law is to preserve competition and not protect competitors, the CCI explained that intervention in such markets should be targeted and proportionate.
To this effect, in Bharti Airtel Limited and Reliance Industries Limited & Reliance Jio Limited, the CCI underlined that Reliance Jio was a new entrant, and in a seriously competitive market situation set apart by the presence of enormous serving players, it would not be anticompetitive for an entrant to incentivize customers towards its own services by giving attractive offers and schemes.
The ‘dominant position’ approach under the Competition Act could also consider the quantum of data produced, traded, and utilized industrially by an online enterprise in India, taking into account implicit benefits this data access has had on an entity, and the degree to which it has influenced consumer behavior in a market. This would allow for Indian law to progress in the direction of her European counterparts.
Expectations from the Future of Competition Regulation in the Digital Realm
Following Facebook - WhatsApp, the amended rendition of the German Act for Restraints of Competition has defined competitive edge as being dependent on the worth of transactions (for example the targeted ‘significant activities’) as opposed to pure turnover. Comparative non-financial merger tests exist in the US, UK and Mexico.
On July 26, 2019, Mr. Injeti Srinivas, head of the Competition Law Review Committee, presented a report to the Ministry of Corporate Affairs, prescribing revisions to the Competition Act, 2002. The Committee noticed that specific trends, for example, exchanges shaping some portion of digital markets, don’t meet traditional asset thresholds, but may affect competition. It suggested presenting deal value thresholds for such mixes, notwithstanding thresholds already subsisting. Obviously, the Indian system has observed the European point of view, however the proposal is yet to emerge in legislature.
The function of the CCI, specifically, is incredibly essential since, on account of the policies it embraces, it can either support or block the advancement of a market/industry. It is significant for both the competition authority and the courts to find some kind of harmony between anti-competitive practices and Big Data innovation. Competition associations around the globe in Europe, USA and even Japan have directed investigations on how the collection and utilization of Big Data may influence competition.