REDEFINING THE RELEVANT MARKET DEFINITION IN THE DIGITAL ERA

[Subhi Pastor is a fourth-year law student at Dr. Ram Manohar Lohiya National Law University, Lucknow]


In the recent times, there has been a significant rise of digital market players and unbridled power is enjoyed by them in the market. To overcome the challenges in the digital market and hold tech giants accountable for their business practices, the Competition Commission of India (“CCI”) has made a remarkable shift in its approach while determining the relevant market, to enquire into abuse of dominant position defined under Section 4 of the Competition Act, 2002. The antitrust watchdog in earlier cases considered online and offline markets to be different channels of distribution but not two separate relevant markets owing to the fact that consumers could use either of them depending on price variation and other relevant factors. However, now the online markets are considered on standalone basis and separate relevant market for the digital players. This has narrowed down the definition of relevant market which is to be considered while establishing the dominant position. The Supreme Court (“SC”) in Co-ordination Committee of Artists and Technicians of West Bengal highlighted the need to define relatively narrow product market in order to fully understand the market share and power enjoyed by the entity.


Background


Section 2(t) defines the relevant product market as one comprising of all those products and services which are regarded as substitutable and interchangeable by the users due to their characteristics, price and intended use. Thus, the substitutability has been the primary tool implied over the years to identify the relevant market which is the first essential step while investigating abuse of dominant position under Section 4 of the Competition Act. Although the test applied in several cases is same but the way it has been applied and factors been considered have changed in the recent cases. For instance, in 2014, in Ashish Ahuja case, online and offline markets were considered as same relevant markets and reasoning given was that the customers could switch between online and offline markets as per the changes in price and other factors after weighing options available in both markets. However, in competition cases afterwards, the substitutability test employed took into consideration the pertinent factors like internet coverage in the Google LLC case, degree of comfort provided by online vending platforms in the Justickets case and growing use of online digital platforms in the MTT case which make online and offline markets separate relevant market for the purposes of analysis in antitrust cases. This points towards a shift in the approach of CCI in terms of interpretation of relevant market for effective enforcement of antitrust regime and for tackling the significant challenges posed by dominant players in digital markets which may otherwise not be tackled by wide interpretation of relevant market.


The evolution of substitutability case in latest antitrust cases


In Matrimony.Com Limited vs Google LLC & Ors, the allegations were raised that Google conducts its search and advertising business indiscriminately by manipulating search results and by favouring its own services and partners, causing harm to fair competition and consumers ultimately. In order to understand the market position enjoyed by the entity, the question was raised regarding the interoperability between online and offline advertising and delineation of relevant market accordingly. The test applied was whether the consumers regarded online and offline markets as substitutable and thus part of the same relevant market. It was held that they are not part of the same relevant market owing to differences in characteristics of offline and online marketing, price variation, and, importantly, limited internet accessibility to a large number of people making online and offline advertising non-substitutable. Furthermore, ‘online general web search’ and ‘online specialized search services’ were recognized as separate relevant markets under Section 2(s) r/w Section 19(7) of the Competition Act, 2002. Google in its response to the above allegations, pointed out the wrong application of hypothetical monopolistic test (SSNIP test). In simpler words, it stated that dismissing offline market as a constraint because of the limited internet accessibility results in applying the test in wrong direction. It said that the test should rather begin by identifying narrow frame of reference and then should examine that to what extent does offline market constrain a hypothetical monopoly in that reference market. However, in the author’s opinion, it would shift the focus on the narrow overlapping area where both mediums could be used simultaneously but they are not being close competitors in the relevant market and therefore leading to misleading results.


Similarly, in antitrust case against Make My Trip (MMT), it was alleged by informants, i.e., Fab Hotels and Treebo that MMT-Go is a dominant entity in a market for hotel bookings through OTAs and it has abused its dominance to discriminate between similarly placed players in the market for franchising budget hotels in India. The intermediary platform (MMT) argued that that relevant market should instead be ‘market for travel and travel related services’, or, ‘booking of hotels/accommodations in India’ since all channels in market, including direct bookings through hotel websites, offline travel agents fiercely compete with each other and only 10% of overall bookings take place through OTAs. However, the CCI denied the above contention and observed that it may hold true for end-use substitutability but from the standpoint of competition case, relevant market comprises of those products which are substitutable due to their characteristics, price and intended use. Interestingly, the CCI held that in case of platform markets, the consumer side is to be identified for which the relevant market is delineated. In the present case, there were two sets of consumers; consumers searching for hotel booking and the hoteliers/franchising service providers who use the platform to list their hotels. In this case, since the allegations were with regard to hoteliers and franchises who depend on OTA for listing their hotels, the relevant market needs to be delineated from their perspective which should include all alternatives available with such hoteliers or franchising service providers and constraints faced by MMT. The Commission did not consider other distribution channels as competitive constraints for MMT.


Thus, the relevant market in the present case for MMT-Go was rightly identified as ‘market for online intermediation services for booking of hotels in India’ considering the surge in online mode of distribution which is characteristically different from other modes due to ease it provides and other features such as comparing the price and booking accordingly.


The recent challenges faced owing to complex nature of digital platforms


The rise of data driven digital platforms and their modern-day business models pose significant challenge to traditional market definition applied by competition regimes across the world. The problem was reiterated in the recent case of Harshita Chawla wherein it was observed that consumer communication apps like WhatsApp and Facebook possess peculiar features where for some function they may appear substitutable while for others they may not. Thus, it becomes imperative to identify the primary or dominant features of an app to categorise it into relevant product market. Further, a close characterization of the market is required in case of multisided platforms providing intermediation services in order to measure their market power. It is yet to be seen how the Commission would deal with their multisided nature of these platforms (digital and non-digital). The issue is when to classify it as one single market clubbing different sides and when to consider them separate markets while taking into consideration the interdependency of different sides. The CCI in Delhi Vyapar Mahasangh although recognized key role played by Amazon and Flipkart in intermediation services but did not provide the relevant market definition in such cases.


Conclusion


The approach of CCI in digital market cases has been inconsistent in the recent years. The characteristic features and varied business models call for consideration on case-to-case basis. The factors considered while carrying out enquiry into abuse of dominant position have played a major role on the outcome of the cases. Section 19(4) lists various factors to be considered while inquiring whether an enterprise enjoys a dominant position or not. Sub clause (m) allows scope to consider other relevant factors not expressly covered by the act and accounts for peculiar characteristics of the platforms.


However, the concept of relevant market and market power can be defined more precisely for digital platforms in order to bring certainty to all the involved stakeholders and allow competition authority to respond promptly to the potential abuse of dominant position.


85 views0 comments