RELEVANT MARKET” AND DIGITAL ECOSYSTEM: RESOLVING THE “NARROW” VERSUS “BROAD” DILEMMA
[Pranay Agarwal is a third year law student at Gujarat National Law University]
Lately, the Competition Commission of India (CCI) has been carrying out investigative raids on the tech platforms like Amazon, Whatsapp, Zomato, Apple, Google, etc. given the growing dominant practices of online platforms. With the rise of consumer demand for online services and the resultant anti-trust concerns, investigative actions of CCI can be said to be its attempts towards exploring ways to check the unhindered supremacy of digital platforms.
In this regard, CCI has been actively engaged in widening the scope of ‘relevant market’ to cover online platforms under the ambit of competition law and therefore has provided a broad and a little ambiguous interpretation of the term. While such a wider interpretation has been justified on the lines of purposive interpretation of the ‘relevant product market’ and socio-economic demands of the nation, it is feared to instead lead to disastrous and unwanted outcomes.
In this article, the change in the stance of the CCI from a narrow to a broad definition of the relevant market has been critically analyzed in light of the contemporary challenges faced in the regulation of the e-space.
The stance of CCI: From SnapDeal to MMT case
The Competition Act 2002 (Act) extensively provides for preventing the anti-competitive practices of entities in India. Nevertheless, due to the high technical nitty-gritty in the law, the role of CCI as a regulatory body became important in present dynamic socio-economic conditions. In this regard, the position of the CCI to deal with online intermediaries can be differentiated as ‘narrow’ and ‘broad’.
In Ashish Ahuja v. SnapDeal (SnapDeal case) and other earlier decisions, CCI adopted a narrow approach where it regarded the online and offline segments of a market to be different channels of distribution and not the same market. This interpretation can be attributed to the basic principle of plain meaning in the statutory construction as well as the socio-economic conditions of the country to protect offline markets.
However, after 2016 the stance of CCI changed in Rubtub Solutions Pvt. Ltd. v. Makemytrip India Pvt. Ltd. & Anr (MMT Case) where it adopted a broader approach to regard both the online and offline segments as different markets due to the different standards and technicalities involved in the delivery of the services. The same was then adopted in various instances where it classified apps like Google (the market for online general web search), Whatsapp (the market for OTT messaging apps through smartphones in India) and Apple (the market for app stores for iOS in India) as separate markets.
Choosing between ‘Broad’ versus ‘Narrow’ Definition: From the point of Substitutability tests
The ‘substitutability’ or interchangeability of the product is considered to be the most essential component to determine the relevant market of the product. The test was propounded by the European courts in the United Brands case, where it was held that the product should be similar to the product inside the market and not outside it.
In this respect, it is important to highlight that there are two methods of determination of the ‘substitutability’ of a product – (a) Demand substitution (Cross elasticity Test); and (b) Small but Significant Non-Transitory Increase in Price (SSNIP Test). The cross-elasticity test was first given in the Cellophane case where the price and the quality of the product were highlighted as essential considerations to its application. The SSNIP test, on the other hand, propounds that if the increase in the price of one will change the demand for the other, the same is substitutable.
While both the tests are still holding good, a proper application of the former requires a proper assessment of the consumer demands than acting on mere speculation. In this respect, the survey of consumer demands in the Indian market still seems a distant thought. On the other hand, the latter test has already been evident by the shift in consumer demand towards online shopping due to price differences, thereby justifying the narrow approach of CCI.
‘Broad’ definition for digital platforms: A Hit or Miss?
From the above analysis, it would not be wrong to infer that the application of the broader definition is quite impractical, the stance of CCI is largely ‘protectionist’ to secure fair competition in the country. The adoption of this approach in the initial stages of the development of the online market served twofold purposes. On one hand, it protected online start-ups and on the other, it prevented abuse of dominance through the application of Section 4(2)(e) of the Act. Thus, it provided both incentive and deterrence which were rather balanced and applied on a case-to-case basis.
However, the tables are turned in contemporary times where online start-ups have instead acquired a dominant position in the markets. In this respect, the dominance of online players can only be avoided if it tries to enter or protect other relevant markets. Moreover, the broader approach makes the relief under Section 19 non-applicable in the case of unilateral agreements due to the condition imposed through Section 19(5), thereby adversely impacting offline retailers.
Nevertheless, the broader approach of the CCI does not seem to be acting as a hindrance in regulating the online market. The Indian watchdog has been addressing contemporary issues through charges of discriminatory actions and on the pretext of preventing other players from entering the market. While CCI measures may provide a temporary recourse, such elusion rather restricts the diverse legal reliefs provided by the Act. Furthermore, unlike the old scenario, the contemporary problems are not restricted to the abuse of the dominant position but have also resulted in unfair pricing and discounting and unilateral commissions imposed on the offline retailers, thus requiring CCI to change its position.
Solving the ‘Broad’ versus ‘Narrow’ equation
The equation of ‘broad’ and ‘narrow’ equation is mostly weighed towards the former by the CCI and other regulatory bodies. While the move is said to be made in the interest of fair competition, the above analysis substantiates the reinstatement of the previous position taken in the SnapDeal case. Though this approach may be contrary to the definition given under Section 2(t), a harmonious interpretation of the provision with the other definition as has been provided under Section 19(7) along with the application of the SSNIP test makes the older position more relevant in the contemporary times.
The position can also be reinforced by the determination of the geographical market of the online players in the present circumstances. In this respect, the definition given under Section 19(6) should be given primacy over that under Section 2(t) due to the latter’s pre-condition of comprehensive demand assessment. Moreover, the extension of the SSNIP test to determine the geographical market as was propounded in HT Media Ltd v. Super Cassettes Industries Ltd. provides ample justification for the online markets being in the same relevant market as the offline markets.
While it may be contended that the reinstatement of the ‘narrow’ approach will lead to adverse consequences regarding discrimination towards the offline segments, the CCI can still control it in two ways. The CCI in this respect can apply Explanation (a) of Section 4, which will render the unfair and unreasonable actions against the offline counterparts as ‘dominant practice’ preventable under Sections 4(1) and 4(2). Also, CCI can resort to alternate provisions like Section 19 and Section 4(2)(a) of the Act to control the discriminatory behaviour of the online intermediaries, thereby giving a much larger scope to the Indian watchdog.
Digital platforms have been enjoying their dominant position and the rising consumer demand. Though the abuse of such a position has not been proved in many cases, efforts are being made by the CCI to prevent any scope for it as its duty to regulate the Indian markets. While the broader approach has been largely contended to be satisfactory which is also evident from the CCI’s stringent actions, the reduction of the scope and jurisdiction conferred by the Act is an undeniable fact.
In this respect, the approach of the CCI should be to serve the interests of both the businesses and consumers irrespective of their capital and market size to serve the purpose and object of the competition law in India. The ‘narrow’ approach in this sense provides for not only the issues addressed by the ‘broad’ approach but also addresses other contemporary issues more effectively.
Furthermore, the widened scope and enlarged jurisdiction of the CCI due to the adaptation of a ‘narrow’ approach will not only lead to fair competition but will also balance the interests of the online and offline players. With CCI engaging itself after the big tech players, it is the need of the hour to rectify the erroneous stance in conformance with the true position and intention of the law and re-establish fairness in the market competition of the nation.