Revamping Antitrust for Digital Ecosystems: Towards a New Regulatory Paradigm
Suhani Suman
3rd Year, B.A. LL.B, Chanakya National Law
“The world is being re-shaped by the convergence of social, mobile, cloud, big data, community and other powerful forces.” As Mark Benioff suggests about the digital forces that are going to shape the market and society and the requirement for a revamped anti-trust. Over the past decade, our environment has undergone significant transformations, with one of the most notable being the widespread emergence of digital technologies, which have universalized and democratized empowerment. These technologies have enhanced human life and increased accessibility to various services compared to earlier times.
Unlike traditional goods or services, data hold inherent value. Given this value, online entities strive to amass as much user data as possible to improve productivity and develop new goods and services. The challenges evolved in the present digital economy[1] is not just because of the anti-competitive actions of companies but the present data-driven market. The accumulation of user data in the hands of a few major players poses a threat despite the convenience it brings to consumers. It is imperative to implement appropriate measures to ensure digital technology realizes its full potential without endangering individuals’ privacy or fostering anti-competitive practices.
A significant contemporary concern is the monopolization of data by a handful of major tech companies. While competition law traditionally addressed such complexities, the unique nature of data complicates its regulation. Currently, there is a large concentration of data like- online search is dominated by Google, with some competition from Microsoft (Bing); social media is dominated by Facebook or services it owns, with some competition from Twitter and Snapchat; Google and Facebook dominate digital advertising revenues; the mobile app downloads market is a duopoly between Apple (App Store) and Google (Google Play); e-commerce through online marketplaces is dominated by Amazon, with eBay providing some competition.[2] The digital economy has properties that can heighten concentration, such as the network effect[3], incumbents, multi-homing[4] and economies of scale and scope. The big tech data companies not only dominate the market due to the concentration of data, but their dominance level is much higher than any company in the past. Unlike the past, the present big tech companies use data collected from consumers.
It is impossible to predict the future technologies as well as their effect on the present market dominators. But the fact that these market dominators have a concentration of maximum data available in the market and all the machines-based learning and AI training is resourced by these big tech companies, indicating their rule in future waves of technologies as well. Making it a concern as if there will be no threat to these companies with respect to competition in their respective market the quality provided by them might also suffer as well as the consumers will have less negotiating power like they might be charged for using their own data, unreasonable term of use etc.
At present there are two main issues involving anti-trust in the digital economy and that is firstly, how to deal with economic forces that are shaping the new technology and secondly, what steps can be taken to cater the ‘market dominance’ of big tech companies like google, Facebook, Amazon, Apple.
In the present scenario, market dominance by big tech companies is becoming a major concern as they have greater access to data, which contributes to the network effect, becoming the main tool for the growth of these big tech companies. The digital economy is growing, and they are operating in that domain for such a long period, having the upper hand. The main concern of anti-trust law is not to control their market dominance but to prevent abuse of such dominance. At present where traditional definition of market is no more relevant since it used to depend on prices paid by the consumers and no the services rendered by consumers are for free and defining market is relevant in order to identify whether a company is in dominant position or not. Also, the Business to customer or multi-side platforms contribute to the problem of market identifications which act as a loophole in the legislation, and the big tech companies abuse it with the help of their vast data access available to them. Hence, it is nearly impossible to define market in a strict sense in the present digital economy.
Nations around the worlds have taken varied approaches in order to deal with this but the countries are yet to implement those. Hence there is yet no clear stance of different jurisdictions to deal with abuse of dominance. Like in South Africa, the Competition in the Digital Economy report from the South African Competition Commission (SACC) states that the SACC would launch proactive investigations into actions taken by leading online companies that could alienate competitors and solidify dominance. The report also states that in order to address the behaviour of companies involved in the digital economy, such as Google, Facebook, Apple, Uber, Airbnb, and Booking.com, the ‘South African Competition Commission’ (SACC) will publish guidelines, launch a market inquiry into digital markets, and cooperate and coordinate with other competition authorities worldwide. Furthermore, the “South African Competition Commission” (SACC) will soon release the findings of its inquiry into the online marketplace for intermediaries, which should shed more light on how it views the digital economy.
Australia takes a similar approach, the ‘Australian Competition and Consumer Commission’ (ACCC), where ACCC conducted inquiries to identify what establishes market power, like a number of users visiting and time spent on the platform. India published its ‘Big Tech Report’ by the Parliamentary Standing Committee of Finance in December 2022, recommending a code of conduct and disclosure obligation for designated platforms, which will be designated based on user number and turnover.
The mergers by these big tech companies further contribute to market dominance. In general, the Anti-trust regime to control mergers to avoid harmful effects on competition is based on revenue or annual turnover or market share, which does not seem to be effective considering the idea of a ‘relevant market’[5] is not strictly applicable in the present digital economy. Further, it is impossible to prove that the act is anti-competitive. Like when the merger of Facebook and Instagram took place, the services provided by the company enhanced at the same cost, i.e., zero, but by this, Facebook did eliminate its competition from social networking platforms and is dominating.
Recently, in order to control such mergers, the EU has alongside the existing merger control regime enacted DMA (EU’s Digital Markets Act) which designate digital firms as gatekeepers and impose obligation on them to inform their every merger regardless of whether that merger is notifiable under the EU merger control regime, giving EU an opportunity to consider whether any merger of these gatekeepers seeks jurisdiction over those transactions. A similar provision is there in the UK Digital Markets, ‘Competition and Consumers Bill’ (the “DMCC Bill”). Similarly, the ‘Deal Value Threshold’ is introduced in India and is being applied in Germany and Austria, where instead of earlier threshold of assets or turnover, the threshold of aggregate turnover and combination value is additionally required to deal with present tech companies which require less asset investment and turnover does not reach the threshold but their mergers result into monopolization thus limiting competition and compromising customer service.
Another issue is agreement between horizontal competitors like algorithmic collusion or data related collaboration. In South Africa, the South African Competition Commission (SACC) stated in its report on ‘Competition in the Digital Economy’ that algorithms may give rise to new forms of cartel behaviour and that conventional approaches to cartel detection, such as dawn raids and corporate leniency programmes, are unlikely to be effective in identifying cartels operating in digital marketplaces.[6]
A major challenge regarding collusion is distinguishing between firms’ intelligent and unilateral reactions to market conditions to maximize profits and practices resulting from cooperating with competitors. Using algorithms further complicates this issue as online environments are more convenient because data-scraping techniques enable automated and regular price modifications and real-time data collection.[7] Implementing competition law is generally simple in situations where there is an anticompetitive agreement and algorithms are used to monitor or enforce that agreement: It doesn’t matter whether computer software rather than people carried out the agreement; it still doesn’t prove anything.[8] With the establishment of its Data, Technology, and Analytics branch, the Competition Markets Authority (CMA) in the UK has started a programme aimed at enhancing its understanding of data and algorithms, as well as their possible impact on competition.[9] Although several competition authorities have released informal opinions or guidelines on this matter, most jurisdictions have not changed their current antitrust laws to address these or other challenges unique to digital platforms.
Daniel Castro, in his “Declaration of the Interdependence of Cyberspace”, highlighted the need for regulation of the digital world owing to its interdependence with the physical space, and with the advent of the digital economy, the demand for a revamped anti-trust has grown more. This is due to the fact that the traditional major firms in this economy have an edge and are exploiting it to monopolise the market or exercise market domination, in addition to the economy’s digitization. It is essential to prevent the monopolization of data by major tech firms. Big tech companies from monopolizing data are crucial for safeguarding consumers’ privacy, preserving competition, and maintaining the quality of services.
Various jurisdictions are taking multiple steps to prevent any anti- competitive action while working towards revamping their anti-trust to the new digital economy. Like at present various countries Anti-trust departments are conducting inquiries and surveys to implement a robust mechanism to tackle the problems of this digital economy while preserving competition and consumer welfare. Before bringing any law, countries are bringing a code of conduct to cater to anti-competitive practices by companies that do not come under the purview of present legislation. Several countries have also adopted multidisciplinary approaches to tackle data monopolization. Italy, for instance, has signed a memorandum of understanding among its competition, communications, and data protection authorities to collaborate in addressing big data issues. Colombia’s Competition Authority has expanded its mandate to include data protection and consumer protection, allowing it to assess policy impacts comprehensively. Australia has implemented a Consumer Data Right (CDR) and established joint compliance and enforcement policies between its competition and consumer protection agencies.
References:
[1] The Digital Economy incorporates all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including government, that are utilising these digital inputs in their economic activities (OECD, 2020, p. 5191).
[2] Unlocking digital competition: Report from the Digital Competition Expert Panel, March 2019, www.gov.uk/government/publications.
[3] Network effects refer to the gains enjoyed by consumers of a product when more consumers use that product. For example, users of a social network experience a benefit, or positive externality, as more of their acquaintances set up accounts on the network (OECD, 2019, p. 6171).
[4] Multi-homing refers to the ability of users to use multiple competing platforms at the same time. This contrasts with single-homing, where consumers use only a single platform (OECD, 2019, p. 10(71).
[5] Relevant market defining is a tool to set the competition policy framework regarding product and geographic dimensions (WIPO Guidelines).
[6] ICC (2023), Global report on antitrust enforcement in the digital economy. https://iccwbo.org/news-publications/policies-reports/global-report-on-antitrust-enforcement-in-the-digital-economy/
[7] CMA, Pricing Algorithms: Economic Working Paper on the Use of Algorithms to Facilitate Collusion and Personalised Pricing, 2018.
[8] the decisions in Case 50223 – Online Sales of Posters and Frames (CMA, 2016) and US v Aston and Trod (DoJ, 2015) for a cartel case involving algorithms.
[9] ICC (2023), Global report on antitrust enforcement in the digital economy. https://iccwbo.org/news-publications/policies-reports/global-report-on-antitrust-enforcement-in-the-digital-economy/
