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Regulating Big tech

2024 APR 1

Mains   > Economic Development   >   Indian Economy and issues   >   Miscellaneous

SYLLABUS

GS 3 >>> Indian Economy and Issues 

REFERENCE NEWS

  • The Committee on Digital Competition Law, formed by the Ministry of Corporate Affairs on February, released its report, recommending legislation to regulate the market power of Big Tech firms like Google and Meta.

MORE ON NEWS

  • The dispute between Google and several Indian companies traces back to when app developers submitted a grievance to the Competition Commission of India (CCI).
  • They claimed that Google was misusing its dominant position in the Android and Play Store framework. The main accusation was that Google coerced app developers into adopting its own payment system, threatening them with a fee for selecting an alternative service.
  • This issue is still developing, with the CCI instructing its Director General to carry out an inquiry and present a report within 60 days. The expected outcome by the CCI may conclude that Google's conduct breached the Competition Act of 2002.

ABOUT BIG TECH FIRMS

  • Big Tech represents the world's largest and most dominant technology corporations, known for their substantial market value, cutting-edge products and services, and extensive customer base. This group includes leading names such as Google, Facebook, Amazon, and Apple.
  • These tech giants typically hold monopolistic or near-monopolistic control over their markets, significantly influencing industry developments, consumer habits, and even governmental policies.
  • Big Tech is at the helm of technological progress, spearheading innovations in areas like AI, cloud technology, and digital entertainment.
  • These corporations collect enormous amounts of data from their users, sparking debates over privacy, data misuse, and security.
  • Big Tech often faces investigations and legal challenges over market control, alleged anticompetitive actions, and consumer rights issues.

GOVT. STEPS TAKEN UP

US’s Federal Trade Commission: US Department of Justice and 16 states sued Apple alleging it monopolised and abused the smartphone market. The case against Apple follows a growing list of lawsuits against Google, Meta and Amazon for abusing market power. The modus operandi is familiar – blocking, suppressing, excluding, diminishing functionality of rival products and limiting third-party wallets.

EU’s Initiatives: In a slew of measures to ensure “contestable and fair markets in the digital sector” in line with the provisions of the Digital Markets Act (DMA), 2022 the European Commission in March,2024 initiated ‘non-compliance investigations’ against so called Big Techs (Apple, Meta and Google’s parent Alphabet). It will also investigate Amazon’s ranking practices in its marketplace.

India’s Stand:

Competition Act, 2002: In India, antitrust issues are governed by the Competition Act, 2002 and the CCI checks upon monopolistic practices. In 2022, the CCI imposed a penalty of Rs 1,337.76 crore on Google for abusing its dominant position in multiple markets for 'anti-competitive practices'.

Competition Amendment Bill, 2022: The government has proposed amendments to the competition law in the Competition Amendment Bill, 2022. The Bill received Presidential Assent in April 2023. The CCI shall frame regulations to prescribe the requirements for assessing whether an enterprise has substantial business operations in India. It will strengthen the Commission’s review mechanism, particularly in the digital and infrastructure space, a majority of which were not reported earlier, as the asset or turnover values did not meet the jurisdictional thresholds.

 

CHALLENGES WITH BIG TECH FIRMS

  • Favouring Own Services/In-house devices: Investigations are probing Alphabet for potentially pushing customers towards its services over competitors. Apple's App Store practices and Safari browser positioning are under scrutiny for similar reasons. Meta is being looked into for its "pay or consent" model.
  • Violations of the Digital Markets Act, 2022 (DMA): In September 2023, firms like Alphabet, Amazon, Apple, ByteDance (TikTok's parent), and Microsoft were labeled as 'gatekeepers' and were expected to adhere to the DMA by March 7, 2024. Following the submission of compliance reports by these companies, the European Commission, after workshops and stakeholder feedback, launched investigations into DMA non-compliance.
  • Biased Practices by Big Techs: The European Commission is examining whether Google biases its search results to favor its own services. There's concern Alphabet's compliance efforts with the DMA won't ensure impartiality for third-party services on Google's search page. Similarly, in March 2024, the CCI began a thorough investigation into Google's Play Store practices after finding initial evidence of competition law violations.
  • Reduced Consumer Choices: The U.S. Department of Justice in October 2020 charged Google with maintaining monopolies through anti-competitive actions in search and search advertising, alleging these practices limited consumer choice and innovation. Amazon faces similar accusations for manipulating its marketplace listings.
  • Ecosystem Lock-in Concerns: The European Commission is investigating whether Apple restricts users' ability to uninstall pre-installed apps, modify default settings, or choose alternative services easily, fearing such practices hinder users' freedom within the Apple ecosystem.
  • Meta's "Binary-Choice" Model Concerns: Meta's subscription model offering in the EU, EEA, and Switzerland—a choice between ad-free usage or ad-supported services—has been criticized by regulators for not providing a genuine alternative for users who opt out of personalized advertising, challenging the aim to limit data accumulation by gatekeepers.
  • Regulatory Lag: The swift innovation by Big Tech leads to a reactionary stance from regulators, struggling to keep pace with these advances. These companies often claim intermediary status, arguing against content liability.
  • Unilateral Pricing Strategies: In the digital domain, large platforms predominantly dictate pricing, contrasting with traditional market-driven pricing. This digital landscape, amplified by network effects and Big Tech's gatekeeping roles, presents unique challenges in ensuring fair competition and consumer protection.

WAY FORWARD

The Standing Committee on Finance delivered its analysis on 'Anti-Competitive Behaviors by Major Technology Firms' in December 2022. Its key insights and proposals include:

  • Management of Digital Marketplaces: Digital marketplaces comprise online businesses serving millions globally. Unique to these markets, company growth often escalates with its size due to data-driven insights and the network effect. This dynamic can quickly cement a few firms as market leaders before regulatory frameworks can catch up. The Committee proposed proactively assessing competitive actions to prevent market monopolization, shifting from the retrospective assessments currently in practice.
  • Identification of Digital Gatekeepers: The Committee recommended that India identify significant digital market actors potentially undermining competition, labeling them as Systemically Important Digital Intermediaries (SIDIs) based on their revenue, market value, and user numbers. These SIDIs would be required to annually report their compliance efforts to the Competition Commission of India (CCI).
  • Proposal for a Digital Competition Law: Acknowledging the digital market's tendency towards concentration, the Committee suggested India needs to refine its competition laws. It advocated for a Digital Competition Act aimed at maintaining a competitive, transparent, and open digital market.
  • Prohibition of Self-Preferencing: The issue of platforms favoring their own services was addressed, noting such practices can harm competition in related markets. The Committee advised that SIDIs should ensure equal treatment for all services on their platforms, avoiding any biases towards their own or affiliated services.
  • Regulation on Data Utilization: With data-driven dominance a key concern, the Committee proposed restrictions on how SIDIs can use user data. Specifically, it recommended prohibiting the combination of personal data across different services without explicit consent and ensuring users aren't automatically enrolled in additional services.
  • Strengthening the CCI: To tackle digital market monopolies more effectively, the Committee suggested enhancing the CCI with a digital market-focused unit. This unit would monitor both existing and emerging SIDIs, advise on SIDI designations, and handle digital market disputes.
  • Accessibility for Third-Party Apps: Addressing the restrictions on third-party apps, the Committee observed that SIDIs should facilitate the use of alternative software and app stores, ensuring competitive fairness while safeguarding against data transfer to adversarial foreign governments.
  • Restrictions on Bundling and Tying: The practice of forcing consumers into purchasing bundled services was criticized for creating market imbalances and stifling competition. The Committee recommended that SIDIs should not obligate the acquisition of additional services as a condition for using their primary platform.
  • Eliminating Anti-Steering Policies: Lastly, the Committee opposed anti-steering practices, where platforms restrict businesses from directing customers to alternative offers. It was recommended that SIDIs should not condition platform access on the acquisition or use of unrelated products or services.Top of Form

PRACTICE QUESTION

Q: Regarding India's approach to regulating Big Tech's influence, identify challenges, and recommend strategies for fostering a fair and competitive digital marketplace in India. (10M,150W)