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Standing Committee Report on Anti-competitive Practices by Big Tech: A Summary
The Report of the Standing Committee on Finance (2022-23) (Report) dated 22 December 2022 is premised on the understanding that digital markets are not substitutable with traditional physical markets, and contains deliberations on a set of ten practices adopted by big tech companies in India. The observations and recommendations in the Report largely track those contained in the Digital Markets Act in the European Union.
Scope of application: types of companies
The Report notes that Systemically Important Digital Intermediaries (SIDIs) can negatively influence competition in digital markets, and must be subject to ex ante regulation. The Report does not define the parameters for assessing whether a tech company is a SIDI; the Report recommends that the Competition Commission of India (CCI), the Central Government, and stakeholders collaborate to arrive at a definition of SIDIs.
Scope of application: types of practices
The Report identifies the following types of practices as anti-competitive:
a. Anti-steering provisions
Definition: Clauses that prevent users of a platform from “steering” their consumers to offers other than those provided by the platform.
Recommendation: A SIDI must not condition access to its platforms/placement on its platform on the purchase or use of products that are not part of or intrinsic to the platforms.
b. Self-preferencing / platform neutrality
Definition: A practice whereby a platform favours its own services or subsidiaries directly or indirectly in situations where it provides the platform and competes on the platform.
Recommendation: A SIDI must not favour its own offers over the offers of its competitors when mediating access to supply and sales markets, including when presenting its own offers in a more favourable manner, and when exclusively pre-installing its own offers on devices.
c. Bundling and tying
Comments: Bundling and tying are prevalent in the digital market, and harm innovation and consumer interest.
Recommendation: A SIDI should not force business users/end users to subscribe to, or register with, any further services as a condition for being able to use, access, sign up, or register with a platform.
d. Data usage
Comments: Market leaders who have amassed a wealth of personal data over a period of time have a “data advantage”, making it difficult for small entrants to attain a critical mass of users and user data.
Recommendation: A SIDI should not:
For the purpose of providing online advertising services, process personal data of end users using services of third parties that make user of core services of the platform;
Combine personal data from the relevant core service of the platform with personal data (i) from any further core services or (ii) from any other services provided by the platform or (iii) with personal data from third party-services;
Cross-use personal data from the relevant core services in other services provided separately by the platform, and vice versa;
Sign up end users to other services of the platform in order to combine personal data, unless the end user has been presented with the specific choice and has given consent.
In competition with business users, use any data that is not publicly available, that is generated or provided by those business users in the context of their use of the relevant core services of the platform, or of services provided along with relevant core services.
e. Mergers and acquisitions
Comments: Some mergers and acquisitions have a deep impact on the market and are not captured by existing thresholds under the Competition Act, 2002.
Recommendation: A SIDI should:
inform the CCI of any intended concentration where the merging entities or the target provide services in the digital sector or enable the collection of data, irrespective of whether it is notifiable to the CCI, and
inform the CCI of such a concentration prior to its implementation and following the conclusion of the agreement, the announcement of the public bid, or the acquisition of controlling interest.
f. Pricing/deep discounting
Comments: Deep discounting by platforms with market power are a matter of concern when the discounts are discriminatory and push prices below cost levels.
Recommendation: A SIDI should not
limit business users from differentiating commercial conditions on its platform, and
prevent business users from offering the same products or services to end users through third party online intermediation services or through its own direct online sales channel on terms different from those offered through the platform.
g. Exclusive tie-ups
Comments: Exclusive tie-ups by major digital platforms can foreclose markets and constrict competition and can ultimately lead to increased prices for the end-user.
Recommendation: A SIDI should not prevent business users from offering the same products or services to end users through third-party online intermediation services or through their own direct online sales channel at prices or conditions that are different from those offered through the online intermediation services of the platform, so that fair market conditions prevail.
h. Search and ranking preferencing
Comments: Keywords, which can either be a single word or a phrase, play a critical role in search and ranking preferencing. High quality, relevant keywords for advertising campaigns can help advertisers reach the right customers at the right time.
Recommendation: A SIDI must provide to any third-party undertaking providing online search engines, at their request, with access to fair, reasonable, and non-discriminatory terms to ranking, query, click and view data in relation to free and paid search generated by end users on its online search engines. Any such query, click and view data that constitutes personal data should be anonymised and a SIDI, particularly those providing search and ranking functionality should not treat the products, services, or lines of business of the platform more favourably relative to those of another business user and in a manner that is inconsistent with the neutral, fair, and non-discriminatory treatment of all business users.
i. Third-party applications
Comments: Gatekeepers have been found to restrict the installation or operation of third-party applications.
Recommendation: A SIDI should allow and technically enable the installation and effective use of third-party software applications or software application stores using, or interoperating with, its operating system and allow those software applications or software application stores to be accessed by means other than the relevant core services of that platform. An exception may only be made in case of preventing data from the SIDI or another business user from being transferred to government of a foreign adversary. A SIDI should, where applicable, not prevent the downloaded third-party software applications or software application stores from prompting end users to decide whether they want to set that downloaded software application or software application store as their default. It should technically enable end users who must themselves decide to set that downloaded software application or software application store as their default to carry out that change easily to ensure transparency.
j. Advertising policies
Comments: Big Tech’s ad business is a monopolist threat and gives them an unfair edge.
Recommendation: A SIDI should:
not process, for the purpose of providing online advertising services, personal data of end users using services of third parties that make use of core services of the platform,
provide advertisers, information on a daily basis, regarding price paid by the advertiser and the remuneration received by the publisher, and
provide advertisers and publishers with access to the performance measuring tools of the gatekeeper and the data necessary for advertisers and publishers to carry out their own independent verification of the advertisements inventory, including aggregated and non-aggregated data.
Proposed legislative changes
The Report recommends two changes:
a. The introduction of a Digital Competition Act
Given the unique needs of digital markets, the government should consider and introduce a Digital Competition Act to ensure a fair, transparent, and contestable digital ecosystem.
b. Revamping the CCI
The CCI must be revamped to include a Digital Markets Unit to enable the CCI to closely monitor SIDIs and emerging SIDIs, provide recommendations to the Central Government on designating SIDIs, review SIDI compliance and adjudicate on digital market cases and conduct. Similar unfair practices of other digital players, even though not specifically designated as SIDls, should also be generally kept track of, monitored and acted upon.