CONTENTS

ABSTRACT...................................................................................................................................2

INTRODUCTION..........................................................................................................................2

OVERVIEW.................................................................................................................................2

SECTION 3: ANTI- COMPETITIVE AGREEMENTS.....................................................................3

SECTION 4 – PROHIBITION OF ABUSE OF DOMINANT POSITION............................................3

SECTION 5 & SECTION 6...........................................................................................................4

NEED FOR COMPETITION IN DIGITALISATION......................................................................10

SUGGESTIONS BY THE CCI STANDING COMMITTEE IN ITS REPORT...................................11

ISSUES WITH IMPLEMENTING AN EX-ANTE REGULATION....................................................12

SUGGESTIONS..........................................................................................................................12

WAY FORWARD........................................................................................................................13

CONCLUSION............................................................................................................................14

1
ABSTRACT
This essay makes a comparative analysis of the growth of competition law along with
digitalisation, while collating the various issues faced by the consumer and competitors of
dominant entities in the various sectors working in the digital space. The Competition Act
has faced several challenges and undergone several changes throughout the journey of
information technology and as we foresee our future to be built around the same, it has been
of utmost priority for legislatures around the world.

INTRODUCTION
[Digitalization and technology have had a massive impact on the Indian economy, and it is
anticipated that this impact will accelerate in the years ahead. The share of the information
technology (“IT”) sector in India, has seen exponential growth, commencing at a mere 0.5%
in 2010 and climbing to 4-5% in 2022. Speculations suggest that it will reach 12-13% by
2030, potentially contributing nearly $1 trillion to the Indian economy.] [Check>>Please
provide source]

The projected growth of various technological sectors until 2030 indicates that, on aggregate,
they are expected to multiply by five times their current size. Furthermore, India's
technological and ‘software as a service’ (“SaaS”) exports are currently underperforming in
comparison to other Asian nations, implying that the sector can expect a significant upswing
in the near future.

However, at present, this sector is largely dominated by foreign entities in most of its
domains. This situation underscores the need for robust and forward-looking regulations that
can foster the growth of all market players.

OVERVIEW
The new century began with a lot of excitement surrounding the internet, and every company
with the “.com” suffix was deemed a success. Funding was readily available for these
companies. However, speculation about future success and lack of profitability led to some
absurd valuations. In 2000, the Dotcom bubble finally burst, as tech companies could not
sustain themselves with inflated stock prices, and investors lost money.

2
But it was not all doom and gloom on the Indian front. In 1999, we took the railway
reservation system online. We introduced the Information Technology Act, Cable Internet,
Yahoo, and eBay. In 2005, we caught the Social Media bug with the introduction of Orkut,
followed by Facebook in 2008, and by 2009, we had 3G internet to cope with the demands of
internet use at the time.

Concerns have arisen regarding market dominance, data privacy, and competition. The e-
commerce sector has been a focal point of competition concerns. Issues such as preferential
treatment, deep discounting, and control and use of data have been the subject of debate.

Considering the above-mentioned concerns, the Competition Act (the “Act”) was enforced to
promote healthy competition, thereby, protecting the interests of the consumers and ensure
freedom of business and trade carried on by the competitors in the markets.

SECTION 3: ANTI- COMPETITIVE AGREEMENTS

Section 3 of the Act, deals with anti-competitive agreements. In simple terms, it prohibits
agreements, arrangements, or practices that have the potential to restrict or distort
competition in the market. This section aims to ensure fair and open competition in the Indian
market.

These agreements may include fixing prices, limiting production or supply, sharing markets,
or engaging in collusive bidding. Such practices can lead to higher prices for consumers or
exclusion of other competitors from the market.

This section is designed to promote healthy competition, prevent monopolistic practices, and
protect the interests of consumers and smaller businesses in the Indian market.1

SECTION 4 – PROHIBITION OF ABUSE OF DOMINANT POSITION

Section 4 of the Competition Act, 2002, addresses the abuse of dominant market positions. It
prohibits enterprises or groups with substantial market power from harming competition and
consumers. It forbids dominant enterprises from abusing their position, including unfair
pricing, limiting production or technical development to harm consumers, and practices that
stifle competition.2

1
Competition Act, 2002, Sec. 3, No. 12, Acts of Parliament, 2003.
2
Supra, Sec. 4

3
The primary aim of Section 4 is to safeguard consumer interests by preventing dominant
firms from engaging in practices that harm competition, increase prices, or limit market
choices.

SECTION 5 & SECTION 6

Section 5 of the Competition Act, 2002 deals with combinations and prohibits anti-
competitive agreements or practices. It states that any combination, which causes or is likely
to cause an appreciable adverse effect on competition (“AAEC”) within India, will be
considered void. The section defines combination as any acquisition or merger between
enterprises or acquiring control over enterprises or assets.3
Section 6 of the Competition Act, 2002 deals with the regulation of combinations. It
establishes the Competition Commission of India (CCI) as the regulatory authority to oversee
and approve or disapprove combinations. The section requires that any combination that
exceeds the specified asset or turnover thresholds must be notified to the CCI within 30 days
of the trigger event. The CCI then examines the combination and determines whether it may
have an adverse effect on competition in the market, and if necessary, it can direct
modifications or remedies to address the concerns.4

Have you experienced a scenario where you purchase a product for its attractive price
but over a very short period of the prices shoot up and you find that alternatives do not
exist anymore. These are symptoms of predatory pricing and deep discounting.

In the realm of e-commerce, pricing and deep discounting strategies often play a pivotal role
in attracting customers. However, such practices can give rise to legitimate concerns. One
such concern pertains to predatory pricing, a manoeuvre employed by dominant market
players to engage in anti-competitive behaviour. This involves the deliberate sale of products
or services at prices below cost, with the intent of weakening or even eradicating competitors,
thereby detrimentally impacting market competition. For instance, predatory pricing can
induce collusion within the market, as rival firms may find it challenging to match such
substantially reduced prices. Moreover, exclusive tie-ups with specific suppliers or
manufacturers that hinder other platforms' access to these products are likewise viewed as
anti-competitive.
3
Supra, Sec.5
4
Supra, sec 6

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Another notable pricing strategy is the loss-leader approach, wherein select products are
offered at a loss to entice customers, the deficit being offset by higher profits from other
offerings. Competition law may be invoked in instances where evidence of anti-competitive
conduct linked to pricing strategies surfaces.

In Delhi Vyapar Mahasang vs.Flipkart Internet Pvt. Ltd and Amazon Seller Services Private
Limited and its affiliated entities, concerns were raised regarding the provision of substantial
discounts. Flipkart faced allegations of conferring significant discounts exclusively to
favoured sellers, such as Omnitech Retail, thereby placing other sellers at a evident
disadvantage. Messages purportedly from Flipkart to its sellers suggested that the platform
would share a portion of the cost during special sales events like Big Billion Days or Diwali
sales, an advantage not extended to other sellers, thereby rendering competition arduous. This
case underscores the critical importance of ensuring a level playing field for all sellers within
the e-commerce ecosystem, and highlights the need for robust regulatory oversight in order to
safeguard fair competition.5

Have you ever found yourself swayed by sub-standard products showcased on e-

commerce platforms during your shopping endeavours?

Amazon and favored sellers shared certain contact information, implying a noteworthy
connection between them. Additionally, Amazon introduced its own brands available
exclusively through favored sellers. In essence, the case underscored the preferential
treatment accorded to specific sellers on Flipkart, which resulted in substantial discounts,
intensifying the competitive challenges faced by other sellers. Claims were also made
regarding the close affiliation between favored sellers on Amazon and Flipkart, in addition to
Amazon's exclusive distribution of its own brands through these select entities.

In response to this issue, Amazon India asserted that its marketplace operates in adherence to
the Foreign Direct Investment (FDI) Policy, stipulating that the platform does not exert direct
or indirect influence over the sale prices of goods or services. Furthermore, Amazon
emphasized their commitment to maintaining a level playing field, ensuring equal services
for all similarly situated sellers. Decisions concerning prices and product assortment on the
Amazon India Marketplace are exclusively made by the sellers themselves.

5
Delhi Vyapar Mahasang vs.Flipkart Internet Pvt. Ltd and Anr, CCI (40 of 2019).

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However, it is crucial to recognize that not all pricing strategies inherently embody anti-
competitive practices. Competent authorities generally evaluate the broader impact of pricing
methodologies on the market as a whole, discerning whether they unduly impede competition
or adversely affect consumers.

Beyond pricing strategies, competition law in India also prohibits agreements that possess the
purpose or effect of substantially hindering, limiting, or distorting competition. Exclusive tie-
ups, a subject of concern, can potentially curtail consumer choice, stifle competition, or
establish barriers for alternative platforms or sellers. This phenomenon often manifests in the
form of encountering the same brands across multiple e-commerce platforms when browsing
specific categories.

The ramifications of exclusive tie-ups are manifold. Firstly, they may lead to a reduction in
competition by limiting the platforms offering certain products, potentially resulting in higher
prices for consumers. Moreover, such arrangements can erect barriers for new or smaller e-
commerce players seeking entry or expansion in the market as is classically seen in markets
which have developed late stage monopolistic tendencies, the established players create
hurdles for small enterprises. In doing so, they also discourage innovation and impede the
diversification of products by restricting access to specific brands or suppliers.

Regulatory authorities, notably the CCI, are entrusted with the responsibility of enforcing
competition law in the country. The CCI may conduct investigations into exclusive tie-ups if
there is suspicion of their anti-competitive ramifications.

It is important to note that exclusive tie-ups are not intrinsically illegal, and under certain
circumstances, they may yield legitimate benefits for both platforms and suppliers. For
instance, they might incentivize investments and promote product quality. Section 3 of the
Act expressly proscribes anti-competitive agreements, encompassing practices such as price-
fixing, production limitations, or engagement in bid-rigging. Furthermore, any misleading or
deceptive advertising policies that detrimentally impact competition may also be subject to
scrutiny under this section.

When Whatsapp introduced its privacy policy back in 2021, did you switch to Signal,
Telegram, or any other alternative?
This is a classic example of abuse of dominant position by the market leader, which in this
case, is Whatsapp. It coerced its users to accept their unfair ‘updated terms of service and

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privacy policy’ and put their customers into a ‘take-it-or-leave-it’ situation. This privacy
policy allowed Whatsapp to share data with Facebook and its subsidiaries.6

This is not the first time that such a policy was introduced, as back in 2017, but did not do the
job for the two giant companies as they had to incorporate an opt-out option which can be
done within 30 days of the implementation of the policy.

The Competition Commission of India (CCI) discussed this issue in a suo moto case against
WhatsApp LLC and its parent company, Facebook Inc. The defendants relied on the 2016
judgment in the Vinod Kumar Gupta case, stating that breaches of the Information
Technology Act do not fall within the act's purview. Moreover, in the cases of Harshita
Chawla v. WhatsApp Inc. (Case No. 15 of 2020) and XYZ v. Alphabet Inc. (Case No. 07 of
2020), it was adjudged that issues related to data localization and data sharing need not be
considered under this Act.

In the recent suo moto case against Google and Facebook, this contention was overlooked as
the CCI emphasized that consent for sharing user data must be 'free,' 'optional,' 'well
informed,' and 'without the threat of service withdrawal.' This would be considered imposing
unfair conditions by a dominant undertaking.

However, the defendants' contentions in this case raise a question about whether data-related
issues should be covered by the Act. This debate becomes more relevant with the new Digital
Personal Data Protection Act in effect and the pending Digital India Bill set to replace the
aging IT Act, promising comprehensive digital-era regulation.

However, the central question remains: will data accumulation concerns continue to be
excluded from these new legal frameworks?
In Matrimony v. Google, the CCI referred to 'data' as the 'oil' for running businesses in this
century. The CCI observed that although data-based markets result in great gains for users, it
also results in a loss of control over personal data and excessive power for big companies
holding data on a large scale.7

6
CCI vs. WhatsApp LLC and Anr. CCI (Suo-Moto 1 of 2021).
7
Matrimony.com Limited vs. Google LLC and 2 Ors, CCI (7 of 2012).

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Monopolistic control over a large customer base on a digital platform can provide an
unnatural advantage to existing businesses in the market, thereby hindering new entrants. As
the number of users increases, the entity collects and compiles that data and uses it to target
customers based on the data they have obtained. This data can be used to attract users based
on their preferences sought in the data obtained, making it difficult for newcomers to obtain
users.

Did you ever receive a message from Zomato or Swiggy providing you discounts on
your favourite dish from a random restaurant?
In the case of National Restaurant Association of India vs. Zomato Ltd and Bundl
Technologies Private Limited (Swiggy), it was observed that the defendants used user data
obtained from purchases and customized offers and advertisements accordingly. The CCI
stated that such practices strengthen the positions of these entities, thereby dissuading new
entrants from entering such markets.8

Sellers and service providers expressed concerns about the lack of transparency in search
ranking criteria. Many respondents believed that search rankings were influenced by special
agreements between platforms and sellers, participation in discount schemes, and commission
payments.

While new players can register on platforms like Swiggy and Zomato, the challenge lies in
the time and effort required to acquire new customers when not being a preferred client in
this sector. Therefore, it is evident that exclusive tie-ups have a detrimental impact on
competition in this sector. In this cycle, new entrants and emerging businesses struggle to
make their offerings resonate with customers.

Have you ever felt compelled to use certain apps or services on your device because they
were pre-installed or prioritized by the manufacturer, even though you might have
preferred alternatives from different providers with similar offerings?
Dominant companies employ such coercive and imposing provisions known as anti-steering
provisions. These provisions prevent platform users from migrating to alternatives, as seen in
the cases of Google's 'Play Store' and Apple's 'App Store,' where they exploit their dominant
positions.
8
National Restaurant Association of India vs. Zomato Ltd and Anr CCI (16 of 2021).

8
For example, in a case involving CCI and Alphabet (Google's parent company), CCI noted
that the Play Store had planned to compel its users to use Google's payment system for its
paid apps and in-app purchases. This move restricted user access to alternative payment
methods. In countries where such a mandate is in effect, Google imposes a 15%-30%
commission on these transactions. Given the prevalence of apps on the Google Play Store,
this imposition allows Google to capture a significant share of the payments processed in this
market.

These companies abuse their dominant positions by elevating their applications above others,
compromising platform neutrality and infringing upon Section 4 of the Act. Companies like
Google, Microsoft, and Apple exhibit such bias. Google prioritizes its applications on the
Play Store or even pre-installs them on your device. In a separate case against Google in
2018, a similar issue was discussed regarding the pre-installation of GMS (Google Mobile
Services) Suite, and CCI held such practices to be violative of Section 4(2)(a)(i) and 4(2)(e)
of the Act.
The EU recognized these violations in 2017 and imposed a hefty penalty of €2.42 billion for
abusing its dominant position by offering its products and services at an unfair competitive
advantage, thereby demoting rival services. Google was ordered to cease the imposition of
unfair dominance on its rivals and adopt a simple merit-based approach while competing in
the market against other competitors. 9

A similar action was taken by Spotify against Apple, where it filed a case with the European
Commission. The plaintiff contended that Apple used its dominant position to retain its users
by restricting the freedom and innovations of its competitors. Spotify alleged that Apple
disallowed the usage of advertising content such as "Get three months now for $0.99" or "Get
in, Get Premium," which the plaintiff had devised to attract users. Later, it was found that
Apple Music used similar advertising content. The Commission initiated a formal inquiry
into this matter in 2021 and ruled in favour of Spotify, declaring Apple's actions abusive of
its dominant position.

The underlying idea that forms the basis for such actions by CCI and its international
counterparts is to maintain healthy competition in the presence of these tech giants. The
9
XYZ (Confidential) vs. Alphabet and 4 Ors, CCI (07 of 2020).

9
dominance of these giants is indisputable due to the widespread use and irreplaceability of the
existing systems we require to function. However, these companies cannot restrict, dissuade,
or impede the entry of new competitors in order to maintain a positive competitive
environment that benefits customers and encourages innovation.

NEED FOR COMPETITION IN DIGITALISATION

Innovation is the engine of this sector; hence, healthy competition is required to maintain a
favourable atmosphere for the competitors to work for the development of digitalisation. A
prime example of this is Reddit.

Initially, Reddit operated solely as a web-based platform, prompting users to resort to third-
party applications to replicate the Reddit experience on mobile. Multiple developers had been
vying with one another to offer users a satisfactory Reddit experience on their mobile
devices. In 2014, Reddit acquired Alien Blue, a popular Reddit mod app, and subsequently
launched the official Reddit app. While Reddit's actions were entirely lawful, they
inadvertently disrupted healthy competition. The current iteration of the Reddit app is buggy
and filled with bots today. 10

Moreover, notable applications such as WhatsApp, Instagram, Facebook, and YouTube have
all come under the Meta Inc. umbrella. These applications, which once had the potential to
compete against each other, are now consolidated under one dominant player, each serving
distinct purposes.

SUGGESTIONS TO COMBAT THE CONSTRAINTS TO COMPETITION IN THE MARKET

CAUSED BY THE ADVENT OF E-COMMERCE

In various nations, longstanding regulations have been in place to ensure equitable

competition. However, in India, such regulatory frameworks are relatively nascent. The
Competition Commission of India (CCI) is structured into distinct divisions, each tasked with
specific facets of its operational purview. Notably, the antitrust division is responsible for
scrutinising and mitigating instances of market dominance by companies, while the
combination division is tasked with overseeing and regulating mergers and acquisitions.

10
Amit Chowdhry, https://www.forbes.com/sites/amitchowdhry/2014/10/16/reddit-launches-ios-app-following-
alien-blue-acquisition/?sh=76c484713af2, 16 October 2014.

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SUGGESTIONS BY THE CCI STANDING COMMITTEE IN ITS REPORT

The Standing Committee in its report, suggests that discounts are not inherently anti-
competitive, but when these discounts are discriminatory and push prices to below cost
levels, thus affecting offline and online retailer’s ability to compete.

For example, I remember wanting to purchase a Bluetooth speaker, and going to the shop to
test speakers, I chose one and instinctively opened amazon.in, showed the shopkeeper the
price and asked him to match it. Begrudgingly he did so.

Here in this scenario, we feel that a shopkeeper can afford to sell me the speaker at amazon
prices. We fail to account that the extra Rs. 100-200 he charges goes towards rent, utilities,
property taxes for his brick-and-mortar shop, whereas amazon has gone ahead and invented
space out of thin air, the playing field is completely uneven. Going to shops is just considered
a visit to a showroom.

The Standing Committee advised that major digital intermediaries like Amazon and Flipkart
should not restrict business users from setting their own terms, including pricing,
commissions, and delisting. Additionally, they should allow business users to offer products
or services through third-party services or their own online sales channels at different prices
and conditions. Even Exclusive Tie-ups would be kept in check this way.11

The Report inter alia recommended the following: -

1. Formation of a Digital Competition Act

2. Setting up a specialised Digital Markets Unit
3. Adopting an ex-ante regulatory framework to govern designated companies.

Consequently, the MCA set up the Committee on Digital Competition Law, which was
supposed to provide its report on August 31, which was later extended for another month.

ISSUES WITH IMPLEMENTING AN EX-ANTE REGULATION

The issues with the new ex ante regulation can be discussed considering the following two
purviews:

11
Anti-Competitive Practices by Big Tech Companies, 53rd Report of the Ministry of Corporate Affairs of India,
December 2022.

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The MRTP Act of 1969 was replaced by the Competition Act of 2002 considering the
cumbersome regulations that it imposed on the companies and transactions falling within its
purview. The Competition Act was introduced with a vision to promote healthy competition
and intervene in cases where such competition turns adverse to the competitors.

The MRTP Act assessed the position and dominance of an entity in a market based on its
revenues, market capitalisation and user count. The report suggests that the ex-ante
regulations would determine ‘Systematically Important Digital Intermediaries’ and ‘market
winners’ based on quantitative factors, which would in turn set back our laws similar to what
we moved on from in the MRTP Act.

Such regulations are not infallible in determining the impact of an action to the market hence
would carry a possibility of incurring losses and create unnecessary delay, which in turn
would discourage innovation in this space. Moreover, it not possible for a statute to predict
the future of an industry that has been unpredictable in nature, with the constant
developments that it has witnessed in the past decades.

Further, the introduction of ex-ante regulations might prove counterproductive to the industry
which is growing at a scorching pace. This addition to the existing laws which are currently
forging themselves around the recent introductions of the Digital Personal Data Protection
Act and the Digital India Bill, would create havoc for the upcoming markets.

At present, with the world turning towards India for obtaining better opportunities. India is
projected to be the hub for the world in the next decade. This introduction would
disincentivise the world to create new relations with our country and its domestic entities.

SUGGESTIONS

It is worth noting that many pivotal M&A transactions that have had a significant impact on
the industry did not fall within the threshold limits of the Act. This prompted the CCI to adapt
the Act in a way that could encompass such deals, especially considering that a majority of
entities in digital markets are light on assets and may not have a significant turnover.
Preventing anti-competitive tendencies arising from mergers and acquisitions in the digital
space requires a combination of legal frameworks, regulatory oversight, and proactive
industry practices.

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WAY FORWARD

1. Strengthen antitrust laws and ensure they are effectively applied to digital mergers and
acquisitions and encourage competition authorities to conduct thorough reviews of
proposed deals to assess potential anti-competitive effects. It is obvious, if you want a
good game, make sure the players know the rules well.
2. Define relevant markets accurately, especially in digital spaces where markets may be
complex and dynamic and evaluate the potential for the merged entity to attain or
strengthen dominance and potentially hinder competition. This is a big concern in the e-
commerce segment even today. The segments are not clearly defined, at some point Uber
was in the taxi business and uber was also in the food delivery business. This will also
help in raising personnel accountability, for example Bike Taxi app “Rapido” riders are
also simultaneously Zomato and Swiggy delivery men, this would raise several liability
concerns as it is risky to have a man trying to fulfil multiple delivery orders as well as
chauffeur another person around.
3. Implement stringent data protection and privacy regulations to safeguard consumer
interests and prevent anti-competitive uses of data post-merger. Recently, Chinese social
media giant “TikTok” has been under fire in the USA due the very egregious and non-
judicious data usage which has been mapped out in the terms and conditions of its user
agreement. There are terms which list that TikTok is essentially allowed carte blanche
access to your mobile device if it can find ways past security systems.
4. Require companies to disclose relevant information during merger assessments,
including data on market share, user base, and potential competitive effects.
5. Establish effective mechanisms to monitor merged entities for compliance with antitrust
conditions and take prompt enforcement action if violations occur.
6. Prohibit practices that give preferential treatment to the merged entity's own services or
products, potentially excluding competitors.
7. Consider broader public interest factors, such as innovation, consumer welfare, and the
impact on small businesses, when evaluating mergers. It is very difficult to do so in a
world which is motivated by the quick buck, but honest value addition to consumer’s
affairs has taken a backseat while consumer data acquisition is the name of the game.
8. Seek input from industry stakeholders, consumer groups, and experts to ensure a
comprehensive understanding of the potential impact of a merger.

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9. Establish mechanisms for post-merger reviews to assess the actual impact on competition
and make adjustments if necessary.
10. By combining these measures, regulators and industry stakeholders can work together to
foster a competitive digital marketplace while allowing for legitimate mergers and
acquisitions that contribute positively to innovation and economic growth.

CONCLUSION

The growing pace of innovations, developments and new entrants in this market has created a
constant need for the law to mould itself around it. The current laws across the world have
been forging it around it but there is a need for developing futuristic laws to address the
upcoming trends in the industry with the rise of data wealth, AI, digital competitiveness, etc.

The past 2 decades have been a

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