CONTENTS

ABSTRACT.............................................................................................................................................2
INTRODUCTION.....................................................................................................................................2
OVERVIEW............................................................................................................................................2
NEED FOR COMPETITION IN DIGITALISATION...................................................................................10
SUGGESTIONS BY THE STANDING COMMITTEE REPORT .................................................................10
ISSUES WITH IMPLEMENTING AN EX-ANTE REGULATION................................................................11
WAY FORWARD...................................................................................................................................12

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. 1

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.

OVERVIEW
The 21st century began with enthusiasm surrounding the internet and every company with the
“.com” suffix was deemed a success while 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.

However, 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 of 2000, cable
internet, Yahoo and eBay. In 2005, we caught the social media bug with the introduction of

1
e-Conomy India: The Economy of a Billion Connected Indians, Report by Google, Temasek and Bain & Co.,
2023.

2
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 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.2

KEY PROVISIONS IN THE COMPETITION ACT 2

Section 33 of the Competition Act (the “Act”) focuses is on the prohibition anti-competitive
agreements, which include practices like price-fixing, market sharing, or collusive bidding.
These actions can harm competition, leading to higher prices for consumers and the exclusion
of other competitors from the market. The aim here is to foster fair competition, prevent
monopolistic behaviours, and protect the interests of consumers and smaller businesses in the
Indian market.

Section 44 of the Act deals with the abuse of dominant market positions, prohibiting firms
with substantial market power from harming competition and consumers. This includes
preventing unfair pricing and practices that stifle competition, with the goal of safeguarding
consumer interests and maintaining a competitive market environment.

Sections 55 and 66 focus on combinations, with Section 5 deeming any combination causing
an appreciable adverse effect on competition within India as void. Section 6 establishes the
Competition Commission of India (CCI) as the regulatory authority to oversee combinations.
The CCI assesses these combinations to determine if they negatively impact market
competition, allowing for necessary modifications or remedies if concerns arise. These

2
Competition Act, 2002, Sec. 3, No. 12, Acts of Parliament, 2003.
3
Supra, Sec. 3.
4
Supra, Sec. 4.
5
Supra, Sec.5.
6
Supra, sec 6.

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provisions collectively work to promote fair competition and protect consumers' interests in
the Indian market.

COMPETITION CHALLENGES IN THE DIGITAL AGE

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? If so, you have been a prey to 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.

The loss-leader approach is yet another pricing strategy, 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,7 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 an 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

7
Delhi Vyapar Mahasang vs.Flipkart Internet Pvt. Ltd and Anr, CCI (40 of 2019).

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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.

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

commerce platforms during your shopping experiences?
Amazon and favoured sellers shared certain contact information, implying a noteworthy
connection between them. Additionally, Amazon introduced its own brands available
exclusively through favoured 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 favoured sellers on Amazon and Flipkart, in addition
to Amazon's exclusive distribution of its own brands through these select entities.8

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.9

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.

8
Supra 6.
9
Supra 6.

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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.

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.

Did you make a switch to Signal, Telegram, or any other alternative messaging platform
when WhatsApp implemented its privacy policy in 2021, which involved sharing user
data with Facebook?

WhatsApp's move in 2021 can be seen as an abuse of its dominant market position. By
pushing its users into a "take-it-or-leave-it" situation with the updated terms of service and
privacy policy, they effectively left people with little choice. This policy ultimately enabled
WhatsApp to share user data with Facebook and its subsidiaries.

This is not the first instance of such a policy being introduced; in fact, a similar policy was
rolled out in 2017. However, it didn't go as smoothly for the two tech giants, as they had to
include an opt-out option, which users could exercise within 30 days of the policy's
implementation.

The CCI discussed this issue in a suo moto case against WhatsApp LLC and its parent
company, Facebook Inc. 10 The defendants relied on the case of Shri Vinod Kumar Gupta,
10
CCI vs. WhatsApp LLC and Anr. CCI (Suo-Moto 1 of 2021).

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Chartered Accountant v. WhatsApp Inc11. stating that breaches of the Information Technology
Act, 2000, do not fall within the Act's purview. Moreover, in the cases of Harshita Chawla v.
WhatsApp Inc.12 and XYZ v. Alphabet Inc.13, it was adjudged that issues related to data
localization and data sharing need not be considered under this Act.

However, in the case of CCI v. Whatsapp LLC and Facebook Inc., this argument was not
given significant consideration. The CCI emphasized that consent for sharing user data must
be 'free,' 'optional,' 'well informed,' and 'without the threat of service withdrawal.' Such a
linkage would be deemed as imposing unfair conditions by a dominant entity.14

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 core question remains: will data accumulation concerns continue to be
excluded from these new legal frameworks?

In Matrimony v. Google, 15 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.

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, thus creating entry barriers in the market.

11
Shri Vinod Kumar Gupta, Chartered Accountant v. WhatsApp Inc. (99 of 2016).
12
Harshita Chawla v. WhatsApp Inc. CCI (15 of 2020)
13
XYZ v. Alphabet Inc. CCI (07 of 2020)
14
Supra 10.
15
Matrimony.com Limited vs. Google LLC and 2 Ors, CCI (7 of 2012).

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Have you ever been surprised by receiving pop-ups from Zomato or Swiggy, offering
exclusive discounts for specific restaurants that you frequently order from, as an
enticing way to attract customers?

In the case of National Restaurant Association of India vs. Zomato Ltd and Bundl
Technologies Private Limited (Swiggy),16 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.

Sellers and service providers raised concerns regarding the opacity of search ranking criteria.
For instance, in the context of searching for a skincare product, it remains unclear as to how
criteria are established to prioritize ‘82E’ over ‘Forest Essentials’, in terms of search results
on e-commerce platforms. Many survey participants speculate that search rankings are
influenced by undisclosed agreements between platforms and sellers, involvement in discount
programs and commission payments.

While new restaurants can easily register on platforms like Swiggy and Zomato, the real
challenge lies in acquiring a customer base, particularly when they are not a preferred client
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 applications 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 better 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 case of Google's Play Store and Apple's App Store, where they exploit their dominant
positions.

16
National Restaurant Association of India vs. Zomato Ltd and Anr CCI (16 of 2021).

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For example, in XYZ v. Alphabet Inc.17, 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 applications on the Google Play Store, this imposition would have allowed Google to
capture a significant share of the payments processed in this market.

In the case of Umar Javeed and Ors. v. Google LLC and Ors.18 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 European
Union (EU) recognized these violations in 2017 and imposed a hefty penalty of €2.42 billion
on Google for abusing its dominant position by offering its products and services at an unfair
competitive advantage, thereby demoting rival services. Google was thus 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.

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. It 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.

Such abuse of dominant positions by digitally manipulating public preferences compromises

platform neutrality and violates the law. 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 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

17
Supra 13.
18
Case No. 39 of 2018.

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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.19

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 BY THE STANDING COMMITTEE REPORT 20

The Standing Committee's report (the “Report”) suggests that discounts are not necessarily
anti-competitive. However, when these discounts are discriminatory and drive prices below
cost levels, they can negatively impact the ability of both offline and online retailers to
compete.

The Standing Committee recommended that prominent digital intermediaries, such as

Amazon and Flipkart, refrain from imposing limitations on business users when it comes to
determining their own terms, which encompasses pricing, commissions, and the ability to

19
Amit Chowdhry, https://www.forbes.com/sites/amitchowdhry/2014/10/16/reddit-launches-ios-app-following-
alien-blue-acquisition/?sh=76c484713af2, 16 October 2014.
20
Anti-Competitive Practices by Big Tech Companies, 53 rd Report of the Ministry of Corporate Affairs of India,
December 2022.

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remove their products or services from the platform. Moreover, they should permit business
users to offer their products or services through third-party platforms or their own online
sales channels, each with varying pricing and conditions.

For instance, imagine a small online retailer on a platform like Amazon. According to the
committee's recommendation, this retailer should have the freedom to decide the pricing of
their products, the commissions they pay to the platform, and whether they want to sell the
same products at different prices on their personal website. This ensures fair competition and
prevents the platform from exerting too much control over these businesses.

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.

ISSUES WITH IMPLEMENTING AN EX-ANTE REGULATION

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

The MRTP Act of 1969 was replaced by the Act 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

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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.

WAY FORWARD
The growing pace of innovations, developments and new entrants in digital markets have
created a constant need for the law to mould itself around it. Thus, there is a need for
developing futuristic laws to address the rising trends in the industry with the rise of data
wealth, artificial intelligence (“AI”), digital competitiveness, etc.

Empowering Antitrust Laws

One key area that requires immediate attention is the strengthening of antitrust laws and their
vigilant application, especially concerning digital mergers and acquisitions. To foster fair
competition, it is essential to encourage competition authorities to conduct thorough reviews
of proposed deals.

Precision in Defining Markets

Another crucial aspect is the accurate definition of relevant markets, which is particularly
challenging in the dynamic and multifaceted world of digital markets. It's not always easy to
delineate where one market ends and another begins. 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.

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Protecting Data Privacy
In our rapidly evolving digital landscape, the need for futuristic laws has become evident. To
address the rising trends in the industry, such as the growing wealth of data and the
increasing prominence of AI and digital competitiveness, it is crucial to implement stringent
data protection and privacy regulations. Recent incidents, like the scrutiny faced by TikTok
in the USA due to questionable data usage practices, underscore the importance of
safeguarding consumer interests and preventing anti-competitive data use.

Transparency in Mergers
In order to promote fair competition, it is essential to require companies to disclose relevant
information during merger assessments, including data on market share, user base, and
potential competitive effects.

Effective Monitoring
The implementation of effective mechanisms to monitor merged entities for compliance with
antitrust conditions is essential, with the readiness to take prompt enforcement action if
required.

Fair Competition
To ensure fair competition, practices that provide preferential treatment to the merged entity's
own services or products, potentially excluding competitors, should be prohibited.

Conclusively, by addressing these facets, it shall be possible to stimulate innovation and

ensure consumer welfare, thereby striking a delicate balance that fosters a thriving digital
ecosystem while safeguarding against potential pitfalls.

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