Transcript
Transcript
Transcript
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ABUSE OF DOMINANCE IN DIGITAL
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
TABLE OF CONTENTS
INTRODUCTION ........................................................................................................................................... 10
CONCLUSION ................................................................................................................................................ 26
2
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
LIST OF ABBREVIATIONS
§ Section
Anr. Another
Inc. Incorporated
No. Number
3
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
Ors. Others
OS Operating System
Pvt. Private
v. Versus
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
TABLE OF AUTHORITIES
STATUTES
CCI ORDERS
1. C. Shanmugam & Anr. v. Reliance Jio Infocomm Limited & Ors., Case No. 98 of 2016.
2. Consumer Online Foundation v. Tata Sky Ltd. & Ors., Case No. 02 of 2009.
3. Fast Track Call Cab Pvt. Ltd. & Anr. v. ANI Technologies Pvt. Ltd., Case No. 06 and 74
of 2015.
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
INTERNATIONAL ORDERS
REPORTS
JOURNALS
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
ARTICLES
1. A Legal Toolkit for Fair and Competitive Digital Markets in India, By Vikas Kathuria,
2021.
2. Disruptive Innovation – Is It Time for a Detailed Competition Scrutiny Yet?, By Arshad
Khan and Anisha Chand, Fortune India, 2018
3. Market Power and Market Definition in Monopolization Cases : A Paradigm is Missing,
BOOKS
1. A Framework for the Design and Implementation of Competition Law and Policy by RS
Khemani, 1999.
2. Competition Enforcement and Procedure by Renato Nazzini, 2016.
3. Digital Markets and Online Platforms : New Perspectives on Regulation and Competition
Law by Jan Kramer, 2020.
4. E-Commerce by IBEF, 2019.
5. Policy Roundtables : Margin Squeeze by OECD, 2009.
6. Practices Excluding Dominant Enterprises by Konrad Kohutek, 2012.
7. The Digital Economy : Promise and Peril in the Age of Networked Intelligence by Don
Tapscott, 1997.
MISCELLANEOUS
1. Commissioner of Competition v. The Toronoto Real Estate Board, 2017 Comp Trib 7.
2. Ministry of Corporate Affairs Notification
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
OBJECTIVES OF RESEARCH
1. To analyze the relevant market in the digital sector that is very diverse and intricate.
2. To analyze if the factors stated in Competition Law to determine the dominant position is
sufficient for investigation in the digital sector.
3. To analyze the jurisprudence of the examining abuse of dominance in digital sector.
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
METHODOLOGY OF RESEARCH
Doctrinal method of research is adopted for this paper which aims to analyze the intersection of
provisions relating to abuse of dominance in competition law with the expanding digital era.
Detailed analysis of literature on competition laws, policies & guidelines in areas of digital
economy and case laws of the European Union, the United States of America, Germany and
several developing and emerging economies form the part of this research paper.
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
INTRODUCTION
The Indian tryst with the competition laws began in 1969 with the Monopolies and Restrictive
Trade Practices Act which aimed at preventing “concentration of economic power to the
common detriment”. It was replaced by the enactment of Competition Act, 2002 that became
fully operational from 2011 by the Central Government Notification. 1 This transition from the
1969 Act to 2002 Act was drawn by the then paradigm shifts in economic parameters caused by
the hypothesis of liberalization, privatization and globalization (LPG).
Currently, it is significant to note that the course of revolution continued at the pace greater than
that mentioned above. Since the enactment of the 2002 Act, India has witnessed increase in the
number of mobile and internet users – particularly in the last five years. 2 This has led to
The arenas in which services are digitized have widened. These include online ticket booking,
online card payments, online ready-to-eat food ordering platforms, online financial services.
1
Ministry of Corporate Affairs Notification, S.O. 479(E), The Gazette of India, 2011.
2
INDIAN BRAND EQUITY FOUNDATION, E-COMMERCE 3 (IBEF 2019).
3
DON TAPSCOTT, THE DIGITAL ECONOMY : PROMISE AND PERIL IN THE AGE OF NETWORKED
INTELLIGENCE 7 (McGraw-Hill Education 1997).
4
Thomas L. Mesenbourg, Measuring the Digital Economy, US CENSUS BUREAU 1, 2 (2000).
5
Laurent Fournier, Merchant Sharing Towards a Zero Marginal Cost Economy, ARXIVLABS 1, 3 (2014).
6
UNCTAD, DIGITAL ECONOMY REPORT, 2019 4 (United Nations 2019).
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Google’s online search engine, Facebook’s online advertising services, Amazon’s digital market
platforms and several app stores and operating system (OS) are playing pivotal role in
establishing profound digital structures.
These are the instances of disruptive innovation which are the technology based innovative
modifications of the already existing services. Entry of a new product / service in the market to
displace the existing competition by not only meeting the basic demands of already existing
value network but by also bringing in certain additional value is called disruptive technology. 7
All these digital technologies possess some similar characteristics which can be attributed to the
features of every digital service provider. These include zero-price services, multi-sided nature,
network effects, economies of scale and scope among others. One of the most distinguishing
characteristics of digital technologies is importance of access to and monetization of data. 8 The
rampant employment of these characteristics to capture market and gain profits has become a
Thereafter the enactment of the Competition (Amendment) Bill, 2020 ensued. The Bill primarily
incorporated the conclusions of the Competition Law Review Committee (CLRC) Report in
2019. The Report recommended to revise thresholds for notification of mergers and introduce
“an enabling provision empowering the government to introduce necessary thresholds” by way
of amendment in the 2002 Act.10 However, no committee so far has been appointed to review the
operations of the provisions of abuse of dominance in India. Other jurisdictions have,
individually or collectively, assessed the working of these provisions, and have incorporated
necessary changes in their anti-trust frameworks.
7
Arshad Khan and Anisha Chand, Disruptive Innovation – Is It Time for a Detailed Competition Scrutiny Yet?,
FORTUNE INDIA (Sep. 23, 2021, 10:59 PM), https://www.fortuneindia.com/opinion/disruptive-innovation-is-it-
time-for-a-detailed-competition-scrutiny-yet/102399.
8
UNCTAD Secretariat, Competition Law, Policy and Regulation in the Digital Era, 19 UNCTAD 1, 2 (2021).
9
COMPETITION COMMISSION OF INDIA, MARKET STUDY ON E-COMMERCE IN INDIA 37 (CCI 2020).
10
INJETI SRINIVAS, REPORT OF COMPETITION LAW REVIEW COMMITTEE 180 (Ministry of Corporate
Affairs 2019).
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
In this backdrop, an attempt has been made to analyze the functioning of abuse of dominance in
India by reviewing the Indian anti-trust jurisprudence, the orders of the Competition Commission
of India and that of the Hon’ble Supreme Court and Courts of other jurisdictions.
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
The Competition Act of 2002 defines relevant market from the prism of relevant product and
geographic market, either cumulatively or in isolation to one another. 11 Thus, the dimension on
which the concept of relevant market rests, either in relevant product market or relevant
geographic market, in India is based on the principle of “homogeneity”. The market in which
Definition of relevant market based on functional characteristics of the product and on the
consumer behavior includes physical characteristics of products, uses to which the product is
suited, evidence about buyers’ willingness to switch from one product to another on changes of
relative prices. Defining relevant geographic market is based on the factors such as transportation
costs, perishability, limit to which products can be moved over long distances with ease etc. 13
11
The Competition Act, 2002, § 2(r), No. 12, Acts of Parliament, 2002 (India).
12
Dr. S. Chakravarthy, Relevant Market in Competition, CUTS INSTITUTE FOR REGULATION &
COMPETITION (Sep. 20, 2021, 10:42 PM), https://circ.in/relevant-market-in-competition-case-analyses/.
13
Russell Pittman, Competition Law in Central and Eastern Europe : Five Years Later, 43 The Antitrust Bulletin
179, 187 (1998).
13
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
Computation of relevant market based on economic tests like SSNIP test (Small but Significant
and Non-transitory Increase in Price test) which is one of the most widely used tests employed
by competition authorities to gauge substitutability to define relevant market does not yield
accurate results in markets relating to digital technology. 15 Rather factors such as dynamic
structures of digital markets, market tipping, lock-in effects and multi-homing can be considered
both while defining powers and while establishing market powers. 16 Further, it is important to
In Meru Travel Solutions Pvt. Ltd. v. Uber India Systems Pvt. Ltd. & Ors., the Competition
Commission of India accepted the report of the Director General who looked at substitutability
from both demand side as well as supply side.18 Since traditional transport facilities and new
transport facilities possess differing characteristics, the CCI rejected Uber’s contention that auto
rickshaw, buses, metro, bike-taxis form part of the same relevant market as that of Uber and Ola.
However, the Director General (DG) analyzed three different models of radio taxi service
industry in Fast Track Call Cab Pvt. Ltd. & Anr. v. ANI Technologies Pvt. Ltd.19 The
Commission noted that Fast Track and Easy Cabs operated in Asset owned Model; Ola and Uber
14
Trade and Development Board, Report of the Intergovernmental Group of Experts on Competition Law and
Policy on its Eighteenth Session, 18 UNCTD 1, 7 (2019).
15
Meru Travel Solutions Pvt. Ltd. v. Uber India Systems Pvt. Ltd. & Ors., Case No. 96 of 2015.
16
supra note 8, at pg. 3.
17
International Competition Network, Report on the Results of the ICN Survey on Dominance / Substantial Market
Power in Digital Markets, ICN REPORT 1, 8 (2020).
18
supra note 15.
19
Case No. 6 & 74 of 2015.
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owns Aggregated Model; whereas Mega and Meru Cabs function in Hybrid Model. The CCI
accepted DG’s report that all these three models are substitutable, and hence are part of the same
relevant market.
Considerably, switching costs and parallel price movements are the factors that indicate
substitutability. Since relevant markets are calculated on the basis of ‘substitutability’ of
products / services, services offered by one side of the platform cannot be considered
substitutable with those offered by the other side of the product. This is because the parties at the
different sides of a platform usually do not have aligned interests. Also from the viewpoint of
substitutability, different usage and characteristics of the services doesn’t allow the users of one
side to switch to another side. WhatApp had, for instance, rebut the submissions of the informant
in Harshita Chawla case that since instant text messaging is not the only service that the users of
WhatsApp enjoy, social networking, content viewing & sharing, gaming services must also be
taken cognizance of while deciding relevant market.20 On this basis, the European Union defines
In Vinod Kumar Gupta v. WhatsApp Inc.23, the Competition Commission of India took note of
the internet based functionalities, the platforms on which the services can be accessed and
pricing conditions to primarily distinguish smart-phones from traditional modes of
communication. Resultantly, the relevant product market for WhastApp Inc. was considered as
“the market for instant messaging services using consumer communication apps through
smartphones in India.” Similarly, in the case where the Competition Commission of India took
suo moto cognizance against WhatsApp LLC and Facebook Inc.24, the CCI confessed difficulty
to compartmentalize WhatsApp and Facebook in watertight compartments in order for them to
be called substitutable.
20
Harshita Chawla v. WhatsApp Inc. & Anr., Case No. 15 of 2020.
21
European Union v. Google, AT. 39740.
22
Italian Competition Authority v. Google.
23
Case No. 99 of 2016.
24
Re : Updated Terms of Service and Privacy Policy for WhatsApp Users, Case No. 01 of 2021.
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
Non price characteristics like geo-blocking, language constraints and cultural factors can also
have an important role in the geographic scope of a market. These factors help not only in
national market definitions but also in cross-border market definition. 25 A narrow definition of
market will tend to result in higher market share for incumbent firms which will resultantly
establish market power, and therefore anti-competitive practices of those firms. 26 Therefore,
caution must be exercised by the authorities in defining relevant market so that there is no
counter-productive effect of such measures.
25
Secretary General of the OECD, Abuse of Dominance in Digital Markets, OECD 1, 19 (2020).
26
William Landes and Richard Posner, Market Power in Anti-trust Cases, 94 HLR 937, 937 (1981).
16
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As soon as the relevant market in which the enterprise is operating is determined, the
competition authorities assess whether such an enterprise is dominant in that market. This is
necessary because the type of conduct that can constitute an abuse of dominance may, in fact, be
pro-competitive when carried out by firms without market power. In this regard, the Competition
Act, 2002 defines ‘dominant position’ as a position of strength which enables the enterprise to
“operate independently of competitive forces” and empowers it to affect the market, the
competitors therein and its consumers in its favor.27 In other words, the economic perspective of
dominance requires the existence of economic power in an enterprise to such an extent that it can
27
The Competition Act, 2002, Explanation (a) to § 4, No. 12, Acts of Parliament, 2002 (India).
28
Daria Kostecka-Jurczyk, Abuse of Dominant Position on Digital Market : Is the European Commission Going
Back to the Old Paradigm?, 24 ERSJ 120, 126 (2021).
29
Lawrence J. White, Market Power and Market Definition in Monopolization Cases : A Paradigm is Missing, THE
UNITED STATES DEPARTMENT OF JUSTICE (Sep. 24, 2021, 5:37 PM), https://www.justice.gov/atr/market-
power-and-market-definition-monopolization-cases-paradigm-missing-0.
30
RENATO NAZZINI, COMPETITION ENFORCEMENT AND PROCEDURE 21 (Oxford University Press
2016).
17
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
The Competition Act, 2002 stipulates certain factors under Section 19(4) which may be
considered while delineating whether an enterprise is dominant or not. Nonetheless, there exists
a demand of a robust mechanism for determining dominance in digital markets wherein digital
platforms obtain a sufficiently large user base on one side of the platform in order to attract users
on another side where there are cross-platform network effects. 31 Thus, the presence of market
power can determine whether a given business strategy is pro-competitive, benign or
anticompetitive.
Indicators for determining market power in digital market can be classified as direct indicators
on the basis of substitutability and indirect indicators on the basis of profitability, market share
and entry barriers. All these indicators were employed by the Competition Commission of Indian
in Harshita Chawla Case while delineating whether WhatsApp is dominant in the relevant
market.32
31
Secretary General of the OECD, Rethinking Antitrust Tools for Multisided Platforms, OECD 1, 31 (2018).
32
Case No. 15 of 2020.
33
Microsoft Corp. v. Commission of the European Communities, Case T-201/04.
34
Suo Moto Case No. 01 of 2021.
35
Mr. Vishwambhar Doiphode v. Vodafone India Limited, Case No. 04 of 2016.
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presence of foreign players such as ZTE, Huawei, Ericsson, Alcatel-Lucent etc. in the sale of
GPON equipments further negates any entity possessing dominance in the relevant market.” 36
The inherent features of digital economy often themselves affect the entry in digital market.
Economies of scale, high fixed costs, network effects, multi-homing, data collection are some of
the significant barriers to entry for the new competitors to compete in the relevant market. The
already established customer base for the incumbent enterprises dissuades entry to the new
players until high costs are incurred on disruptive innovation. When customers get habituated to
a service provider, s/he is unlikely to switch to other service provider due to limited data
operability and high switching cost. In such circumstances, network effects impede entry for the
new competitors. The already existing players also command advantage to the behavioral factors
wherein customers are unwilling to try new products on account of limits to multi-homing.
Data acquisition, being an important asset for entry, costs exorbitant to the entrants. Therefore,
Moreover, market share of enterprises and measures of profitability are factors determining
dominance and therefore their emanating market power. In general, the greater the market share
of an alleged dominant firm, the more likely it is to exercise market power. 38 However, sine
other factors, these are not reliable factors on their own. The Competition Commission of India
had observed in 2016 that comparable investments and financial strength of Department of
Telecommunications do not suggest dominant position being enjoyed by it, for they are not the
dominance determining factor.39 Later in the case against Google LLC, the Competition
36
Case No. 29 of 2014.
37
Case No. 07 of 2020.
38
RS KHEMANI, A FRAMEWORK FOR THE DESIGN AND IMPLEMENTATION OF COMPETITION
LAWAND POLICY 71 (The World Bank 1999).
39
C. Shanmugam & Anr. v. Reliance Jio Infocomm Limited & Ors., Case No. 98 of 2016.
19
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
Commission of India had held the former a dominant player in the market of licensable smart TV
OS on account of its 75% market share, coupled with profound network effects. 40
40
Kshitiz Arya & Anr. v. Google LLC & Ors., Case No. 19 of 2020.
20
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Section 4 of the Competition Act, 2002 lays down certain exercises which are considered as an
abuse of dominance in the relevant market by an establishment. Sub-section 2 to Section 4 points
out five abuses in order i.e. exploitative abuse, exclusive dealing, refusal to deal, tying / bundling
and leveraging of dominant position. The Competition Commission of India has not classified
these abuses into such nominal watertight compartments; rather has left them open to be
interpreted for ensuring fair competition for greater good in the economy.
With evolution of digital markets, the abuses are majorly classified into exclusionary and
exploitative abuses.41 The former not only prevents entry of new competitors, but also push the
The most frequently accused abuses in matured as well as developing jurisdictions in digital
markets are refusal to deal or exclusive dealing, margin squeeze, loyalty rebate, tying / bundling,
predatory pricing and exploitative abuses. In brief, when a dominant firm owns or otherwise
exercises control over such a technology which is feasible to be shared and necessary to compete
in the relevant market, such a theory of harm is ‘refusal to deal’. One such example can be
gained from the observations of the CCI in where it found that the restrictions imposed by
MakeMyTrip and Oyo on Treebo did not permit the latter to list its hotels on Booking.com and
Paytm which are MakeMyTrip’s direct competitors.42 Similarly, when the upstream firm sells an
input which has no potential substitution to the downstream firm at an exorbitant price, often
resulting in worse quality of products to the consumers, ‘marginal squeeze’ is said to have taken
place. ‘Loyalty rebates’ are not abuse per se, but when such rebates are offered to the customers
who are local buyers to the same seller, and hardly buy from any other seller – coupled with
some other conditions, they are deemed to be exploitative. Also, when there is no justification for
41
COMPETITION COMMISISON OF INDIA,
https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf (last visited Sep. 27, 2021).
42
Rubtub Solutions Pvt. Ltd. v. MakeMyTrip India Pvt. Ltd. & Anr., Case No. 01 of 2020.
21
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compelling a buyer to purchase an additional product for the purchase of the main product, ‘tying
/ bundling’ theory of harm is said to be exercised by the dominant enterprise. ‘Predatory pricing’
is such a form of abuse where a dominant firm offers the services / products at a price lower than
the manufacturing price in order to drive the competitors out of the market so that it can charge
higher price to the consumers to recoup the profits in future. It is, however, significant to note
that most of these theories do not constitute abuse per se. The landscape of abuse can be
determined when it is aligned with the theory of harm, and not with the mechanical approach
where an enterprise is convicted merely on overreaching the pre-set thresholds. 43
Vertical exclusion should be understood as preferring (favoring) your own goods or services as
against competitors. The Commission considers as anti-competitive exclusion a situation where
market access to an as effective competitor is impeded by the dominant company to the
detriment of consumers.44 In such circumstances, abuse should be determined by the damage to
the consumers, and not by the competitor’s access to a specific product. 45 The CCI had, though
Distinguishing between legitimate changes which improve the quality of matches and those
which unfairly bias them can be very difficult since the impact of any individual adjustment can
be subtle and the effects can be cumulative. 47
‘Refusal to deal’ concerns access of essential input, technology or distribution network that is
quintessential for an establishment to compete effectively in the relevant market. 48 When a
dominant firm denies access of such essential inputs to its rivals, it amounts to foreclosure of
competition by way of refusal to deal. In case of digital markets, such cases are often witnessed
in transaction platforms operating in vertical integration. The 2016 case of the Commissioner of
43
supra note 25 at 25.
44
KOHUTEK KONRAD, PRACTICES EXCLUDING DOMINANT ENTERPRISES 434 (Wolters Kluwer 2012).
45
IOANNIS KOKKORIS, The Google Saga : Episode 1, 14 EUR. COMP. JOURN. 462, 473 (2018).
46
M/s Kansan News Pvt. Ltd. v. M/s Fast Way Transmission Pvt. Ltd. & Ors., Case No. 36 of 2011.
47
JAN KRAMER, DIGITAL MARKETS AND ONLINE PLATFORMS : NEW PERSPECTIVES ON
REGULATION AND COMPETITION LAW 41 (Centre on Regulation in Europe 2020).
48
Barak Orbach, The Anti-Trust Curse of Bigness, 85 SCLR 605, 643 (2017).
22
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
Competition v. The Toronoto Real Estate Board49 is an apt illustration where the platform
operator imposed a set of restrictions, effectively denying access of relevant information to the
competitors, while selling its own product on the platform. However, several difficulties
compound for the competition authorities while dealing with ‘Refusal to Deal’ theory of harm in
digital markets, for the blanket consideration of this theory may not always serve the objective of
the competition law. OECD had noted in 2007 that such a conduct by a dominant firm ought not
to patently be tainted as anti-competitive as it may be for the reasons of effectiveness. 50
Moreover, if such firms are not allowed to possess exclusive rights over the input, they would
not be incentivized to undertake risk to develop new technology for the welfare of consumers.
This rift between discouragement and development of innovation is the pathway for the
competition authorities to adopt for effective functioning.
Therefore, the doctrine which assists in accurate analysis of such cases is ‘doctrine of
indispensability’ which requires the authorities to evaluate whether the input in question is so
The abuse of dominant position by way of predatory pricing finds place under Section 4(2)(a)(ii)
of the Competition Act, 2002, the definition of which can be sought in explanation (b) to Section
4(2)(e). With a view to foreclose competition, when the selling price is reduced even below the
cost price of that product or provision of services, such practices are referred to as predatory
pricing. Most of the digital platform services are available to the consumers free of cost i.e. at the
49
2016 Comp Trib 7.
50
SECRETARY GENERAL OF THE OECD, POLICY ROUNDTABLES : REFUSAL TO DEAL 35 (OECD
2007).
51
European Commission, Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC
Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, C 45/02 OFF. JOURN. OF THE EU 1, 18
(2009).
52
FEDERAL TRADE COMMISSION, https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-
laws/single-firm-conduct/refusal-deal (lat visited Sep. 27, 2021).
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
zero price. If such cases are approached with mechanical approach of price-cost test, false-
positives in terms of predatory pricing would be generated, for such a zero price strategy may be
a part of “freemium” policy in which the firms offers both – a zero price version and a paid
premium version.53 Even in those cases where the digital platforms are charging prices,
difficulties may be encountered in determining the appropriate cost as the marginal costs in such
markets are often very low.
These can be complicated by such digital technologies which are multi-sided. Cross-
subsidization between different sides of the market often makes it a possibility that one side of
the market is zero priced, while other side of the market is priced. One of such sides make
exercise network effect to augment the customer base on the other side, which is a pro-
competitive strategy. In such matters, the authorities need to consider the overall cost of the
technology on both sides of the market to assess the true situation as was done by the Paris Court
of Appeal by overturning the decision in Bottin Cartographes v. Google Inc. & Google
Enterprises operating in digital market are often integrated in both upstream and downstream
markets in such a manner that they abuse their dominant position in upstream market by
exercising exclusionary operation such as market squeezing. In such types of exclusionary
activities, the upstream firm produces an essential or bottleneck input for which there is no
economic substitution. Since such a firm competes in both upstream and downstream markets,
the upstream firm sells such an input to downstream firms which is necessary in the provision of
some products / services. Hence, when the margin between the price at which such an input is
sold by the upstream firm to the downstream firm and the price at which the downstream firm
sells its product to the consumer is too small to allow the firms in the downstream market to
53
supra note 25 at 32.
54
CONCURRENCES, https://www.concurrences.com/en/review/issues/no-1-2016/case-comments/Predatory-
pricing-The-Paris-Court-77422 (last visited Sep. 27, 2021).
55
Lina Khan, Amazon’s Antitrust Paradox, 126 YLJ 710, 781 (2016).
24
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
survive, a margin squeeze is said to arise.56 This fabricated high cost incurred by the downstream
firm and low return secured on it makes the situation worse for them in the long run. In other
words, for enterprises operating in a downstream market to be competitive, they have to maintain
the sales price at the level of vertically integrated companies.57 In Indian context, this theory of
harm has never been directly implicated, but indirectly and unconsciously, the CCI had resorted
to the margin squeeze theory of harm in XYZ v. Alphabet Inc. & Ors.58 The Commission noted
that Google has dominance over application store; thus the policy of the app store to increase the
cost of the firms in downstream markets affects their competitiveness. Competitors in the
downstream market are at a disadvantageous position owning to such high cost, because if the
downstream firms raise their subscription fees to “offset these costs”, their customer base will be
affected.
Leveraging the market position to enter another market was found to be present in case of Mr.
Umar Javeed & Ors. v. Google LLC & Anr. The CCI opined that mandatory preinstallation of
56
SECRETARY GENERAL OF THE OECD, POLICY ROUNDTABLES : MARGIN SQUEEZE 21 (OECD).
57
D.K. JURKZYK, supra note 28, at 129.
58
Case No. 07 of 2020.
59
Case No. 39 of 2018.
60
Matrimony.com Limited v. Google LLC & Ors., Case Nos. 07 and 30 of 2012.
25
ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
CONCLUSION
In US-India Business Council Virtual Roundtable held in July 2020, the Hon’ble Chairperson of
the Competition Commission of India observed thus :
“The incentive to engage in anti-competitive conducts partly arises as the platforms are the ones
who determine the rules according to which users, including consumers, business users and
providers of complementary services, interact on it. Thus, in digital markets certain business
restrictions may be needed to preserve, protect and facilitate competition and to ensure that
platform rules do not impede competition without objective justification.”61
India is a large market for national as well as international enterprises as it provides a larger
The illustrations cited above demonstrate that reliance on SSNIP test or mechanical test to
determine relevant market has been giving erroneous results. This model shift from price based
determination to consumer behavior based assessment has gained reliability and accuracy.
However late the Competition Commission of India expressly recognized the obsolescence of
SSNIP test in 2015 case of Meru Cabs, mechanism based on multi-sidedness, network effects,
zero-price services, multi-homing, market tipping and alike factors to determine relevant market
in digital economy is being adopted. Also, free-flow of data may give rise to new businesses,
creating new markets, foster competition, ensure transparency, and growth in artificial
intelligence driven products/services, resulting in overall welfare. 62
61
COMPETITION COMMISSION OF INDIA, http://www.cci.gov.in/node/5336 (last visited Sep. 27, 2021).
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VIKAS KATHURIA, A LEGAL TOOLKIT FOR FAIR AND COMPETITIVE DIGITAL MARKETS IN INDIA
15 (Observer Research Foundation 2021).
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
The CCI has efficiently moved forward onto the next stage for determining abuse of dominant
enterprises. Even though the 2002 legislation does not provide whether the abuses mentioned
under Section 4(2) are exhaustive, the Commission has interpreted the abusive activities by
digital enterprises in a manner that is commensurate with those mentioned in the Act. Be it a case
of vertical exclusion, margin squeeze, newer avenues of refusal to deal, exploitative deals, the
Commission has been dealing with tech-giants in sync with internationally acclaimed doctrines
and principles. Placing reliance on cases of matured jurisdictions like the European Union, the
Union States etc. has benefited the Indian jurisprudence on competition law to be internationally
resilient.
On the other hand, ustice seems to be eroded when there remains friction between different
regulatory bodies. Interface between sectoral regulators, therefore, is a mechanism which can
serve justice to the giants. The CCI has, in a number of cases, including in Consumer Online
Foundation v. Tata Sky Ltd. & Ors.63, requested the appropriate regulators to examine the issue
Platforms such as United Nations Conference on Trade and Development (UNCTAD) are
gaining more reliance in terms of international co-operation in the current times when global and
cross border nature of digital platforms are increasing at an exhilarated momentum. More so in
times when the world has been reeling under a pandemic, countries need to create open digital
markets to contribute in achievement of inclusive economic development goals.
63
Case No. 02 of 2009.
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ABUSE OF DOMINANCE IN THE DIGITAL ECONOMY OF INDIA
At the end, the technology is changing at a speed faster than anything else which makes it
necessary for those who decide its fate to be more dynamic, inclusive and comprehensive in its
working – be it entrepreneurs or adjudicators. Efforts should be made in a direction where the
consumers can be made aware of abusive practices by the service providers as the collective
lawsuits can help counter such anti-healthy market practices at an early stage.
28