By Sumit Jain and Siddharth Mishra
Introduction
The Indian government is currently busy with a host of legislation to regulate digital markets in the pipeline. While some of the changes like the Competition (Amendment) Act, 2023, and e-commerce rules have already been notified, others like the Digital Competition and Digital India Act are still at the inception stage. Even the Data Protection Act is yet to be passed by the Parliament with an additional pace gaining on regulation around generative AI. What, however, is yet to obtain focus is the potential regulatory concern in the AdTech market under the broad header of digital competition.
Structure and significance of AdTech (Advertisement Technology) market
The overall size of the Indian economy is over $3.5 trillion. Companies spend, at least, two per cent of their total revenues on buying advertisements thereby making it a sizable chunk for economic regulation. AdTech can largely be defined as a dynamic ecosystem through which the sellers (read ‘publishing houses’) and buyers (read ‘advertisers’) are connected through the usage of technology on a micro-second basis so that relevant advertisements are displayed to the consumer.
There are a myriad of entities on the supplier and buyer side of the AdTech ecosystem. At least ten publishing houses and thousands of companies regularly sell and buy advertisement space on each side of the market. There are primarily five players involved in the supply chain of AdTech, i.e. advertisers (buyers), demand-side platforms (DSPs), Ad Exchange (intermediary), supply-side platforms (SSPs) and publishers (sellers). Recently, this structure of the market has come into dispute where there have been, at least, three information complaints filed by various advertisers before the competition watchdog alleging violation of the Indian competition law. The informant parties have stated that Google Inc. as a tech intermediary has been imposing one-sided terms and conditions on the supply side of the market.
Position across the globe
Competition concerns in the AdTech industry have been a subject of intense debate and scrutiny across the globe. Some of the evolved jurisdictions have already taken a view on the conduct of the intermediary in this space.
United States (US)
The Department of Justice in a recent complaint has held that intermediaries involved in the AdTech industry are building structural barriers to entry in the market. The Department further held that Google Inc. specifically debars publishers from multi-homing publisher Ad servers and restricts the development of technology by rival entities thereby withholding efficient matchmaking of demand and supply on a real-time basis. The overall conduct of Google has been such that it increases its dependency on publishers and advertisers, thereby further cementing its dominant position in the AdTech space. The department is looking for multi-pronged action against the firm to correct the anomalies.
Australia
Australian Competition and Consumer Commission (ACCC) has possibly done one of the most seminal works when it comes to inquiring competition concerns in the AdTech space. In a report published by the regulator, the authority has paid detailed reliance not only on the submissions made by the parties before itself, but also across competition authorities around the world. The ACCC held that the concerned tech intermediary has been making conflicting statements before different regulators across the globe. The commission found out that while Google has been stating that its servers are incapable of providing certain data pointers related to the performance of advertisements, it has given a contrary commitment to the French competition authority in order to circumvent detailed proceedings and the possibility of hefty fines. The ACCC further held that the current legal framework is insufficient to address the regulatory concerns in the AdTech space and recommended the government to enact separate legislation to tackle issues related to economic concentration.
Requirement of a calibrated approach
The growing size of the GDP and efficient markets has been a long-sought goal for governments across the globe. In such a case, the enhancement brought to the table by the tech intermediaries through the deployment of advanced technologies should be given due weightage. This is where the role of a competition regulator becomes even more complex. The point of inquiry has to be effective where the proposed remedy lifts structural barriers in the market, and nimble at the same time so that it doesn’t disincentivize the incumbents to undertake economic innovation. Swift action, if not taken at an appropriate time, has the potential to cause immense damage to the growing Indian digital economy.
Conclusion
The time is ripe for the Indian competition commission to take swift action in the industry, as has been already argued in a white paper published by the Centre for Competition Law and Economics. The need of the hour is not only to conduct exhaustive research but also in a timely manner so that efficient outcomes are achieved. The commission should not shy away from adopting new-age techniques to achieve these outcomes and implementation of the recently incorporated commitment and settlement scheme may be a first step in this direction. This would ensure free and fair participation in the market.
The author is Sumit Jain and Siddharth Mishra. Sumit Jain is director at the Centre for Competition Law and Economics (CCLE); Siddharth Mishra is external consultant to CCLE