In India, as the government seeks to promote the use and adoption of technology across sectors, it must first adopt a whole-of-government approach.
By Ambika Khanna
In recent years, the CCI has actively pursued alleged antitrust activities in the technology sector. In January 2020, it launched an investigation into Amazon and Flipkart for abusing their dominant positions and carrying out acquisitions with the aim to stifle competition and for using predatory pricing tactics. The companies have managed to obtain a stay on the CCI investigation from the Karnataka High Court. In October 2020, the CCI started a probe against Google for pre-installation of G-Pay on Android phones and for forcing exclusivity for in-app purchases. In another case in 2018, the CCI imposed a penalty of $20 million on Google for abusing its dominant market position and for bias in search activities on the internet.
The combined market capitalisation of the five Big Tech companies Facebook, Amazon, Apple, Microsoft and Google (FAAMG) in September 2020 was over $6 trillion, more than double the GDP of India. In addition to the zero-financial-cost-to-consumer strategy and the network effects principle, mergers and acquisitions by Big Tech across sectors have been key to their burgeoning growth.
There’s nothing reprehensible about being big and established. But it is the ‘how’ of their growth that raised concerns. Governments globally have questioned some of these investments alleging that their objective is to neutralise competition, leading to monopolisation and stifling of innovation. In December 2020, the US FTC along with 48 US states filed a case against Facebook alleging monopolisation and killing of competition by making large acquisitions including that of Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion.
FAAMG have come under increased scrutiny for reasons ranging from monopolistic behaviour and data privacy to content moderation and advertising policies. Australia introduced a media bargaining code in December 2020 to curb anticompetitive practices by Big Tech by mandating a payment structure between the platform and news outlets. In the US, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law concluded after an investigation in October 2020 that Big Tech have been indulging in anticompetitive practices by abusing their status as gatekeepers of the internet.
The European Commission, in 2019, imposed a penalty of over $1 billion (1.3% of its annual turnover in 2018) on Google for abusing its dominant position in online advertising. Google was found guilty of including anticompetitive clauses in contracts with its vendors, restricting them from hosting rivals’ content.
China is playing catch-up with homegrown BAT (Baidu, Alibaba and Tencent). In December 2020, China’s antitrust regulator alleged that Alibaba violated the anti-monopoly law by entering into contracts that demanded exclusivity from vendors. In March 2021, Tencent was fined $76,000 for not being transparent about its acquisitions.
India is trying to update its regulation to deal with fast-moving Big Tech. The Department for Promotion of Industry and Internal Trade introduced amendments to the FDI policy in 2018. It imposed embargoes on product exclusivity and prohibited inventory-based models for foreign e-commerce players. While Flipkart and Amazon protested, they did have to change their business models to align with the new regulations.
Globally, as the antitrust movement against Big Tech gathers steam, it’s time to find solid solutions. Breaking-up Big Tech is not a sustainable long-term solution as this will merely open the door for a new set of dominant players—just as Blackberry and Yahoo were replaced by FAAMG.
Governments must look at solutions that create a level-playing field, a fair marketplace and promote consumer welfare as well as innovation in the industry.
One such solution is stricter merger control, in addition to the financial thresholds, by a nation’s antitrust watchdog prior to a merger or acquisition which will entail a detailed investigation including a comprehensive due diligence into a potential transaction by the regulator.
In India, as the government seeks to promote the use and adoption of technology across sectors, it must first adopt a whole-of-government approach. The tech sector will benefit immensely if policymakers across ministries align and expedite policymaking—from the MeitY on data protection (personal and non-personal data) and AI, to the Ministry of Commerce and Industry on e-commerce and FDI, to the Ministry of Home Affairs on national security concerns, to the CCI on antitrust and merger control. This inter-ministerial collaboration can reap immense socio-economic benefits for the economy, resulting in policies that reflect the ‘new India’.
The author is senior researcher, International Law Studies Programme, Gateway House