Crushing the competition

By: |
August 26, 2020 4:22 AM

The regulator itself refuses to see that competition is being crushed, and even when it sees, its ruling is stayed by appellate authorities—thus, the increasing dominance of digital giants is inevitable.

Amazon, some allege, uses the data of products on its e-commerce platform to decide what to sell under its own brand.Amazon, some allege, uses the data of products on its e-commerce platform to decide what to sell under its own brand.

Big Tech firms such as Google, Facebook, Amazon, and Apple have come under the radar of many governments, including that of the US, Australia, and France, for trying to steamroll competition by either buying competitors out or pushing other vendors to avoid working with them.

Here is a glimpse of how they allegedly misuse use their dominant position. Google’s search engine is accused of stealing content with the goal of keeping users glued to its site, instead of directing them to other sources on the web. It promotes its own products on its platform instead of those of its rivals, even if the latter provide better service. An analysis of 15,000 search results by The Markup has found that 41% of the first page of Google search results is dominated by Google-run products.

Amazon, some allege, uses the data of products on its e-commerce platform to decide what to sell under its own brand. Facebook is accused of using its money muscle to simply buy competitors out.

How far they can allegedly go in scuttling competition is captured in the statement of Representative David Cicilline of Rhode Island, who led the probe by the US Congress’s antitrust panel of the House Judiciary Committee (the probe started in June 2019 and concluded with the testimony of CEOs of these giants on July 29, 2020). Cicilline said “these companies as they exist today have monopoly power” and added “some need to be broken up, all need to be heavily regulated.”

In the US, an investigation by the Federal Trade Commission (FTC) and the Justice Department is already underway (as also probe by states across the country on Facebook and Google). Soon, one may see action against the tech majors. Other countries have also swung in action. For instance, Australia has made it mandatory for Google and Facebook to pay news companies for the content. In France, Google has been asked to negotiate with publishers to pay for reusing snippets of content in its news aggregator and in Google Search. Where does India stand?

One out of three Indians has a smartphone and uses it to access information and interact with friends and relatives, a demand promptly met by Google and Facebook, respectively. Both get tens of millions of visits every day. As a result, many advertisements that were earlier going to content-providers viz. newspaper, magazines, publishers, etc, are now going to Google/Facebook. Likewise, searches which should have gone to service-providers such as MakeMyTrip.com or Yatra.com etc are cornered by Google.

In its February 8, 2018, ruling, the CCI said, “Google was leveraging its dominance in the market for online general web search, to strengthen its position in the market for online syndicate search services” and imposed a penalty of $21 million. It directed Google “to not enforce any restrictive clauses on third-party websites for hosting Google search bars and ads”. The order (not a unanimous decision, but 4:2) came after several years of investigation. It was a typical case of ‘too little, too late’.

The Indian online retail space is dominated by Amazon and Flipkart/Walmart. They entered as ‘marketplace’ operators; under the existing policy on FDI (Press note 3, 2016), a foreign investor is not allowed to sell directly to consumers. Yet, they are now operating as direct sellers. The policy was meant for the benefit of millions of small vendors, but Amazon et al are now dominant sellers.

The All India Online Vendors Association (AIOVA), an umbrella organisation of small traders, petitioned the CCI alleging abuse of market dominance against Flipkart India Pvt Ltd, which is into wholesale trading/distribution of books, mobiles, computers and related accessories, and the e-commerce marketplace Flipkart Internet Pvt Ltd. But, CCI saw nothing wrong in this practice.

It ruled that, looking at the present market-construct and structure of online marketplace platforms in India, “it does not appear that any one player in the market is commanding any dominant position at this stage of evolution of market”. This was bizarre. That a few players—that too connected to the owners of marketplaces—are dominating the platform is visible to all! The National Company Law Appellate Tribunal (NCLAT) rightly quashed the CCI order and ordered a probe.

In another complaint—filed on January 13, 2020, by the Delhi Vyapar Mahasangh (DVM)—alleging anti-competitive behaviour by Amazon Seller Services and Flipkart Internet, the CCI had ordered a probe. But, the investigation has been stayed by the High Court of Karnataka.

The regulator itself refuses to see that competition is being crushed, and even when it sees, its ruling is stayed by appellate authorities—thus, the increasing dominance of digital giants is inevitable. They also have monopoly over data which can be put to ‘unfair’ commercial use. Look at the partnership between Facebook and Jio Platforms Limited (JPL), under the latter’s e-commerce platform, JioMart. With JioMart, the duo intend to connect 30 million kirana stores to every customer in their neighbourhood, wherein the over-400-million-strong Indian database of WhatsApp—a 100% subsidiary of Facebook—will come in handy.

In the absence of a law on data protection and regulation (a Personal Data Protection Bill, 2019 introduced in the winter session was referred to a joint select committee for scrutiny), Amazon/Facebook/Flipkart will only increase their dominance in India’s online retail.

India’s regulatory wherewithal is far from being able to deal with the rising tide of global tech giants. When will it fulfil its role of creating a level playing field? One can only wait and watch.

The author is Policy analyst
Views are personal

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