INTRODUCTION
The Finance Minister’s latest budget speech highlights the shift from a traditional brick-and-mortar model to a digital marketplace, simplifying consumer experience. However, this shift has led to concerns about anti-competitive conduct by big players, affecting smaller players and new entrants. The role of Competition and Consumerism (CCI) in the Indian jurisdiction has become even more significant.
Data has orchestrated this transition from physical markets to the virtual space. While competitive concerns persist, data breach issues have also cropped up. Lack of transparency in processing data for furthering the intention of big players to capture the market and enhance profits have been found to be problematic. It is therefore, important for the competition regulator to take control at this juncture in order to avoid a situation where powerful players start monopolizing the market. This would not only harm the competitors but also the consumers in the long run.
DATA PRIVACY CONSIDERATIONS IN ESTABLISHING DOMINANCE
Section 4 of the Competition Law lucidly specifies the scope of the term ‘dominant position’ in the Indian market[1]. It implies a position of strength retained by an enterprise over a considerable period of time with adequate leverage to function independently in the market or manipulate the stakeholders or the market forces in the concerned enterprise’s favour through its conduct.[2] The parameters that are evaluated before concluding on a firm’s dominance in the market are laid down u/s 19(4) of the Act. It is pertinent to understand that these factors were incorporated keeping in mind the features of physical markets or brick and mortar markets. Digital space had not evolved as much when the legislation was enacted and therefore, there exists an apparent lacuna in terms of investigating digital markets.[1]
To facilitate dominance investigation, CCI considers the economic power of the enterprise which includes commercial advantages over competitors.[2] While the argument that data is an inexhaustible resource seems legitimate, there is a lingering fear that the marginal value of data for inference purposes could decrease rapidly once a certain amount of data has been collected.[3] Dependence of consumers on the enterprise is another key determinant in establishing dominance. This parameter can be appropriately traced to the network effect that is being created by intermediaries in the digital space. Further, high capital cost of entry acts as an entry barrier in the data market. It is at this juncture that the debate between a stringent data protection mechanism or a lenient approach takes shape.
Smaller firms may be marginalized by differentiated data access because they lack the financial resources to support an all-encompassing data retention framework. Personalized services draw more customers and generate more data when they can access a broader pool of data. Larger businesses benefit from this “snowball effect,” which increases market share from smaller ones by using improved algorithms and cutting-edge features. But if this tendency continues in the same direction and eventually becomes monopolized, it may harm competition.[4]
Article 102 of TFEU prohibits the abuse of dominance by an enterprise. Resembling Section 4 of the Indian Competition Act, this prohibition of European Competition Law has been frequently used by the competition regulator to investigate allegations against tech giants and holding them liable for exploitative or exclusionary conduct. Identifying a fair ratio between price and economic value has been the Achilles’ heel of the European competition authorities as possible sanctions have been diffused due to the absence of a standard benchmark to trace exploitation.[1] In order to address the issue, data protection law has been found to be a normative benchmark for investigating and penalizing companies guilty of exploitation or exclusion.[2] Primarily, failure to comply with data protection laws or infringing data protection standards would automatically act as indicator of exploitative condition. Further, a change in privacy standards or data processing conditions offered to users would attract scrutiny in a similar fashion as an unjustified increase in price does, in markets that operate on price parameters.
While the principle of ‘abuse of dominance’ is based on market power of an enterprise, data privacy law does not consider market power as a relevant parameter for intrusion or breach theoretically. However, in practice, it has been evident that enterprises with a whole gamut of resources have been extremely subtle in trying to evade privacy laws so as to pursue their market domination ambitions. [3] It can be argued that data privacy laws apply regardless of how powerful the player is in the market but in EU, dominant companies have a “special responsibility” to ensure that competition in the market is not impeded in any way.[4] In 2020, the Belgian Data Protection Authority also emphasized that from the perspective of data privacy, large data holders such as Google have a “special responsibility” to ensure that their complicity with the GDPR is in proportion with their turnover.[5]
Therefore, the principle of “special responsibility” attributed to large data holders or big market players is an important consideration in investigating abuse of dominance offences under the EU Competition regime. In India, the CCI can take lessons from this and undertake scrutiny of tech behemoths trying to create entry barriers or further strengthen their foothold in the market. However, it is also imperative to ensure that the CCI does not over-reach its jurisdiction in its attempt to regulate the competition framework in Europe[1].
ROLE OF DATA IN ABUSE OF DOMINANCE ANALYSIS
Data is often regarded as the “oil of the twenty-first century”[1] because it is acknowledged as a crucial driver in the digital world. Consumers pay for services online by granting businesses permission to acquire their data instead of paying via money. It is commonly agreed that data access and its use can be an element in determining whether an enterprise is dominant in the context of abuse of dominance.
Firms may gather enormous data and use it to gain a major competitive edge in other markets.[2]But, it’s crucial to understand that data power is not the same as having dominance in the market. A tiny amount of data can be significantly more valuable than a vast amount of data. As a result, any discussion of market dominance should look at the access to data available to the presumed dominant enterprise but not to competitors on a case to case basis.[3] Large data accumulation by companies causes them to acquire market power and creates entry barriers and forecloses rivals. The Draft national e-Commerce Policy also states that “Greater access to data provides a greater digital capital to a corporation, granting it an advantage over its competitors”[1].
In Hoffman La Roche, the CJEU held that the company held a dominant position due to its technological superiority, which included its “well developed customer information”. It’s worth noting that commercial data collection isn’t limited to personal information only. Non-personal and publicly available data, such as information on competitors, company behaviour, and strategy, may be equally important to firms.[2] Also, recent changes to the German Competition Act have made data access an element to examine when evaluating a company’s position in the market (whether dominant or not).[3]
The Google shopping case[4], where Google decreased the number of users on its general search engine results pages for the shopping services of its competitors and increased the number to its own shopping service, hence, favouring its own services unilaterally. The Commission held that “expanding a dominant position from one market to another is a distinct sort of abuse that is well-established and falls outside the scope of merits-based competition”.
In Indian jurisprudence, Matrimony.com Ltd vs Google LLC was the first case where the CCI recognised data as a competition law concern in 2012. The informants alleged that – “Google had abused its dominant position in the online search advertising market by imposing discriminatory situations on its advertisers and dominantly displaying Google’s own websites in comparison to other results pages”. Google contented that according to the meaning of abuse under section 4 of the competition act it is necessary that there is a sale and purchase of goods and services. The CCI held that although Google provides its services for free on the user oriented side of the market but the amount of data collected by it, can be used to its capabilities to create revenue from targeted advertisement[1].
OVERLAP OF COMPETITION LAW AND DATA PRIVACY IN MERGERS
In India, the EU, and the United States, the general standard procedure has been to separate competition aspects from privacy laws and delegate the latter matter to data protection authorities[1]. However, certain cases every so often have emphasised how difficult it is to separate the two in specific circumstances, particularly where privacy and competition regulations are linked togerther. In Asnef-Equifax, the Court looked at whether banks were restricting competition by exchanging information about the solvency of potential borrowers. The court held that “Any probable concern pertaining to the protection of personal data is not, as such, a subject of competition law”[2].
With regards to mergers, courts took a similar position. In Google/Doubleclick and Facebook/WhatsApp[3], it refused to examine the possible data protection ramifications of the parties’ separate datasets merging together. In Google/Doubleclick, for example, the Commission noted that its judgement was based only on “the assessment of this activity in accordance with Community competition laws”.[4] As a result, both the Commission and the Court appeared to disregard data privacy concerns when applying competition legislation.
POTENTIAL HARMS VIA DATA DRIVEN MERGERS
I. DETERIORATING THE QUALITY OF PRIVACY
It is becoming a general norm that the merged entity always stands to gain anything from the merger in the relevant market and to do so it may overlook the privacy concerns, resulting in a reduction in product quality like in Google/DoubleClick merger, the use of “deep” and “wide” tracking, which was introduced as a result of the merger, would potentially result in a decline in the quality of search results for customers who value their privacy[1]. In such a setting, recognizing additional non-price competition factors in merger evaluations becomes critical, since customers compensate these platforms through these non-price mechanisms.
II. REMOVES COMPETITION ON PRIVACY PROTECTION
Network effect is the simple principle that the more members or users a social network has, the more attractive it becomes for other people to join as well, because the usefulness of the network goes up with the number of users.[2] By a method of illustration, the greater number of users that these companies have, the better their service becomes to each new user, which makes a pattern of more users, leading to an increase in services for them. Thus, more new users emerge and the trend continues. It multiplies rapidly and hence encourages companies with huge data to consolidate their market positions.
Mergers can enable to ensure a greater market utilization and share of a given product, hence improving the product’s quality even more[1].The lock-in effect describes how moving to a different product is more difficult or worthless unless a majority of the original product’s consumers also switch.[2] When mergers improve network and lock-in effects, the user base of the combined organisation grows considerably, driving away existing, privacy-protecting rivals. Furthermore, this poses significant barriers to entry for future privacy-protecting rivals. The previously mentioned Microsoft/LinkedIn merger is a notable instance of this, since the merger aided LinkedIn’s development because with every windows that a user bought, Linkedin came installed already on it, and network effects tipped the market for “professional social media” on LinkedIn’s side. This might hinder the rise of LinkedIn’s competitors that provide more privacy protection. As a result, mergers have the potential to diminish competition on privacy issues.
CONCLUSION
It is indisputable that uneven user data gathering practices can occasionally be anti-competitive. Sectoral regulators are also tasked with safeguarding and promoting competition in markets, even if competition regulators are responsible for other things as well. Sectoral regulations operate on an ex-ante basis, meaning they happen faster than an ex-post competitive assessment. In the aforementioned Bharti Airtel case, the Supreme Court of India granted precedence to sectoral regulators over other authorities to prevent territorial disputes. But it appears that antitrust authorities are increasingly using this tactic to make up for gaps or inadequacies in other laws and regulations, most notably data privacy legislation.
Inter-jurisdictional discrepancies highlight the seriousness of data law issues, requiring immediate and comprehensive establishment of data protection laws. A market power
[1] Oxford Journal of Competition Law and Economics <https://academic.oup.com/jcle/article-abstract/13/4/767/4802444> accessed 6 March, 2024.
[2] Whatsapp vs. Facebook https://www.cci.gov.in/sites/default/files/SM01of2021_0.pdf >accessed 6 March, 2024.
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[2] Network effects helped Facebook Win- (Digital World) <https://www.dw.com/en/network-effects-helped-facebook-win/a-40418818> accessed 6 March, 2024.
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[2] Case C-238/05- Asnef-Equifax < https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:62005CJ0238&from=EN > accessed 6 March, 2024.
[3]CaseNo.COMP/M.7217-FACEBOOK/WHATSAPP https://ec.europa.eu/competition/mergers/cases/decisions/m7217_20141003_20310_3962132_EN.pdf > accessed 6 March, 2024.
[4]CaseNo.COMP/M.4731–Google/DoubleClick https://ec.europa.eu/competition/mergers/cases/decisions/m4731_20080311_20682_en.pdf >. accessed 6 March, 2024.
[1] Matrimony vs. Google < https://www.cci.gov.in/sites/default/files/07%20%26%20%2030%20of%202012.pdf> accessed March 4, 2024.
[1] Draft National e-Commerce Policy,<https://dpiit.gov.in/sites/default/files/Extension_Deadline_E-Commerce_Policy_11032019.pdf> accessed March 4, 2024.
[2] Case 85/76, Hoffmann-La Roche & Co. AG, L:2022:057:TOC (EUR) <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ%3AL%3A2022%3A057%3ATOC> accessed March 4, 2024.
[3] Law against Restraints of Competition (GWB), Section 18 Market dominance, <https://www.gesetze-im-internet.de/gwb/__18.html> accessed March 4, 2024.
[4] Case At.39740 Google Search (Shopping) Antitrust Procedure, <https://ec.europa.eu/competition/antitrust/cases/dec_docs/39740/39740_14996_3.pdf>accessed March 4, 2024
[1] Joe Kaeser: Data Is the 21st Century’s Oil, (The Economic Times), <https://economictimes.indiatimes.com/magazines/panache/data-is-the-21st-centurys-oil-says-siemens-ceo-joe-kaeser/articleshow/64298125.cms?from=mdr> accessed Feburary 25, 2024.
[2] Abuse of Dominance in Digital Markets – OECD(OECD- Abuse of Dominance ), <https://www.oecd.org/daf/competition/abuse-of-dominance-in-digital-markets-2020.pdf> accessed April 25, 2022
[3] Report on Competition Policy – European Commission, <https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf> accessed March 4, 2024.
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[1] Fransisco Costa-Cabral and Orla Lynskey, ‘Family Ties: the intersection between data protection and competition in EU Law’ (Kluwer Law International, 2017)
[2] Competition Law and Data (n 17), p. 25.
[3] European Data Protection Supervisor, ‘Preliminary Op. of the Eur. Data Protection Supervisor, Privacy and Competitiveness in the Age of Big Data’ (March 2014),<https://edps.europa.eu/sites/edp/files/publication/14-03-
26_competitition_law_big_data_en.pdf> accessed 22 February 2024.
[4] European Commission, ‘Guidance on Its Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings’, 2009/C 45/02, ¶ 9 (noting special obligations on dominant undertakings).
[5] Autorité de Protection des Données, X c/ Google, 14 July 2020, decision no. 37/2020, https://www.autoriteprotectiondonnees.be/publications/decision-quant-au-fond-n-37-2020.pdf. >accessed 22 February 2024.
[1] MCA, ‘Report Of The Competition Law Review Committee’ (2019) < https://www.ies.gov.in/pdfs/Report-Competition-CLRC.pdf> accessed 7 February, 2024.
[2] Competition Act 2002, s 19(4)(d).
[3] Andres V. Lerner, ‘The Role of ‘Big Data’ in Online Platform Competition’ (2014), <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482780> accessed 20 February 2024, p. 35.
[4] MCA, ‘Report Of The Competition Law Review Committee’ (2019) < https://www.ies.gov.in/pdfs/Report-Competition-CLRC.pdf> accessed 7 February, 2024.
[1] MCA, ‘Report Of The Competition Law Review Committee’ (2019) < https://www.ies.gov.in/pdfs/Report-Competition-CLRC.pdf> accessed 7 February, 2024.
[2] Competition Act 2002, s 4 explanation (a).