Big Tech and the need in India for ex-ante regulation
#GS-02 Governance, #GS-03 Economy
Competition Commission of India (CCI):
- The CCI is a statutory body which acts as the competition regulator in India and is responsible for enforcing the Competition Act, of 2002.
- The Commission was established in 2003, although it became fully functional only by 2009.
- The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of the Raghavan committee.
The objectives of the Commission are:
- To prevent practices that harm the competition.
- To promote and sustain competition in markets.
- To protect the interests of consumers.
- To ensure freedom of trade.
The need to overhaul Competition Act:
- When India established the CCI under the Indian Competition Act 2002, it was to protect and promote competition in markets, and prevent practices that hinder competition.
- However, it did not account for the network effect of Big Tech companies as a force to reckon with.
- Another major concern in the use and access to data, since, there is sensitive data stored on these platforms (financial records, phone location, and medical history).
- Big corporations have asserted ownership of the right to use or transfer this data without restriction.
- Finally, market distortion can also lead to poorer quality of services, data monopoly, and stifle innovation.
- For a consumer, there is a need to establish harmony of the Competition law with the new Consumer Protection Act 2020 and e-commerce rules.
- The Competition Act of 2000, was largely constituted to deal with the physical marketplace.
- There is an urgent need to contextualise the law to the digital marketplace and devise new provisions with adequate ex-ante legislation.
Ex-ante legislation and Market Dominance:
- In any free economy, market dominance is natural.
- But things get hazy when it is abused to prevent competition.
- Network effects, along with a status quo bias can create significant entry barriers for competitors to enter or operate in the markets concerned.
- While the competition laws address that anomaly, they are too slow to respond in complex technical sectors.
- Thus there is an urgent need for ex-ante legislation to prevent market failures and mitigate possible anti-competitive conduct.
- Predatory pricing, which entails the lowering of prices that forces other firms to be out competed are prevalent with Big Tech companies.
- It is essential to establish an ex-ante framework to ensure a level playing field for local sellers.
What can be done?
- India can learn from the European Union, the United States, and even Australia who have moved to transform their competition law.
- The EU’s Digital Market Act and “gatekeepers” who will enforce rules and regulations ex-ante to foresee anti-competitive practices is an example.
- It is equally important to contextualise India’s reality.
- Kirana stores competing with e-retailers such as Big Basket is an example of unfair competition between legacy businesses and their digital counterparts.
- In such a setting, bulldozing through an EU-based approach to competition might not be the best way for Indian marketplace interests in protecting the local digital economy.
- Thus, India needs a new ex-ante-based framework that promotes competition by ensuring a level-playing field for the big, the small, the old and the new.