COMPETITION ISSUES IN NEW AGE MARKETS- CHALLENGES AND WAY FORWARD
The authors of this write up are Dr. Ashu Dhiman, Assistant Professor at Centre for Legal Studies,
Gitarattan International Business School. and Paramjeet Singh, BBA.LLB(Hons.) (6th Sem) CLS GIBS.
INTRODUCTION
INTRODUCTION
Competition Act 2002
was introduced by the Vajpayee government to promote fair leveling ground in the
market and to prevent abuse of dominant positions of the big players in the
market. The main objective of the act was enshrined under the preamble of the
said act, which provides that goal is the overall economic development of the state
by providing efficiency in the market along with just and fair regulations of
competition among competitors.
To
achieve the objectives of the act, Competition
commission of India[1]
was formed in October of 2003 with a Chairperson along with 6 other members
appointed by the central government. The role of this body is to undertake and
fulfill the duties provided to the commission under the purview of the act.
Competitions Act 2002[2]
came into effect in 2002 and repealed[3]
the previous act known as The Monopolies
and Restrictive Trade Practices Act 1969[4].
It is a tool or an authority which provides criminal as well as civil liability
for any parties which violates the provision of the act or makes a negative or
adverse effect on the competitive market. This act derives its authority from the Constitution of India[5]
as it restricts monopoly and directs the state to take steps to avoid
concentration of wealth in the hands of few.
COMPETITION ISSUES
Just as human being evolved through a passage of time, the world economy is also evolving at an exponential rate as compared to that of humans. As according to a report of the United Nation[6] in 2009. Out of 10 most valuable companies, topmost two companies were EXXON MOBIL and PETRO CHINA and 9th position was held by Royal Dutch Shell, what all these companies had in common was their extraction of natural resources such as gas or oil for commercial purposes. Fast forward 10 years and in 2019, out of 10 most valuable global countries, none of the companies are those which deal with natural resources. This paradigm shift occurred due to the entry of the digital era in the market. Now out of 10, 6 of the most valuable companies are related to technology and owe their dominance in the market, due to the widespread of digital platform. Such of the issues being faced in the digital market areas such follows;
1) The main issue which is being faced in this sector is the matter of pricing, big and dominating companies generally tend to offer their products and services at cheaper price as compared to other competitors in the market with a view to obtain competitive edge in the market and gather as much as market cap as possible.
To take a recent example, Reliance Industries entered into the telecommunications sector with their brand names JIO, reliance industries used their dominant position in the market and gave free data and free calls to their users with free sims, which totally destroyed the competition and the competitors such as Airtel, Vodafone and Idea lost thousands of crore and this scheme helped JIO get most subscribers in the country. Airtel filed a complaint regarding this to competition commission of India, but Competition Commission ruled against it stating that giving free and exclusive benefits to customers does not amount to be unfair trade practices.
2) The other issue being that the dominant companies in modern times has changed their traditional method of doing business which states that business companies tend to maximize their profits but companies of today, tend to focus more of their growth and expansion of data instead of only focusing on money.
For ex, Google as the world’s biggest online search engine[7], provides its software Android for free to mobile manufacturers in exchange for data from their users. Similarly, Facebook provides a free platform for people to connect with each other all over the world, free of cost and gather data of their user’s interest, activities and their likes or dislikes. By gathering so much data about their users, the tech giants receive a competitive edge in the market as they know so much about their user and then they provide their users with appropriate advertisement through which they generate revenue.
3)Other issue being that the technologies can use algorithms or artificial intelligence to create better and better response every time a user uses the program, whereas new entrants in the market with sufficient funding for their project does not have that advantage which already established dominant company has. Most of the times, start-up’s or general new companies which has the potential to become a competitor to the company are often get acquired at the early stage.
For ex, Google till date has acquired 223 businesses such as start-ups which amounts to 19 billion USD[8]
4)Other issue being that sometimes a big or dominating company acquires two competing companies and earns from there profit. As customers will have the option to choose between the companies or brands they want to prefer, but in the end, the consumers are still buying from the same corporation
For ex, Rivalry of OPPO, VIVO, RealMe and OnePlus in Indian market is not new but all of these competing companies are just mere subsidiaries of a Chinese corporation known as BBK Electronics[9].
In another example, competing automobiles companies such as Audi, Porsche, Bentley, Skoda etc. are merely subsidiaries of Volkswagen Group[10].
CONCLUSION
At the pace which the technology has developed, it has changed the nature of the market and existing market approaches without giving due consideration to outdated policies and piece of legislation which in turn needs to be taken under account. There are still a number of challenges such as one of the major challenges with the Competition Commission Of India is dealing with the antitrust issues which involve the new age economy and evolve in accordance with the business done globally. The most important tool of analysis is the antitrust regulators which are used to examine issues in relation to the digital economy. Algorithm pricing, mergers where data and not turnover are of more relevance and big data are certain issues to be dealt with too. There is a dire need of hiring scientists so as to do work with the competition regulators. In this, new era or age economy organizations will be examined for market power and maltreatment of predominance. The Competition Commission of India should establish a Competition Law Review Committee which includes a working group which deals with the new age markets and big data so as to make a critical examination on the issues in relation to the digital economy.
COMPETITION ISSUES
Just as human being evolved through a passage of time, the world economy is also evolving at an exponential rate as compared to that of humans. As according to a report of the United Nation[6] in 2009. Out of 10 most valuable companies, topmost two companies were EXXON MOBIL and PETRO CHINA and 9th position was held by Royal Dutch Shell, what all these companies had in common was their extraction of natural resources such as gas or oil for commercial purposes. Fast forward 10 years and in 2019, out of 10 most valuable global countries, none of the companies are those which deal with natural resources. This paradigm shift occurred due to the entry of the digital era in the market. Now out of 10, 6 of the most valuable companies are related to technology and owe their dominance in the market, due to the widespread of digital platform. Such of the issues being faced in the digital market areas such follows;
1) The main issue which is being faced in this sector is the matter of pricing, big and dominating companies generally tend to offer their products and services at cheaper price as compared to other competitors in the market with a view to obtain competitive edge in the market and gather as much as market cap as possible.
To take a recent example, Reliance Industries entered into the telecommunications sector with their brand names JIO, reliance industries used their dominant position in the market and gave free data and free calls to their users with free sims, which totally destroyed the competition and the competitors such as Airtel, Vodafone and Idea lost thousands of crore and this scheme helped JIO get most subscribers in the country. Airtel filed a complaint regarding this to competition commission of India, but Competition Commission ruled against it stating that giving free and exclusive benefits to customers does not amount to be unfair trade practices.
2) The other issue being that the dominant companies in modern times has changed their traditional method of doing business which states that business companies tend to maximize their profits but companies of today, tend to focus more of their growth and expansion of data instead of only focusing on money.
For ex, Google as the world’s biggest online search engine[7], provides its software Android for free to mobile manufacturers in exchange for data from their users. Similarly, Facebook provides a free platform for people to connect with each other all over the world, free of cost and gather data of their user’s interest, activities and their likes or dislikes. By gathering so much data about their users, the tech giants receive a competitive edge in the market as they know so much about their user and then they provide their users with appropriate advertisement through which they generate revenue.
3)Other issue being that the technologies can use algorithms or artificial intelligence to create better and better response every time a user uses the program, whereas new entrants in the market with sufficient funding for their project does not have that advantage which already established dominant company has. Most of the times, start-up’s or general new companies which has the potential to become a competitor to the company are often get acquired at the early stage.
For ex, Google till date has acquired 223 businesses such as start-ups which amounts to 19 billion USD[8]
4)Other issue being that sometimes a big or dominating company acquires two competing companies and earns from there profit. As customers will have the option to choose between the companies or brands they want to prefer, but in the end, the consumers are still buying from the same corporation
For ex, Rivalry of OPPO, VIVO, RealMe and OnePlus in Indian market is not new but all of these competing companies are just mere subsidiaries of a Chinese corporation known as BBK Electronics[9].
In another example, competing automobiles companies such as Audi, Porsche, Bentley, Skoda etc. are merely subsidiaries of Volkswagen Group[10].
CONCLUSION
At the pace which the technology has developed, it has changed the nature of the market and existing market approaches without giving due consideration to outdated policies and piece of legislation which in turn needs to be taken under account. There are still a number of challenges such as one of the major challenges with the Competition Commission Of India is dealing with the antitrust issues which involve the new age economy and evolve in accordance with the business done globally. The most important tool of analysis is the antitrust regulators which are used to examine issues in relation to the digital economy. Algorithm pricing, mergers where data and not turnover are of more relevance and big data are certain issues to be dealt with too. There is a dire need of hiring scientists so as to do work with the competition regulators. In this, new era or age economy organizations will be examined for market power and maltreatment of predominance. The Competition Commission of India should establish a Competition Law Review Committee which includes a working group which deals with the new age markets and big data so as to make a critical examination on the issues in relation to the digital economy.
The
Competition Commission Of India has across the nation pertinence and
specifically, a greater part of the Competition Commission Of India's issues
begun in Mumbai as it is the financial capital of India. Given this, the Central
Government ought to consider setting up seats of the Competition Commission Of
India to speedily settle on rivalry cases. This is additionally basic in light
of a legitimate concern for encouraging more extensive access to equity and
simplicity of working together in India.
With the
implementation of new or modified competition law regulations, many of the new
start-ups in the world of digital platform will be able to compete with and
within the existing competitors and competition, which would further motivate
and encourage the spirit of entrepreneurship among the people which would
fulfill the commission’s objective of promoting competition and with an increase of
competitors in the market;
1)
Quality of products, services, and goods will
increase.
2)
Competition will be fair and just.
3)
Big dominant companies cannot further bully
consumers into buying their goods, if the consumers have other options in the
market.
4)
Economic development of India will thrive with
the new entrants in the market.
[1] The Competition Act 2002 (Act 12 of 2003), sec 5.
[2] The Competition Act 2002 (Act 12 OF 2003)
[3] The
competition Act 2002 (Act 12 of 2003), sec 66.
[4] The Monopolies and Restrictive Trade Practices Act 1969 (Act 54 of 1969)
[5] The Constitution of India 1949, art. 39(c)
[6] United Nations Conference on Trade and Development, Table 1 and 2, page
no.2 and 3.
[7] Dave Davies, Meet the 7 most popular search engines in the world, SEARCH ENGINE JOURNAL, 07/01/2018,
available at https://www.searchenginejournal.com/seo-101/meet-search-engines/
(Last visited on 17/04/2020)
[8] Google Acquisitions, MicroAcquire. Available at
https://acquiredby.co/google-acquisitions/ (last visited on 17/04/2020)
[9] Robert Triggs, Who is the world’s second-largest phone manufacturer?, Android Authority, 19/01/2020, available
at https://www.androidauthority.com/bbk-phone-manufacturer-808839/ (Last
visited on 17/04/2020)
[10] Autobahn Performance, The Volkswagen group subsidiaries and Brands, Medium, 21/09/2019, available at
https://medium.com/@autobahnaudivw/volkswagen-group-subsidiaries-brands-35561cc1fe3d
(Last visited on 17/04/2020)
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